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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JANUARY 31, 1996 COMMISSION FILE NUMBER: 1-9494
TIFFANY & CO.
(Exact name of registrant as specified in its charter)
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DELAWARE 13-3228013
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
727 FIFTH AVENUE 10022
NEW YORK, NY (Zip Code)
(Address of principal executive offices)
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(212) 755-8000
(Registrant's telephone number, including area code)
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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COMMON STOCK, $.01 PAR VALUE NEW YORK STOCK EXCHANGE
STOCK PURCHASE RIGHTS NEW YORK STOCK EXCHANGE
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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 X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/
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STATE THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NON-AFFILIATES
OF THE REGISTRANT. THE AGGREGATE MARKET VALUE SHALL BE COMPUTED BY REFERENCE TO
THE PRICE AT WHICH THE STOCK WAS SOLD, OR THE AVERAGE BID AND ASKED PRICES OF
SUCH STOCK, AS OF A SPECIFIED DATE WITHIN 60 DAYS PRIOR TO THE DATE OF FILING.
As of March 25, 1996 the aggregate market value of voting stock held by
non-affiliates was $741,147,994.23. See Item 5. Market for Registrant's Common
Equity and Related Stockholder Matters below.
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INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE REGISTRANT'S
CLASSES OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE: 16,157,179 shares of
Common Stock outstanding as of March 25, 1996.
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The following documents are incorporated by reference into this Annual
Report on Form 10-K: Registrant's Annual Report to Stockholders for the Fiscal
Year Ended January 31, 1996 (Parts I, II and IV) and Registrant's Proxy
Statement Dated April 8, 1996 (Part III).
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PART I
ITEM 1. BUSINESS
(a) General development of business.
Registrant (also referred to as the "Company") is the parent corporation of
Tiffany and Company ("Tiffany"). The Tiffany business was founded in 1837 and
was incorporated in New York in 1868. On May 5, 1987 Registrant completed the
initial public offering of its Common Stock.
(b) Financial information about industry segments.
Industry segment information is not provided because the Registrant operates
in a single industry segment: retail and wholesale distribution of fine jewelry,
gift and fashion accessory items. Incorporated by reference from Registrant's
Annual Report to Stockholders for the fiscal year ended January 31, 1996
(Footnote Q. "Foreign Operations") is the Registrant's geographic segment
information for the fiscal years ended January 31, 1996, 1995 and 1994.
(c) Narrative description of business.
As used below, the terms "Fiscal 1993", "Fiscal 1994" and "Fiscal 1995"
refer to the fiscal years ended on January 31, 1994, 1995 and 1996,
respectively.
Products
Registrant's principal product categories are fine jewelry, timepieces,
sterling silverware, china, crystal, stationery, writing instruments, fragrance,
leather goods, scarves and ties.
Registrant offers an extensive selection of fine jewelry at a wide range of
prices. In Fiscal 1993, 1994 and 1995, approximately 65%, 67% and 70%,
respectively, of Registrant's net sales were attributable to jewelry. See
Merchandise Purchasing, Manufacturing and Raw Materials below. Designs are
developed by employees, suppliers, independent designers and independent "name"
designers. See Designer Licenses below.
TIFFANY & CO. brand watches and clocks as well as other brands of watches
are sold. The range of TIFFANY & CO. brand sterling silver merchandise includes
flatware, hollowware (tea and coffee services, bowls, cups and trays), trophies,
key holders, picture frames and desk accessories. Crystal, glassware, china and
other tableware, is sold under the TIFFANY & CO. trademark, as well as the
trademarks of well-known manufacturers. Custom engraved stationery, writing
instruments, handbags, wallets, scarves, men's ties and
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fashion accessories are sold under the TIFFANY & CO. trademark. Fragrance
products are sold under the trademarks TIFFANY, TRUESTE, and TIFFANY FOR MEN.
Distribution and Marketing
Channels of Distribution
Registrant sells through three channels of distribution, and reports its
sales as follows:
U.S. Retail consists of retail sales from stores in the United States
and wholesale sales to selected independent retailers in the Americas.
See U.S. Retail below;
Direct Marketing consists of sales in the United States through a staff
of specialized sales personnel who concentrate on business clients, and
sales through direct mail catalogs. See Direct Marketing below; and
International Retail consists of both retail and wholesale sales to
customers located outside the Americas. See International Retail below.
U.S. Retail
The Fifth Avenue store in New York accounts for the largest portion of the
Company's sales and is the focal point for marketing and public relations
efforts. Approximately 21%, 19% and 17% of total Company net sales for Fiscal
1993, 1994 and 1995, respectively, were attributable to the New York store's
retail sales. Management believes that the New York retail store will continue
to account for a substantial portion of the Company's sales. Approximately
32,450 gross square feet in the New York building are devoted to retail selling.
Prior to September 1963, when the first branch store was opened in San
Francisco, the New York store was Tiffany's sole retail location in the United
States. Since that time, branch stores have been opened in the following cities:
Houston (1964), Beverly Hills (1964), Chicago (1966), Atlanta (1969), Dallas
(1982), Boston (1984), Costa Mesa (1988), Vienna, Virginia (Washington D.C.
area) (1990), Philadelphia (1990), Palm Beach (1991), San Diego (1992), Honolulu
(1992), Troy, Michigan (1992), Bal Harbour (1993), Maui, Hawaii (1994), Oak
Brook, Illinois (1994), Short Hills, New Jersey (1995), White Plains, New York
(1995), and King of Prussia, Pennsylvania (1995). The Beverly Hills branch store
was relocated to larger quarters in 1990, as were the San Francisco and Houston
branches
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in 1991. Each of the 20 U.S. branch stores displays a representative selection
of merchandise but none maintains the extensive selection carried by the New
York store. Management currently contemplates the opening of new branch stores
in major United States cities at the rate of approximately three per year. Lease
agreements to open a branch in Chevy Chase, Maryland and to move to a larger
location in Chicago, Illinois have been entered into and, subject to completion
of construction, Registrant expects to open for business in Chevy Chase in May,
1996 and to relocate its store in Chicago in October, 1997. See Item 2.
Properties below for further information concerning U.S. Retail store leases.
United States branch stores range in size from approximately 1,600 to 16,000
gross square feet and total approximately 204,000 gross square feet devoted to
retail purposes. Historically, an average of approximately 45% of the floor
space in each branch store has been devoted to retail selling. Newer stores are
designed to devote approximately 60% of total floor space to retail selling.
Tiffany sells jewelry, watches, tableware and other products at wholesale to
approximately 200 United States independent retail locations (exclusive of
locations which sell TIFFANY fragrance products but not other TIFFANY & CO.
products). Selected merchandise is provided to these accounts at wholesale
prices that allow traditional retail jewelry mark-ups.
TIFFANY, TRUESTE and TIFFANY FOR MEN brand fragrance products are sold in
Registrant's own stores, through its Direct Marketing channel of distribution
and through wholesale distribution in the U.S. and many overseas markets.
TIFFANY, TRUESTE and TIFFANY FOR MEN products are now available in
approximately 2,570 retail locations in the United States and abroad.
Chanel, Inc. sells fragrance concentrates to Tiffany. A subsidiary of
Chanel, Inc. provides production, packaging, warehousing, accounting and
U.S. distribution services. Tiffany retains control of marketing and promotion
and owns all fragrance product inventories and receivables.
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Direct Marketing
Corporate Division sales executives call on business clients throughout the
United States, selling products drawn from the retail product line and items
specially developed for the business market, including trophies and items made
to customer specifications. Price allowances are given to business customers for
volume purchases. Corporate Division customers purchase for business gift
giving, employee service and achievement recognition awards, customer incentives
and other purposes. Products and services are marketed through a sales force of
approximately 130 persons, through advertising in newspapers and business
periodicals and through the publication of special catalogs.
Tiffany also distributes catalogs of selected merchandise to its proprietary
list of mail and telephone customers and to mailing lists rented from third
parties. Four seasonal SELECTIONS(R) catalogs are published, supplemented by
COLLECTIONS and other catalogs. The following table sets forth certain data with
respect to mail order operations for the periods indicated:
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Fiscal Years Ended January 31,
1994 1995 1996
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Number of names on catalog mailing list
at year-end (consists of customers who
purchased by mail or telephone prior to
the applicable date): 535,307 595,165 662,000
Total catalog mailings during fiscal year
(in millions): 14.1 15.0 17.5
Total mail or telephone orders received
during fiscal year: 210,379 239,485 258,879
</TABLE>
International Retail
Stores and boutiques included in the International Retail channel of
distribution are listed below. For locations operated by Registrant's subsidiary
corporations, Registrant records as sales the retail price charged to retail
customers. For locations operated by third-party distributors, Registrant
records as sales the wholesale price charged to the third-party distributors.
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International Locations
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LOCATIONS OPERATED BY REGISTRANT'S SUBSIDIARIES
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FREE-STANDING STORES JAPAN: MITSUKOSHI DEPARTMENT STORES
London, England Tokyo (Nihombashi) Takamatsu
Munich, Germany Tokyo (Shinjuku) Matsuyama
Zurich, Switzerland Tokyo (Shinjuku) + Hirakata
Frankfurt, Germany Tokyo (Ginza) Kobe
Milan, Italy (Faraone) Tokyo (Ikebukuro) Nagoya (Hoshigaoka)
Florence, Italy (Faraone) Yokohama Nagoya (Sakae)
Hong Kong (Peninsula Hotel) Sendai Niigata
Hong Kong (Landmark Center) Sapporo Chiba
Taipei, Taiwan Osaka Kagoshima
Singapore (Raffles Hotel) Kurashiki Okinawa
Singapore (Ngee Ann City) Hiroshima
Toronto, Canada
Sydney, Australia + (Accessories Boutique)
JAPAN: NON-MITSUKOSHI DEPARTMENT STORES
Kawasaki, (Saikaya Department Store) JAPAN: OTHER MITSUKOSHI LOCATIONS
Kokura, (Izutsuya Department Store) (NON-DEPARTMENT STORE LOCATIONS)
Kumamoto, (Tsuruya Department Store) Hilton Hotel, Nagoya, Japan
Kyoto, (Daimaru Department Store) Hotel Okura, Kobe, Japan
Hamamatsu, (Matsubishi Department Store) Tokyo Bay Hotel, Tokyo, Japan
Oita, (Tokiwa Department Store) Royal Hotel, Osaka, Japan
Osaka (Shinsaibashi), (Daimaru Department Store) Nagano, Japan (Specialty Store)
Osaka (Umeda), (Daimaru Department Store) Fukuoka, Japan (Specialty Store)
Sagamihara (Isetan Department Store) Kanazawa, Japan (Specialty Store)
The Landmark, Yokohama, Japan
OTHER DEPARTMENT STORE LOCATIONS
Hong Kong (Sogo Department Store)
Kaohsiung, Taiwan (Hanshin Department Store)
Taipei, Taiwan (Sogo Department Store)
LOCATIONS OPERATED BY LOTTE TRADING CO., LTD. LOCATIONS OPERATED BY MITSUKOSHI LIMITED AND AFFILIATES
Lotte World Department Store, Seoul (Duty-free) DEPARTMENT STORE LOCATIONS
Lotte Department Store, Seoul (Duty-free) (Duty-paid) Taipei, Taiwan
Hotel Lotte, Seoul (Lobby boutique) (Duty-free) Tokyo (Nihombashi), Japan (Faraone)
Hotel Paradise, Pusan (Duty-free) Tokyo (Shinjuku), Japan (Faraone)
Hotel Lotte, Pusan (Duty-free)(Duty-paid) Sapporo, Japan (Faraone)
Matsuyama, Japan (Faraone)
NON-DEPARTMENT STORE LOCATIONS
Moana Surfrider Hotel, Honolulu, Hawaii
Tumon Sands Plaza, Guam
LOCATIONS OPERATED BY OTHER THIRD PARTIES
DFS Australia
DFS Saipan
DFS Singapore
DFS Taiwan
Central JTC, Bangkok, Thailand
Mohammed bin Masaood & Sons, Abu Dhabi, U.A.E.
Plaza Indonesia, Jakarta, Indonesia
Rustan's Department Store, Manila, Philippines
Rustan's Tower, Manila, Philippines
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The preceding listing does not include international "trade accounts", i.e.
non-U.S. retailers to which TIFFANY & CO. or FARAONE brand merchandise is sold
on a wholesale basis, but which do not operate a dedicated TIFFANY & CO. or
FARAONE boutique within their respective stores.
From 1972 through July 1993, selected TIFFANY & CO. products, principally
jewelry and watches, were purchased from Tiffany by Mitsukoshi Limited and its
affiliated companies ("Mitsukoshi") for distribution in Japan in TIFFANY & CO.
boutiques. Under the agreement with Tiffany by which Mitsukoshi purchased and
distributed TIFFANY & CO. products in Japan (the "Distribution Agreement"), all
sales transactions between Tiffany and Mitsukoshi were denominated in U.S.
dollars. Registrant recorded wholesale sales to Mitsukoshi as revenue and
Mitsukoshi received the merchandise into inventory and recorded revenue on the
final sale in Japanese yen to the ultimate consumer. Mitsukoshi established
retail prices for TIFFANY & CO. merchandise in Japan and bore responsibility for
management of inventory and the risk of currency fluctuations between the
Japanese yen and the U.S. dollar.
On June 12, 1993, Registrant, through its affiliated companies, entered into
an agreement (the "93 Agreement") to realign its business relationship with
Mitsukoshi. Under the 93 Agreement, Registrant's wholly owned subsidiary,
Tiffany & Co. Japan Inc. ("Tiffany-Japan") assumed merchandising and marketing
responsibilities in the operation of TIFFANY & CO. boutiques previously operated
by Mitsukoshi in its stores and other locations in Japan. The changeover in
responsibilities from the Distribution Agreement to the 93 Agreement occurred
during the month of July 1993. Tiffany-Japan now provides merchandising and
marketing management and owns substantially all merchandise held for sale in the
boutiques. Mitsukoshi provides and maintains boutique facilities, staffs the
boutiques with retail employees and assumes credit and certain other risks.
Tiffany-Japan pays Mitsukoshi fees aggregating 27% of net retail sales made in
such boutiques. Tiffany-Japan also pays Mitsukoshi an incentive fee of 5% of the
amount by which boutique sales increase year-to-year, calculated on a
per-boutique basis. In Tokyo, TIFFANY & CO. boutiques may be established only in
Mitsukoshi's stores and TIFFANY & CO. brand jewelry may be sold only in such
boutiques, or in a "flagship store" (see below). The mutual obligations
described in this paragraph will expire on October 15, 2001.
In Fiscal 1993, 1994 and 1995, Mitsukoshi's wholesale purchases from Tiffany
constituted, respectively, 7%, 3% and 2% of Registrant's net sales. Under the 93
Agreement, Mitsukoshi no longer purchases TIFFANY & CO. merchandise for sale in
Japan. Instead, Mitsukoshi acts for Tiffany-Japan in the sale of merchandise
owned by Tiffany-Japan and Registrant recognizes as revenues the retail price
charged to the ultimate consumer in Japan. Tiffany-Japan holds inventories for
sale, establishes retail prices, bears the risk of currency fluctuations,
provides one or more brand managers in each boutique, controls merchandising and
display within the boutiques, manages inventory and controls and funds all
advertising and publicity programs with respect to TIFFANY & CO. merchandise.
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Because the inventory repurchased and to be repurchased by Tiffany from
Mitsukoshi was previously sold by Tiffany to Mitsukoshi, Registrant reversed the
sales and related gross profit associated with the repurchase. Accordingly, in
1993 Registrant established a $57.5 million reserve, representing the provision
for product returns; this reduced net income in Registrant's second fiscal
quarter ended July 31, 1993 by approximately $32.7 million, or $2.07 per share.
The establishment of this reserve resulted in a net loss in such second quarter
and in Fiscal 1993. Registrant's carrying value of the inventory purchased from
Mitsukoshi is lower than the purchase price paid by Mitsukoshi because of the
reversal of such gross profit. The majority of inventories of saleable TIFFANY &
CO. merchandise owned by Mitsukoshi have been repurchased by Tiffany-Japan. In
addition, as of January 31, 1996 approximately (Y) 2.7 billion ($25.0 million)
of TIFFANY & CO. inventory must be repurchased by Tiffany through the period
ending February 28, 1998. The price for inventories to be repurchased by
Tiffany is payable in Japanese yen. Mitsukoshi agreed to accept a deferred
payment in respect of (Y)2.8 billion ($25.8 million) of the purchase price to
be paid by Tiffany for inventory already repurchased. This amount was prepaid
in full on February 15,1996. All other amounts payable by Tiffany for inventory
repurchased pursuant to the 93 Agreement must be paid 40 days following
receipt of inventory.
Under separate agreements, Mitsukoshi operates four FARAONE boutiques in
Mitsukoshi stores in Japan, a TIFFANY & CO. boutique in its department store in
Taipei, and TIFFANY & CO. boutiques in Honolulu and on the island of Guam.
Tiffany sells merchandise to Mitsukoshi for resale in these boutiques on a
wholesale basis.
Under the 93 Agreement, Tiffany-Japan reserved the right to make TIFFANY &
CO. brand jewelry available for sale in Tokyo in a single "flagship store",
i.e., a TIFFANY & CO. store not located within a larger department store;
however, Tiffany-Japan was required to offer to Mitsukoshi the opportunity to
participate in the capitalization and ownership of a corporation which would
operate the flagship store. In lieu of forming such a corporation, Mitsukoshi,
Tiffany and Tiffany-Japan entered into an Agreement dated February 23, 1996 (the
"FSS Agreement") governing the operation of a 7,700 square foot TIFFANY & CO.
store in premises (the "Premises") located in Tokyo's Ginza shopping district
(the "Flagship Store"). The FSS Agreement will expire on September 30, 2001. The
Premises are leased by a third party to Tiffany-Japan for a fixed annual rental
and subleased by Tiffany-Japan to Mitsukoshi on a percentage-of-sales basis (the
"Sublease"). Tiffany-Japan is obligated to complete, at its cost, all necessary
improvements to equip the Premises, deliver the Premises to Mitsukoshi and bear
all costs of operating the Premises. The Flagship Store is expected to open in
May 1996. Under the FSS Agreement, Tiffany-Japan selects and furnishes its own
merchandise for display in the Flagship Store, prices the merchandise for retail
sale, bears all risk of loss until the merchandise is sold to a customer and
determines all issues of display, packaging, signage and advertising. Mitsukoshi
acts for Tiffany-Japan in the sale of the merchandise, collects and holds the
sales proceeds, makes credit available to customers, bears all credit losses
and provides its point-of-sale transaction processing system (the "POS System").
Tiffany-Japan provides all necessary staff other than ten employees to be
provided by Mitsukoshi. After compensating Tiffany-Japan on a
percentage-of-sales basis
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for rent and staffing, Mitsukoshi will retain 8.3% of net sales for most sales
transactions in the Flagship Store. Management of the Flagship Store, other
than with respect to the POS System, is the responsibility of Tiffany-Japan.
In 1989, Mitsukoshi purchased from General Electric Capital Corporation
("GECC"), 1,500,000 shares of Registrant's Common Stock. As of March 25, 1996,
Mitsukoshi owned 2,135,000 shares, or 13.2% of the Registrant's Common Stock.
In 1992, Registrant assumed the operation of four TIFFANY & CO. boutiques
previously operated by Mitsukoshi in third party department stores in Japan.
Registrant now operates nine boutiques in Japan in non-Mitsukoshi department
stores.
Mr. Yoshiaki Sakakura, Chairman and Chief Executive Officer of Mitsukoshi,
was appointed a director of the Registrant on November 15, 1989, and will
continue to serve as a director if elected by Registrant's stockholders at their
annual meeting scheduled to be held on May 16, 1996.
Wholesale distribution of TIFFANY & CO. jewelry and/or watches is also made
through independent distributors in Australia, Europe, Indonesia, Japan, Korea,
the Middle East, the Philippines, Saipan, Singapore, Taiwan and Thailand.
Tiffany began its ongoing program of international expansion through
proprietary retail stores in 1986 with the establishment of the London store.
The Munich and Zurich stores were opened in 1987 and 1988, respectively. Stores
in Hong Kong at the Peninsula hotel and at the Landmark center were opened in
August 1988 and March 1989, respectively. In 1990, a store was opened in Taipei,
and in 1991 stores in Singapore (at the Raffles Hotel), Frankfurt and Toronto
were opened, and the London store was expanded. In Fiscal 1993, a second store
was opened in Singapore's Ngee Ann City, and the Peninsula hotel store in Hong
Kong was expanded. In Fiscal 1994, Tiffany opened its store in Sydney,
Australia.
Company-operated international TIFFANY & CO. stores and boutiques range in
size from approximately 500 to 13,000 gross square feet and total approximately
134,000 gross square feet devoted to retail purposes.
In October 1989, Registrant completed the purchase of a controlling interest
in the parent corporation of Faraone, S.p.A. ("Faraone"), a manufacturing
jeweler which operates retail jewelry stores under the FARAONE tradename in
Milan and Florence and offers its products at wholesale to other retailers in
Europe and through Mitsukoshi-operated FARAONE boutiques in Japan. Faraone also
offers TIFFANY & CO. products in its stores and through its wholesale
distribution, and FARAONE products are offered in TIFFANY & CO. stores in Europe
and the United States.
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Registrant expects to continue to open stores in locations outside the
United States. However, the timing and success of this program will depend upon
many factors, including Registrant's ability to obtain suitable retail space on
satisfactory economic terms and the extent of consumer demand for TIFFANY & CO.
products in overseas markets. Such demand varies from market to market and is
positively affected by Tiffany's established reputation. On the other hand,
consumers in some markets, such as Europe, are not as familiar with TIFFANY &
CO. products as are consumers in Japan, where Tiffany has had a retail presence
since 1972. TIFFANY & CO. boutiques have now been installed in all current
Mitsukoshi department stores in Japan. Future expansion in Japan will, to some
extent, be dependent upon Mitsukoshi establishing new department stores.
However, under its agreement with Mitsukoshi, Tiffany has retained certain
rights so that it may undertake further development in Japan on its own
initiative, and Tiffany also operates and plans to operate additional boutiques
in stores other than Mitsukoshi in locations outside of Tokyo.
The following chart details the growth in the Company's stores and boutiques
since fiscal 1987 on a worldwide basis:
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Worldwide Retail Locations
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Registrant's Subsidiary Companies Independent
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North America and Europe Asia-Pacific and Middle East
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End of
Fiscal: U.S. Canada Europe Japan Elsewhere Mitsukoshi Others Total
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1987 8 0 2 0 0 21 0 31
1988 9 0 3 0 1 21 0 34
1989 9 0 5 0 2 24 0 40
1990 12 0 5 0 3 27 0 47
1991 13 1 7 0 4 38 2 65
1992 16 1 7 7 4 36 4 75
1993 16 1 6 37 5 8 6 79
1994 18 1 6 37 7 8 7 84
1995 21 1 6 38 9 7 14 96
</TABLE>
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Advertising and Promotion
Tiffany regularly advertises its business, primarily in newspapers and
magazines. Cooperative advertising funds are received from certain merchandise
vendors and the Company also provides its domestic and international third-party
distributors with cooperative advertising funds. In Fiscal 1993, 1994 and 1995,
Tiffany spent approximately $18.1 million, $21.8 million and $24.6 million,
respectively, on worldwide advertising, net of amounts contributed by vendors to
Tiffany, but inclusive of cooperative advertising funds contributed by Tiffany
to third party distributors.
Public Relations (promotional) activity is also a significant aspect of
Registrant's business. Management believes that Tiffany's image is enhanced by a
program of charity sponsorships, grants and merchandise donations. The Company
also engages in an aggressive program of retail promotions and media activities
to maintain consumer awareness of the Company and its products. Each year,
Tiffany publishes its well-known Blue Book which showcases fine jewelry and
other merchandise. Tiffany's New York window displays are another important
aspect of Tiffany's promotional efforts. In its New York store, Tiffany displays
table settings created by leading interior decorators and by prominent hosts and
hostesses. John Loring, Tiffany's Design Director, is the author of several
books featuring TIFFANY & CO. products. Registrant considers these and other
promotional efforts important in maintaining Tiffany's image as an arbiter of
taste and style.
Trademarks
The designations TIFFANY(R) and TIFFANY & CO.(R) are the principal
trademarks of Tiffany, as well as serving as tradenames. Tiffany has obtained
and is the proprietor of trademark registrations for TIFFANY and TIFFANY & CO.
for a variety of product categories in the United States and in other countries.
Over the years, Tiffany has maintained a program to protect its trademarks and
has instituted legal action where necessary to prevent others either from
registering or using marks which are considered to create a likelihood of
confusion with the Company or its products. Tiffany has been generally
successful in such actions and management considers that its United States
trademark rights in TIFFANY and TIFFANY & CO. are strong. However, use of the
designation TIFFANY by third parties (often small companies) on unrelated goods
or services, frequently transient in nature, may not come to the attention of
Tiffany or may not rise to a level of concern warranting legal action. Despite
the general fame of the TIFFANY and TIFFANY & CO. name and mark for the
Company's products and services, Tiffany does not claim to be the sole person
entitled to use the name TIFFANY in every category in every country of the
world; third parties have registered the name TIFFANY in the United States in
the food services category, and in a number of foreign countries in respect of
certain product categories (including, in a few countries, the categories of
fragrance, cosmetics, jewelry, eyeglass frames, clothing and tobacco products)
under circumstances where Tiffany's rights were not sufficiently clear under
local law, and/or
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where management concluded that Tiffany's foreseeable business interests did not
warrant the expense of litigation.
Designer Licenses
Tiffany has been the sole licensee for jewelry designed by Elsa Peretti,
Paloma Picasso and the late Jean Schlumberger since 1974, 1980 and 1956,
respectively. In 1992, Tiffany acquired trademark and other rights necessary to
sell the designs of the late Mr. Schlumberger under the TIFFANY-SCHLUMBERGER
trademark. Ms. Peretti and Ms. Picasso retain ownership of copyrights for their
designs and of their trademarks and exercise approval rights with respect to
important aspects of the promotion, display, manufacture and merchandising of
their designs and Tiffany is required by contract to devote a portion of its
advertising budget to the promotion of their respective products; each is paid a
royalty by Tiffany for jewelry and other items designed by them and sold under
their respective names. Written agreements exist between Ms. Peretti and Tiffany
and between Ms. Picasso and Tiffany but may be terminated by either party
following six months notice to the other party. Tiffany is the sole retail
source for merchandise designed by Ms. Peretti worldwide; however, she has
reserved by contract the right to appoint other distributors in markets outside
the United States.
The designs of Ms. Peretti accounted for 14%, 12% and 13% of Tiffany's net
sales in Fiscal 1993, 1994 and 1995, respectively. Merchandise designed by Ms.
Picasso accounted for 5% of Tiffany's net sales in Fiscal 1993 and 1994
respectively, and 4% of net sales in Fiscal 1995. Registrant's operating results
could be adversely affected were it to cease to be a licensee of one or more of
these designers or should its degree of exclusivity in respect of their designs
be diminished.
Merchandise Purchasing, Manufacturing and Raw Materials
Merchandise offered for sale by Tiffany is supplied from the Company's
workshops in New York City and Pelham, New York; Parsippany, New Jersey;
Attleboro, Massachusetts; Salem, West Virginia; Paris, France; and Milan, Italy
and through purchases and consignments from others. The following table shows
Tiffany's sources of merchandise, based on cost, for the periods indicated:
<TABLE>
<CAPTION>
Fiscal Years Ended January 31,
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Produced by Tiffany 27% 26% 20%
Purchased from others 73 74 80
Total 100% 100% 100%
</TABLE>
Approximately 34% of the merchandise purchased from others in Fiscal 1995 was
manufactured outside the United States.
- PAGE 12 -
<PAGE> 13
Gems and precious metals used in making Tiffany jewelry may be purchased
from a variety of sources. For the most part, purchases of such materials are
from suppliers with which Tiffany enjoys long-standing relationships. Tiffany
believes that there are numerous alternative sources for gems and precious
metals and that the loss of any single supplier would not have a material
adverse effect on its operations.
Diamond jewelry accounted for approximately 23%, 22% and 22% of Tiffany's
net sales for Fiscal 1993, 1994 and 1995, respectively. Tiffany does not
purchase uncut diamonds and does not anticipate any material adverse change in
the availability of cut and polished diamonds in general. The supply and price
of diamonds in the principal world markets are significantly influenced by a
single entity, the Central Selling Organization (the "CSO"), a marketing arm of
De Beers Centenary AG, a Swiss corporation. The CSO has traditionally controlled
the marketing of approximately 70-80% of the world's supply of uncut diamonds
and sells uncut diamonds to worldwide diamond cutters from its London office
approximately 10 times a year in quantities and at prices determined in its sole
discretion. Tiffany does not purchase diamonds directly from the CSO. The
availability and price of diamonds to the CSO and Tiffany's suppliers may be, to
some extent, dependent on the political situation in diamond-producing
countries, such as South Africa (which currently accounts for approximately 10%
of the world diamond output), Australia, Brazil, Botswana, the former Soviet
Union and Zaire, and on the continuance of the prevailing supply and marketing
arrangements for uncut diamonds. Sustained interruption in the supply of uncut
diamonds from the producing countries could adversely affect Tiffany and the
retail jewelry industry as a whole.
Finished jewelry is purchased from more than 150 manufacturers, most of
which have long-standing relationships with Tiffany. Tiffany believes that there
are alternative sources for most jewelry items; however, due to the
craftsmanship involved in certain designs, Tiffany would have difficulty in
finding readily available alternatives in the short term.
TIFFANY & CO. brand clocks and components for watches are manufactured by
third party suppliers. Some watches are also assembled by third parties.
Tiffany contracts with a single manufacturer to produce its silver flatware
patterns from Tiffany's proprietary dies by use of Tiffany's traditional
manufacturing techniques. Likewise, engraved stationery is purchased from a
single manufacturer. Loss of either manufacturer could result in the
unavailability of silver flatware or engraved stationery, as the case may be,
during the period necessary for Tiffany to arrange for new production.
As Registrant's sales have grown, management has increasingly begun to focus
its attention on merchandise supply issues and has acquired additional
merchandise manufacturing capabilities. In Fiscal 1989, the Company completed
the acquisition of the assets and business and assumed certain liabilities of
Howard H. Sweet & Son, Inc., a manufacturer of gold and silver jewelry and
chains located in Attleboro, Massachusetts
- - PAGE 13 -
<PAGE> 14
("Sweet"). Tiffany operates the Sweet business as a separate subsidiary under
the name and trademark HOWARD H. SWEET & SON. In Fiscal 1990, Tiffany acquired
the assets and business of McTeigue & Co., a manufacturer of gold jewelry. In
Fiscal 1991 Tiffany completed the acquisition of the business of the late
Camille Le Tallec. Located in Paris, this workshop decorates hand-painted
tableware and operates a modest retail shop under the Le Tallec name. In Fiscal
1992, Tiffany acquired the assets and business of Judel Glassware Co., Inc.,
which produces crystal glassware in Salem, West Virginia. In Fiscal 1995, the
Company restructured its watch operations in Switzerland by divesting its watch
assembly operation and contracting with the purchaser of such operation for the
continued production of watches. It also consolidated certain New York jewelry
manufacturing operations into a leased facility in Pelham, New York. Registrant
may seek additional manufacturing capacity in certain key product categories,
although there are no current plans to do so.
Competition
Registrant is faced with substantial competition in all areas in which it is
active, in most cases from companies that provide competition for only a portion
of its diverse lines of merchandise. Competitors and the intensity of
competition vary across product lines, geographic locations and channels of
distribution. In the United States, TIFFANY & CO. retail stores must compete
with jewelers and other retailers whose international reputations for style,
integrity and expertise are also well established. Tiffany must also compete
with jewelers and other retailers who compete primarily on the basis of price.
However, while price promotion is common in the jewelry industry, Tiffany does
not compete through price promotion but rather on the basis of value -- the
quality of its products and designs -- and the service provided by its store
personnel.
The international marketplace for TIFFANY & CO. products is characterized by
highly competitive conditions. Although Registrant believes that the name
TIFFANY & CO. is known and respected internationally, and although Tiffany did
operate retail stores in London and Paris prior to World War II, Tiffany did not
have a retail presence in Europe in the post-war era until 1986. Accordingly,
consumer awareness of Tiffany and its products is not as strong in Europe as in
the United States or in Japan, where Tiffany has distributed its products for
many years. Registrant expects that its overseas stores have and will continue
to experience intense competition from established retailers in international
cities where TIFFANY & CO. stores are and may eventually be located.
In direct marketing, the TIFFANY & CO. reputation and diverse product line
are believed to be favorable competitive factors; nonetheless, highly
competitive conditions prevail. A growing number of direct sellers compete for
access to the same mailing lists of known purchasers of luxury goods, and
mailing and production costs are increasing. In marketing to businesses, Tiffany
faces numerous competitors who sell a wide variety of products. Although Tiffany
offers products retailing at a wide range of price points, in marketing to
businesses, Tiffany often must compete with competitors who offer a greater
- PAGE 14 -
<PAGE> 15
variety of merchandise with a per item price below $25. Tiffany chooses to offer
a more limited selection within this price range in order to adhere to its
established quality standards.
Employees
As of January 31, 1996, the Registrant's subsidiary corporations employed an
aggregate of approximately 3,656 full-time and part-time persons. Of those
employees, 3,164 were employed in the United States. Of Tiffany's total
employees, approximately 1,274 persons are salaried employees, 412 are engaged
in manufacturing and 1,503 are retail store personnel. None of the Company's
employees is represented by a union. Registrant believes that relations with its
employees are good.
ITEM 2. PROPERTIES
All of Tiffany's principal operating facilities are leased although
Registrant does own a small glass manufacturing facility in Salem, West
Virginia.
New York Store
Tiffany leases the land and building at 727 Fifth Avenue in New York City
for use as its main retail store and executive offices. The building was
constructed in 1940. Approximately 32,450 gross square feet of this 124,000
square foot building are devoted to retail selling purposes, with the balance
devoted to executive and administrative offices, jewelry production and storage.
The building at 727 Fifth Avenue was designed to be a retail store for Tiffany
and Tiffany believes it is well configured and located for this function.
The initial lease term for the New York store building expired on October
31, 1994 and has been renewed for an additional five year term expiring on
October 31, 1999. It may, subject to the terms of the lease, be renewed for four
more successive terms of five years each. Basic rent for the building is $7.1
million per annum. That rate will remain effective until the expiration of the
current five-year renewal term. If and when Tiffany exercises additional renewal
terms, the basic rent will be increased by the greater of (i) a proportional
increase in accordance with a consumer price index or (ii) the fair rental value
of the property as determined by an appraisal proceeding. Although Tiffany is
not privy to specific lease rates for comparable store leases in New York's
Fifth Avenue shopping district near 57th Street, it has been reported that lease
rates within the district are generally rising due to demand by other retailers.
Accordingly, rent for the building may increase in 1999 by an amount in excess
of the proportional increase in such consumer price index. Tiffany must also pay
all costs of operating the building, including real property taxes, in addition
to the basic rent.
- - PAGE 15 -
<PAGE> 16
Customer Service Center
Tiffany's distribution facility in Parsippany, New Jersey is 18 years old
and consists of approximately 135,000 square feet of space devoted to
warehousing, receipt and distribution of merchandise, order processing,
silversmithing and offices. The initial term of the net lease covering this
facility expires on May 31, 1997 and may be renewed thereafter for one renewal
term of six months. The current basic rental is approximately $7.65 per square
foot per annum. Tiffany also leases 51,000 square feet of warehouse space in
Pine Brook, New Jersey, a town adjacent to Parsippany. That lease expires April
30, 1997. Management believes that its New Jersey distribution facilities are
adequate but not optimal for efficient distribution of Tiffany's products.
Tiffany also leases 29,227 square feet of office space in Parsippany to house
its financial operations. The lease for that facility will expire on November
19, 1996 and the current annual base lease rate is $25.18 per square foot. To
improve efficiency and provide room for future growth, in 1995 Tiffany entered
into a lease of undeveloped property in Parsippany on which will be built a
"Customer Service Center", a combined warehouse, distribution, light
manufacturing, computing and office center (the "CSC"). The CSC will comprise
approximately 269,000 square feet, of which approximately 96,000 square feet
will be devoted to office and computer operations use. The CSC is now under
construction and is scheduled to be fully complete and operable during the first
half of 1997; all of Tiffany's New Jersey operations, other than retail stores,
will be consolidated therein. On completion of construction and subject to the
other conditions stated in the lease, the basic lease term will commence; it
will expire on January 31, 2000. Subject to the conditions stated in the lease,
Tiffany may thereafter extend the term of the lease for nine separate one year
periods. The rental rate will be approximately $13.33 per square foot throughout
the 12-year maximum term of the lease. Under the terms of a Construction Agency
Agreement entered into by Tiffany with the landlord and subject to the
conditions stated therein, Tiffany acts as landlord's agent for the purpose of
constructing the CSC, is responsible for any costs incurred in excess of a fixed
budget and will receive a credit against its lease rental obligation for any
savings achieved. Under the terms of its lease, and subject to certain
conditions stated therein governing the end of the lease term and Tiffany's
obligation to pay specified costs and expenses, Tiffany has the right to
purchase the CSC in each of years 1997 through 2009 for a scheduled purchase
price that ranges from $37.5 to $27.8 million. Alternatively, if the CSC is sold
to a third party for less than such scheduled purchase price, Tiffany would
become liable for an end-of-term rental adjustment up to the amount of such
deficiency (subject to a conditional maximum deficiency), and would, if the CSC
is neither purchased by Tiffany nor sold to a third party, become liable for an
end-of-term rental adjustment that would range from $37.5 to $24.6 million in
years 1997 through 2009 depending on Tiffany's compliance with certain lease
conditions. Registrant has guaranteed Tiffany's obligations under the CSC lease
and the Construction Agency Agreement and provided certain financial covenants
to landlord's lenders in support of such guaranty consistent with financial
covenants provided to Registrant's bank lenders.
- PAGE 16 -
<PAGE> 17
Branch and Subsidiary Retail Store Leases
Set forth below is the expiration date for each of Tiffany's existing branch
and subsidiary retail store leases (and, where applicable, optional renewal
terms): Phipps Plaza Shopping Center, Atlanta, GA, July 31, 2000 (two five-year
terms); Two Rodeo Drive, Beverly Hills, CA, October 7, 2005 (two five-year
terms); Copley Place, Boston, MA, July 31, 2009 (two five-year terms); 715 North
Michigan Avenue, Chicago, IL, September 30, 1997 (one 10-year term); South Coast
Plaza, Costa Mesa, CA, January 31, 2004 (one five-year term); The Galleria,
Dallas, TX, October 31, 1997 (one five-year term); Union Square, San Francisco,
CA, October 29, 2006 (one 10-year term); Galleria Post Oak Shopping Center,
Houston, TX, September 30, 2001 (one five-year term); The Mall at Short Hills,
Millburn, NJ, August 30 2005 (one five-year term); 259 Worth Avenue, Palm Beach,
FL, May 31, 2007 (two five-year terms); King of Prussia Plaza, Upper Merion
Township, PA, October 30, 2005 (one five-year term); The Bellevue, Philadelphia,
PA, November 16, 2005 (one five-year term); The Paladion, San Diego, CA, May 31,
2007; Fairfax Square, Vienna, VA, March 31, 2000 (two five-year terms); The
Somerset Collection, Troy, MI, September 30, 2007; The Westchester, White
Plains, NY, April 30, 2005 (one five-year term); Ala Moana Center, Honolulu, HI,
January 31, 2000; Bal Harbour Shops, Bal Harbour, FL, May 31, 2003; Whalers
Village, Maui, HI, July 31, 1999; Oakbrook Center, Oak Brook, IL, April 30, 2009
(two five-year terms); Chifley Tower, Sydney, Australia, January 31, 1999 (two
five-year terms); 20 Goethestrasse, Frankfurt, Germany, January 31, 2001 (one
10-year term); 25 Old Bond Street, London, England, March 24, 2016;
Residenzstrasse 11, Munich, Germany, June 30, 1998 (one four-year term); The
Landmark, Hong Kong, October 31, 1997; The Peninsula, Kowloon, Hong Kong,
February 28, 1997; Raffles Hotel, Singapore, September 15, 1997 (one three-year
term); Regent Hotel, Taipei, Taiwan, October 6, 2000 (one five-year term); 85
Bloor Street, Toronto, Canada, October 15, 2006 (one seven-year term);
Bahnhofstrasse 14, Zurich, Switzerland, September 30, 2000; and Ngee Ann City,
Singapore, September 15, 1999 (one one-year term).
In addition to the leases shown above, Tiffany has entered into a 10-year
lease for a 6,000 square foot retail location at Chevy Chase Plaza, Chevy Chase,
Maryland. Construction of the store commenced January, 1996 and is anticipated
to be completed in May, 1996. Tiffany has also entered into a 15-year lease for
a 15,295 square foot location to be constructed at 730 North Michigan Avenue,
Chicago, Illinois. This new store will replace the existing store in Chicago
located at 715 North Michigan Avenue following completion of construction. It is
expected that the new store will open in October, 1997.
Registrant also operates two FARAONE stores in Italy, one in Milan and one
in Florence. The Milan store is located on Via de Montenapoleone. The present
lease expires on March 31, 1999, but may, subject to certain conditions imposed
by Italian law, be renewed for an additional term of six years. The Florence
store is located on Via Tornabuoni. The present lease expires on June 30, 1997
and is renewable for an additional term of six years, subject to the same
conditions imposed by law upon the Milan lease.
- - PAGE 17 -
<PAGE> 18
ITEM 3. LEGAL AND ENVIRONMENTAL PROCEEDINGS
Registrant and Tiffany are from time to time involved in routine litigation
incidental to the conduct of Tiffany's business, including proceedings to
protect its trademark rights, litigation instituted by persons alleged to have
been injured upon premises within Registrant's control and litigation with
present and former employees. Although litigation with present and former
employees is routine and incidental to the conduct of Tiffany's business and any
business employing significant numbers of U.S.-based employees, such litigation
can result in large monetary awards when a civil jury is allowed to determine
compensatory and/or punitive damages for actions claiming discrimination on the
basis of age, gender, race, religion, disability or other legally protected
characteristic or for termination of employment that is wrongful or in violation
of implied contracts. However, Registrant believes that no litigation currently
pending to which it or Tiffany is a party or to which its properties are subject
will have a material adverse effect on its results of operations or financial
condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended January 31, 1996.
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of Registrant are:
<TABLE>
<CAPTION>
NAME AGE POSITION YEAR JOINED TIFFANY
<S> <C> <C> <C>
William R. Chaney 63 Chairman of the Board of Directors and 1980
Chief Executive Officer
Michael J. Kowalski 44 President 1983
James E. Quinn 44 Executive Vice President 1986
Jeanne B. Daniel 40 Senior Vice President - Merchandising 1986
Patrick B. Dorsey 45 Senior Vice President - General Counsel 1985
and Secretary
James N. Fernandez 40 Senior Vice President - Finance 1983
and Chief Financial Officer
</TABLE>
- PAGE 18 -
<PAGE> 19
<TABLE>
<S> <C> <C> <C>
Fernanda K. Gilligan 49 Senior Vice President - Public Relations 1984
John R. Loring 56 Senior Vice President - Design Director 1979
Diana Lyne 42 Senior Vice President - Marketing 1984
Thomas J. O'Neill 43 Senior Vice President - International 1985
John S. Petterson 37 Senior Vice President - Corporate Sales 1988
Dale S. Strohl 59 Senior Vice President - Operations 1984
Larry M. Segall 41 Vice President, Treasurer and Controller 1985
</TABLE>
William R. Chaney. Mr. Chaney, Chairman and Chief Executive Officer of Tiffany
since August 1984, joined Tiffany in January 1980 as a member of its Board.
Prior to 1984 he served as an executive officer of Avon Products Inc. Mr. Chaney
also serves on the board of directors of the Bank of New York.
Michael J. Kowalski. Mr. Kowalski was appointed President on January 18, 1996.
He previously served as Executive Vice President from March 19, 1992, with
overall responsibility in the following areas: merchandising, marketing,
advertising, public relations and product design. He has held a variety of
merchandising management positions since joining Tiffany in 1983 as Director of
Financial Planning.
James E. Quinn. Mr. Quinn joined the Company in July 1986 as Vice President of
branch sales for the Company's corporate sales operations. He was promoted to
his current position as Executive Vice President responsible for all United
States retail and corporate sales on March 19, 1992 and assumed responsibility
for retail and corporate sales for the Americas in 1994. In January, 1996 his
responsibilities were expanded to include Operations.
Jeanne B. Daniel. Ms. Daniel has served in a variety of merchandising management
positions since joining the Company in 1986 as a merchandising management
associate. She was appointed Senior Vice President with responsibility for
merchandising in October 1992.
Patrick B. Dorsey. Mr. Dorsey joined the Company in July 1985 as General Counsel
and Secretary.
James N. Fernandez. Mr. Fernandez joined Tiffany in October 1983 and has held
various positions in financial planning and management since that time. He was
appointed to his current position in April 1989.
- - PAGE 19 -
<PAGE> 20
Fernanda K. Gilligan. Mrs. Gilligan joined Tiffany in October 1984 as Director
of Retail Marketing. She assumed her current responsibilities in January 1990.
John R. Loring. Mr. Loring has served as Design Director since joining Tiffany
in 1979.
Diana Lyne. Ms. Lyne joined Tiffany in July 1984 as Director of Advertising. She
assumed her current responsibilities in January 1990.
Thomas J. O'Neill. Dr. O'Neill joined Tiffany in February 1985 as a management
associate. He assumed responsibility for sales in the Asia-Pacific region in
March 1992. His responsibilities expanded to include sales in the Middle East in
1994, and all international sales in January, 1996.
John S. Petterson. Mr. Petterson joined Tiffany in 1988 as a management
associate. He assumed his current responsibilities in May, 1995.
Dale S. Strohl. Mr. Strohl assumed his current responsibilities in September
1984.
Larry M. Segall. Mr. Segall joined Tiffany in 1985 as Controller. He was
appointed Treasurer-Controller on January 21, 1993.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Registrant's Common Stock is traded on the New York Stock Exchange. In
consolidated trading, the high and low selling prices per share for shares of
such Common Stock for Fiscal 1994 were:
<TABLE>
<CAPTION>
Fiscal 1994 High Low
<S> <C> <C>
First Fiscal Quarter $34.50 $28.50
Second Fiscal Quarter $37.50 $28.50
Third Fiscal Quarter $39.75 $33.63
Fourth Fiscal Quarter $43.63 $29.00
</TABLE>
In consolidated trading, the high and low selling prices per share for shares of
such Common Stock for Fiscal 1995 were:
<TABLE>
<CAPTION>
Fiscal 1995 High Low
<S> <C> <C>
First Fiscal Quarter $34.50 $29.00
Second Fiscal Quarter $38.88 $31.38
Third Fiscal Quarter $46.00 $38.25
Fourth Fiscal Quarter $55.75 $43.88
</TABLE>
- PAGE 20 -
<PAGE> 21
On March 25, 1996, the high and low selling prices quoted on such
exchange were $54.88 and $53.75 respectively. On March 25, 1996 there were 2,255
record holders of Registrant's Common Stock.
It is Registrant's policy to pay a quarterly dividend of $0.07 per
share of Common Stock, subject to declaration of such dividend by Registrant's
Board of Directors. In Fiscal 1994, dividends of $0.07 per share were paid on
April 11, 1994, July 11, 1994, October 11, 1994 and January 10, 1995. In Fiscal
1995, dividends of $0.07 per share were paid on April 11, 1995, July 11, 1995,
October 10, 1995 and January 10, 1996.
In calculating the aggregate market value of the voting stock held by
non-affiliates of the Registrant shown on the cover page of this Report on Form
10-K, 2,135,000 shares of Registrant's Common Stock beneficially owned by
Mitsukoshi Limited and by the executive officers and directors of the Registrant
(exclusive of shares which may be acquired on exercise of employee stock
options) were excluded, on the assumption that certain of those persons could be
considered "affiliates" under the provisions of Rule 405 promulgated under the
Securities Act of 1933.
ITEM 6. SELECTED FINANCIAL DATA
Incorporated by reference from Registrant's Annual Report to Stockholders for
the fiscal year ended January 31, 1996, page 8.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Incorporated by reference from Registrant's Annual Report to Stockholders for
the fiscal year ended January 31, 1996, pages 9-12.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Incorporated by reference from Registrant's Annual Report to Stockholders for
the fiscal year ended January 31, 1996, pages 14-27.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
NONE
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Incorporated by reference from Registrant's Proxy Statement dated April 8, 1996,
pages 2-6.
- - PAGE 21 -
<PAGE> 22
ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference from Registrant's Proxy Statement dated April 8, 1996,
pages 8-19.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated by reference from Registrant's Proxy Statement dated April 8, 1996,
pages 6-8.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated by reference from Registrant's Proxy Statement dated April 8, 1996,
pages 14-15. See also Part I, Item 1. Distribution and Marketing, International
Retail, above, for a discussion of Registrant's business relationship with
Mitsukoshi Limited, a holder of in excess of 10% of Registrant's issued and
outstanding Common Stock.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
(a) List of Documents Filed As Part of This Report:
1. Financial Statements:
Data incorporated by reference from
the 1995 Annual Report to Stockholders
of Tiffany & Co. and Subsidiaries:
Report of Independent Accountants
(following this Form 10-K)
Consolidated balance sheets
as of January 31, 1996 and 1995
Consolidated statements of operations
for the years ended January 31, 1996, 1995 and 1994
Consolidated statements of stockholders' equity
for the years ended January 31, 1996, 1995 and 1994
Consolidated statements of cash flows
for the years ended January 31, 1996, 1995 and 1994
Notes to consolidated financial statements
- PAGE 22 -
<PAGE> 23
2. Financial Statement Schedules:
The following financial statement schedule should be read in
conjunction with the consolidated financial statements incorporated by reference
herein:
II. Valuation and qualifying accounts and reserves.
All other schedules have been omitted since they are either not applicable or
not required, or because the information required is included in the
consolidated financial statements and notes thereto.
3. Exhibits:
The following exhibits have been filed with the Securities and Exchange
Commission but are not attached to copies of this Form 10-K other than complete
copies filed with said Commission and the New York Stock Exchange:
Exhibit Description
3.1 Restated Certificate of Incorporation of Registrant. Incorporated by
reference from Exhibit 3.1 to Registrant's Report on Form 8-K dated
June 23, 1989.
3.2 By-Laws of Registrant (as last amended January 18, 1996).
4.1 Form of Rights Agreement Dated as of November 17, 1988 by and between
Registrant and Manufacturers Hanover Trust Company, as Rights Agent.
Incorporated by reference from Exhibit 4.1 to Registrant's Report on
Form 8-K dated November 18, 1988.
4.2 Amendment to Rights Agreement dated as of September 21, 1989 by and
between Registrant and Manufacturers Hanover Trust Company, as Rights
Agent. Incorporated by reference from Exhibit 4.2 to Registrant's
Report on Form 8-K dated September 28, 1989.
4.3 Indenture dated as of March 15, 1991 between Registrant and
Manufacturers Hanover Trust Company, as Trustee, in respect of
Registrant's 6-3/8% Convertible Subordinated Debentures Due 2001.
Incorporated by reference from Exhibit 4.3 to Registrant's Report on
Form 10-K for the fiscal year ended January 31, 1992 and dated April
10, 1992.
10.5 Designer Agreement between Tiffany and Paloma Picasso dated April 4,
1985. Incorporated by reference from Exhibit 10.5 filed with
Registrant's Registration Statement on Form S-1, Registration No.
33-12818 (the "Registration Statement").
- - PAGE 23 -
<PAGE> 24
Exhibit Description
10.16 Lease dated October 15, 1984 between Avon Export Corporation and
Tiffany for 727 Fifth Avenue, New York, N.Y. Incorporated by reference
from Exhibit 10.16 to the Registration Statement.
10.53 Distribution and Manufacturing Services Agreement between Chanel, Inc.
and Tiffany and Company dated as of January 1, 1993. Incorporated by
reference from Exhibit 10.53 filed with Registrant's Report on Form
10-K for the fiscal year ended January 31, 1993 and dated April 12,
1993.
10.54 Letter Agreement dated March 4, 1987 between Tiffany and Elsa Peretti.
Incorporated by reference from Exhibit 10.54 to the Registration
Statement.
10.56 Purchase Agreement dated as of July 18, 1988, by and between Tiffany
and Chanel, Inc. Incorporated by reference from Exhibit 28.2 to the
Form S-8.
10.89 Subscription Agreement in respect of Registrant's 6-3/8% Convertible
Subordinated Debentures due 2001, dated March 8, 1991 among Lehman
Brothers International Limited, Credit Suisse First Boston Limited,
Goldman Sachs International Limited, Merrill Lynch International
Limited, The Nikko Securities Co., (Europe) Ltd., Paribas Limited,
Robertson, Stephens & Company, UBS Phillips & Drew Securities Limited.
Incorporated by reference from Exhibit 10.89 to Registrant's Report on
Form 10-K for the fiscal year ended January 31, 1991.
10.101 Form of Note Purchase Agreement, including the form of 7.52% Senior
Notes due 2003 issued thereunder at par by Registrant on January 31,
1993 for an aggregate principal amount of $51,500,000. Incorporated by
reference from Exhibit 10.101 filed with Registrant's Report on Form
10-K for the fiscal year ended January 31, 1993 and dated April 12,
1993.
10.102 Master Agreement (interest rate transfers "Swap Transactions") dated
January 26, 1993 between Lehman Brothers Special Financing Inc. and
Registrant, and confirmation of Swap Transaction dated February 1, 1993
for notional amount $50 million. Incorporated by reference from Exhibit
10.102 filed with Registrant's Report on Form 10-K for the fiscal year
ended January 31, 1993 and dated April 12, 1993.
10.111 Agreement made June 12, 1993 by and between Tiffany-Japan (Delaware)
Inc., Tiffany and Mitsukoshi Limited. Incorporated by reference from
Exhibit 10.111 filed with Registrant's Report on Form 8-K dated June
12, 1993.
- PAGE 24 -
<PAGE> 25
Exhibit Description
10.116 Credit Agreement dated as of June 26, 1995 by and among Registrant,
Tiffany, Tiffany & Co. International, The Bank of New York, as Issuing
Bank and as Swing Line Lender, The Bank of New York, as Arranging Agent
and The Bank of New York as Administrative Agent. Incorporated by
reference from Exhibit 10.116 filed with Registrant's Report on Form
10-Q for the fiscal quarter ended July 31, 1995 and dated September 13,
1995.
10.119 Amended and Restated Lease Agreement dated as of December 1, 1995,
effective as of August 1, 1995, by and between First Fidelity Bank,
National Association, not in its individual capacity, but solely as the
trustee under that certain Trust Agreement 1995-1 dated as of July 1,
1995, as amended, as Owner-Lessor and Tiffany, as Lessee; Amended and
Restated Construction Agency Agreement dated as of December 1, 1995,
effective as of December 11, 1995, by and between Tiffany, as Agent,
and First Fidelity Bank, National Association, a national banking
association, not in its individual capacity but solely as trustee
pursuant to a Trust Agreement 1995-1 dated as of July 1, 1995, as
amended, as Owner; Agreement and Consent to Assignment dated as of
December 1, 1995 among Registrant, Tiffany and Fleet National Bank of
Connecticut, as Collateral Trustee; and Definition Appendix to the
foregoing documents listed in this Exhibit 10.119.
10.120 Watch Supplier Agreement as of October 30, 1995 by and among Tiffany
and Tiffany & Co. Watch Center S.A. and TWF SA.
10.121 Agreement as of February 23, 1996 among Mitsukoshi Limited,
Tiffany-Japan Inc. and Tiffany.
11.1 Statement re Computation of Per Share Earnings.
13.1 Annual Report to Stockholders for Fiscal Year Ended January 31, 1996
(pages 8 through 27 of such Annual Report have been filed in electronic
format).
21.1 Subsidiaries of Registrant.
23.1 Consent of Coopers & Lybrand L.L.P., independent accountants.
- - PAGE 25 -
<PAGE> 26
Executive Compensation Plans and Arrangements
Exhibit Description
10.2 Registrant's 1985 Stock Option Plan and forms of incentive stock option
agreement and stock option agreement, as last amended on January 18,
1990. Incorporated by reference from Exhibit 10.3 to Registrant's
Report on Form 10-K for the fiscal year ended January 31, 1990 and
dated April 13, 1990.
10.3 Registrant's 1986 Stock Option Plan and form of stock option agreement,
as last amended on March 19, 1992. Incorporated by reference from
Exhibit 10.3 to Registrant's Report on Form 10-Q for the fiscal quarter
ended April 30, 1992 and dated June 11, 1992.
10.25 Deferred Compensation Agreement between William R. Chaney and Tiffany
and Company dated December 31, 1989. Incorporated by reference from
Exhibit 10.25 to Registrant's Report on Form 10-K for the fiscal year
ended January 31, 1990 and dated April 13, 1990.
10.49 Form of Indemnity Agreement, approved by the Board of Directors on
March 19, 1987. Incorporated by reference from Exhibit 10.49 to the
Registration Statement.
10.60 Registrant's 1988 Director Stock Option Plan, as amended May 18, 1995,
and form of Stock Option agreement.
10.105 Group Long Term Disability Insurance Policy issued by The Mutual
Benefit Life Insurance Company. Policy Number: G53,152. Incorporated by
reference from Exhibit 10.105 filed with Registrant's Report on Form
10-K for the fiscal year ended January 31, 1993 and dated April 12,
1993.
10.106 Tiffany and Company Executive Deferral Plan. Incorporated by reference
from Exhibit 10.106 filed with Registrant's Report on Form 10-K for the
fiscal year ended January 31, 1993 and dated April 12, 1993.
10.108 Tiffany & Co. Retirement Plan for Non-Employee Directors. Incorporated
by reference from Exhibit 10.108 filed with Registrant's Report on Form
10-K for the fiscal year ended January 31, 1993 and dated April 12,
1993.
10.109 Summary of informal incentive cash bonus plan for managerial employees.
Incorporated by reference from Exhibit 10.109 filed with Registrant's
Report on Form 10-K for the fiscal year ended January 31, 1993 and
dated April 12, 1993.
- PAGE 26 -
<PAGE> 27
Exhibit Description
10.113 Tiffany and Company Pension Plan, as last amended February 16, 1994.
Incorporated by reference from Exhibit 10.113 filed with Registrant's
Report on Form 10-K for the fiscal year ended January 31, 1994 and
dated April 7, 1994.
10.114 1994 Tiffany and Company Supplemental Retirement Income Plan.
Incorporated by reference from Exhibit 10.114 filed with Registrant's
Report on Form 10-K for the fiscal year ended January 31, 1994 and
dated April 7, 1994.
10.115 1994 Form of Split Dollar Life Insurance Agreement entered into by
Tiffany and Company and certain Executive Officers including form of
Assignment of Life Insurance Policy as Collateral and Rider No. 1 to
1994 Form of Split Dollar Life Insurance Agreement entered into by
Tiffany and Company and certain Executive Officers. Incorporated by
reference from Exhibit 10.115 filed with Registrant's Report on
Form 10-K for the fiscal year ended January 31, 1995 and dated
April 7, 1995.
REGISTRANT WILL FURNISH COPIES OF ANY OF THE FOREGOING EXHIBITS TO ANY
REGISTERED HOLDER OF THE REGISTRANT'S COMMON STOCK UPON PAYMENT OF A FEE OF $.15
PER PAGE FURNISHED, WHICH FEE REPRESENTS REGISTRANT'S EXPENSES IN FURNISHING
SUCH EXHIBIT.
(b) Reports on Form 8-K.
On January 22, 1996 Registrant filed a Report on Form 8-K reporting the
appointment of Michael J. Kowalski to the position of President. The text of
Registrant's announcement was included in the Report.
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
TIFFANY & CO.
(Registrant)
Date: April 8, 1996 By: /s/ William R. Chaney
-------------------------
William R. Chaney
Chairman of the Board
- - PAGE 27 -
<PAGE> 28
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
By: /s/ William R. Chaney
----------------------------------------
William R. Chaney
Chairman of the Board
(principal executive officer) (director)
By: /s/ James N. Fernandez By: /s/ Charles K. Marquis
----------------------------- -----------------------------
James N. Fernandez Charles K. Marquis
Senior Vice President-Finance Director
(principal financial officer)
By: /s/ Larry M. Segall By: /s/ James E. Quinn
----------------------------- -----------------------------
Larry M. Segall James E. Quinn
Vice President Executive Vice President
(principal accounting officer) (director)
By: /s/ Jane A. Dudley By: /s/ Yoshiaki Sakakura
----------------------------- -----------------------------
Jane A. Dudley Yoshiaki Sakakura
Director Director
By: /s/ Samuel L. Hayes, III By: /s/ William A. Shutzer
----------------------------- -----------------------------
Samuel L. Hayes, III William A. Shutzer
Director Director
By: /s/ Michael J. Kowalski By: /s/ Geraldine Stutz
----------------------------- -----------------------------
Michael J. Kowalski Geraldine Stutz
President Director
(director)
- PAGE 28 -
<PAGE> 29
[COOPERS AND LYBRAND LETTERHEAD]
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and
Board of Directors of Tiffany & Co.
Our report on the consolidated financial statements of Tiffany & Co. and
Subsidiaries has been incorporated by reference in this Form 10-K from page 13
of the 1995 Annual Report to Stockholders of Tiffany & Co. and Subsidiaries. In
connection with our audits of such consolidated financial statements, we have
also audited the related financial statement schedule listed in item 14(a)2 of
this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic consolidated financial statements taken as
a whole, presents fairly, in all material respects, the information required to
be included therein.
Coopers & Lybrand LLP
New York, New York
March 6, 1996
<PAGE> 30
TIFFANY & CO. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E
- --------------------------------------------------------------------------------------------------------------------------
Additions
---------------------------
Balance at Charged to
beginning costs and Charged to Balance at end
Description of period expenses other accounts Deductions of period
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year Ended
January 31, 1996:
Reserves deducted from
assets:
Accounts receivable
allowances principally
doubtful accounts $5,721,155 $3,034,423 $ -- $3,057,361 (a) $ 5,698,217
Allowance for inventory
liquidation and
obsolescence 8,602,482 3,043,617 -- 698,284 (b) 10,947,815
Allowance for inventory
shrinkage 2,468,133 2,728,866 -- 3,522,463 (c) 1,674,536
LIFO Reserve 9,770,000 2,100,000 -- -- 11,870,000
</TABLE>
- -------------------
(a) Uncollectible accounts written off.
(b) Liquidation of inventory previously written down to market.
(c) Physical inventory losses.
<PAGE> 31
TIFFANY & CO. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E
- --------------------------------------------------------------------------------------------------------------------------
Additions
---------------------------
Balance at Charged to
beginning costs and Charged to Balance at end
Description of period expenses other accounts Deductions of period
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year Ended
January 31, 1995:
Reserves deducted from
assets:
Accounts receivable
allowances principally
doubtful accounts $4,170,217 $3,640,485 $ -- $2,089,547 (a) $5,721,155
Allowance for inventory
liquidation and
obsolescence 7,061,876 1,787,945 -- 247,339 (b) 8,602,482
Allowance for inventory
shrinkage 2,035,358 2,195,829 -- 1,763,054 (c) 2,468,133
LIFO Reserve 8,470,000 1,300,000 -- -- 9,770,000
</TABLE>
- -------------------
(a) Uncollectible accounts written off.
(b) Liquidation of inventory previously written down to market.
(c) Physical inventory losses.
<PAGE> 32
TIFFANY & CO. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E
- --------------------------------------------------------------------------------------------------------------------------
Additions
---------------------------
Balance at Charged to
beginning costs and Charged to Balance at end
Description of period expenses other accounts Deductions of period
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year Ended
January 31, 1994:
Reserves deducted from
assets:
Accounts receivable
allowances principally
doubtful accounts $7,292,659 $3,119,873 $(3,000,000)(a) $3,242,315(b) $4,170,217
Allowance for inventory
liquidation and
obsolescence 3,527,704 3,833,000 - 298,828(c) 7,061,876
Allowance for inventory
shrinkage 2,150,000 2,573,852 - 2,688,494(d) 2,035,358
LIFO Reserve 6,871,000 1,599,000 - - 8,470,000
</TABLE>
- -------------------
(a) Reclassified to the product return reserve in connection with the
Company's realignment of its business in Japan.
(b) Uncollectible accounts written off.
(c) Liquidation of inventory previously written down to market.
(d) Physical inventory losses.
<PAGE> 33
EXHIBIT INDEX
SEE PAGES 23 THROUGH 27 FOR A COMPLETE LIST OF EXHIBITS FILED, INCLUDING
EXHIBITS INCORPORATED BY REFERENCE FROM PREVIOUSLY FILED DOCUMENTS.
EXHIBIT DESCRIPTION
3.2 By-Laws of Registrant (as last amended January 18, 1996).
10.60 Registrant's 1988 Director Stock Option Plan, as amended May 18, 1995,
and form of Stock Option agreement.
10.119 Amended and Restated Lease Agreement dated as of December 1, 1995,
effective as of August 1, 1995, by and between First Fidelity Bank,
National Association, not in its individual capacity, but solely as the
trustee under that certain Trust Agreement 1995-1 dated as of July 1,
1995, as amended, as Owner-Lessor and Tiffany, as Lessee; Amended and
Restated Construction Agency Agreement dated as of December 1, 1995,
effective as of December 11, 1995, by and between Tiffany, as Agent,
and First Fidelity Bank, National Association, a national banking
association, not in its individual capacity but solely as trustee
pursuant to a Trust Agreement 1995-1 dated as of July 1, 1995, as
amended, as Owner; Agreement and Consent to Assignment dated as of
December 1, 1995 among Registrant, Tiffany and Fleet National Bank of
Connecticut, as Collateral Trustee; and Definition Appendix to the
foregoing documents listed in this Exhibit 10.119.
10.120 Watch Supplier Agreement as of October 30, 1995 by and among Tiffany
and Tiffany & Co. Watch Center S.A. and TWF SA.
10.121 Agreement as of February 23, 1996 among Mitsukoshi Limited, Tiffany-
Japan Inc. and Tiffany.
11.1 Statement re Computation of Per Share Earnings
13.1 Annual Report to Stockholders for Fiscal Year Ended January 31, 1996
(pages 8 through 27 of such Annual Report have been filed in electronic
format).
21.1 Subsidiaries of Registrant.
23.1 Consent of Coopers & Lybrand L.L.P., independent accountants.
27 Financial Data Schedule.
NOTE: ALL OTHER EXHIBITS HAVE BEEN INCORPORATED BY REFERENCE FROM EXHIBITS TO
DOCUMENTS PREVIOUSLY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. REFER TO
THE LIST OF EXHIBITS ON PAGES 23 THROUGH 27 FOR REGISTRATION, FILE AND EXHIBIT
NUMBERS.
- - PAGE 29 -
<PAGE> 1
EXHIBIT 3.2
RESTATED BY-LAWS
AS LAST AMENDED JANUARY 18, 1996
-OF-
TIFFANY & CO., A DELAWARE CORPORATION
(HEREIN CALLED THE "CORPORATION")
-OO0OO-
ARTICLE I
Stockholders
SECTION 1.01. Annual Meeting. The Board of Directors by resolution shall
designate the time, place and date (which shall be, in the case of the first
annual meeting, not more than 13 months after the organization of the
Corporation and, in the case of all other annual meetings not more than 13
months after the date of the last annual meeting) of the annual meeting of the
stockholders for the election of directors and the transaction of such other
business as may come before it.
SECTION 1.02. Notice of Meetings of Stockholders. Whenever stockholders are
required or permitted to take any action at a meeting, written notice of the
meeting shall be given (unless that notice shall be waived or unless the meeting
is to be dispensed with in accordance with the provisions of Article SIXTH of
the Certificate of Incorporation of the Corporation) which shall state the
place, date and hour of the meeting and, in the case of a special meeting, the
purpose or purposes for which the meeting is called. The written notice of any
meeting shall be given, personally or by mail, not less than ten nor more than
sixty days before the date of the meeting to each stockholder entitled to vote
at such meeting. If mailed, such notice is given when deposited in the United
States mail, postage prepaid, directed to the stockholder at his address as it
appears on the records of the Corporation.
When a meeting is adjourned to another time or place, notice need not be given
of the adjourned meeting if the time and place thereof are announced at the
meeting at which the adjournment is taken. At the adjourned meeting the
Corporation may transact any business which might have been transacted at the
original meeting. If the adjournment is for more than thirty days, or if after
the adjournment a new record date is fixed for the adjourned meeting, a notice
of the adjourned meeting shall be given to each stockholder of record entitled
to vote at the meeting.
<PAGE> 2
SECTION 1.03. Quorum. At all meetings of the stockholders, the holders of a
majority of the stock issued and outstanding and entitled to vote thereat,
present in person or by proxy, shall constitute a quorum for the transaction of
any business.
When a quorum is once present to organize a meeting, it is not broken by the
subsequent withdrawal of any stockholders.
The stockholders present may adjourn the meeting despite the absence of a quorum
and at any such adjourned meeting at which the requisite amount of voting stock
shall be represented, the Corporation may transact any business which might have
been transacted at the original meeting had a quorum been there present.
SECTION 1.04. Method of Voting. The vote upon any question before the meeting
need not be by ballot. All elections and all other questions shall be decided by
a plurality of the votes cast, at a meeting at which a quorum is present, except
as expressly provided otherwise by the General Corporation Law of the State of
Delaware or the Certificate of Incorporation.
SECTION 1.05. Voting Rights of Stockholders and Proxies. Each stockholder of
record entitled to vote in accordance with the laws of the State of Delaware,
the Certificate of Incorporation or these By-Laws, shall at every meeting of the
stockholders be entitled to one vote in person or by proxy for each share of
stock entitled to vote standing in his name on the books of the Corporation, but
no proxy shall be voted on after three years from its date, unless the proxy
provides for a longer period.
SECTION 1.06. Ownership of its Own Stock. Shares of its own capital stock
belonging to the Corporation or to another corporation, if a majority of the
shares entitled to vote in the election of directors of such other corporation
is held, directly or indirectly, by the Corporation, shall neither be entitled
to vote nor be counted for quorum purposes. Nothing in this section shall be
construed as limiting the right of any corporation to vote stock, including but
not limited to its own stock, held by it in a fiduciary capacity.
SECTION 1.07. Voting by Fiduciaries and Pledgors. Persons holding stock in a
fiduciary capacity shall be entitled to vote the shares so held. Persons whose
stock is pledged shall be entitled to vote, unless in the transfer by the
pledgor on the books of the Corporation he has expressly empowered the pledgee
to vote thereon, in which case only the pledgee, or his proxy, may represent
such stock and vote thereon.
Tiffany & Co. (Delaware) Restated By-Laws 1/18/96 Page 2
<PAGE> 3
If shares or other securities having voting power stand of record in the names
of two or more persons, whether fiduciaries, members of a partnership, joint
tenants, tenants in common, tenants by the entirety or otherwise, or if two or
more persons have the same fiduciary relationship respecting the same shares,
unless the Secretary of the Corporation is given written notice to the contrary
and is furnished with a copy of the instrument or order appointing them or
creating the relationship wherein it is so provided, their acts with respect to
voting shall have the following effect:
(1) If only one votes, his act binds all;
(2) If more than one votes, the act of the majority so voting
binds all;
(3) If more than one votes, but the vote is evenly split on any
particular matter, each faction may vote the securities in
question proportionally, or any person voting the shares, or
a beneficiary, if any, may apply to the Court of Chancery or
such other court as may have jurisdiction to appoint an
additional person to act with the persons so voting the
shares, which shall then be voted as determined by a majority
of such persons and the person appointed by the Court. If
the instrument so filed shows that any such tenancy is held
in unequal interests, a majority or even-split for the
purpose of this subsection shall be a majority or even-split
in interest.
SECTION 1.08. Fixing Date for Determination of Stockholders of Record. In order
to determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock,
or for the purpose of any other lawful action, the Board of Directors may fix,
in advance, a record date, which shall not be more than sixty nor less than ten
days before the date of such meeting, nor more than sixty days prior to any
other action. If no record date is fixed by the Board of Directors, the record
date shall be determined in accordance with the provisions of the General
Corporation Law of the State of Delaware.
SECTION 1.09. List of Stockholders. The officer who has charge of the stock
ledger of the Corporation shall prepare and make, at least ten days before every
meeting of the stockholders, a complete list of the stockholders entitled to
vote at the meeting, arranged in alphabetical order, and showing the address of
each stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder, for
any purpose germane to the meeting, during
Tiffany & Co. (Delaware) Restated By-Laws 1/18/96 Page 3
<PAGE> 4
ordinary business hours, for a period of at least ten days prior to the meeting,
either at a place within the city where the meeting is to be held (which place
shall be specified in the notice of the meeting) or, if not so specified, at the
place where said meeting is to be held, and the list shall be produced and kept
at the time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who may be present. Upon the willful neglect or
refusal of the directors to produce such a list at any meeting for the election
of directors, they shall be ineligible for election to any office at such
meeting.
SECTION 1.10. Stockholder's Right of Inspection. Stockholders of record, in
person or by attorney or other agent, shall have the right, upon written demand
under oath stating the purpose thereof, during the usual hours for business to
inspect for any proper purpose the Corporation's stock ledger, a list of its
stockholders, and its other books and records, and to make copies or extracts
therefrom. A proper purpose shall mean a purpose reasonably related to such
person's interest as a stockholder. In every instance where an attorney or other
agent shall be the person who seeks the right to inspection, the demand under
oath shall be accompanied by a power of attorney or such other writing which
authorizes the attorney or other agent to so act on behalf of the stockholder.
The demand under oath shall be directed to the Corporation at its registered
office in this State or at its principal place of business.
The stock ledger shall be the only evidence as to who are the stockholders
entitled to examine the stock ledger, the list required by Section 1.01 or the
books of the Corporation, or to vote in person or by proxy at any meeting of the
stockholders.
SECTION 1.11. Conduct of Meetings. Meetings of the stockholders shall be
presided over by one of the following officers in the order of seniority and if
present and acting: the Chairman of the Board of Directors, if any, the Vice
Chairman of the Board of Directors, if any, the Chief Executive Officer, if any,
the President, a Vice President, or, if none of the foregoing is in office and
present and acting, by a chairman to be chosen by the stockholders. The
Secretary of the Corporation, or in his absence, an Assistant Secretary, shall
act as secretary of every meeting, but if neither the Secretary nor an Assistant
Secretary is present, the chairman of the meeting shall appoint a secretary of
the meeting. In the conduct of a meeting of the stockholders, all of the powers
and authority vested in a presiding officer by law or practice shall be vested
in the chairman of the meeting.
Tiffany & Co. (Delaware) Restated By-Laws 1/18/96 Page 4
<PAGE> 5
SECTION 1.12. Advance Notice of Stockholder Proposals. At any meeting of the
stockholders, only such business shall be conducted as shall have been brought
before the meeting (i) by or at the direction of the Board of Directors or (ii)
by any stockholder of the Corporation who complies with the notice procedures
set forth in this Section 1.12. For business to be properly brought before any
meeting of the stockholders by a stockholder, the stockholder must have given
notice thereof in writing to the Secretary of the Corporation at the principal
executive offices of the Corporation, which written notice must be received by
the Secretary of the Corporation not less than 60 days in advance of such
meeting or, if later, the fifteenth day following the first public disclosure of
the date of such meeting (by mailing of notice of the meeting or otherwise). A
stockholder's notice to the Secretary shall set forth as to each matter the
stockholder proposes to bring before the meeting (1) a brief description of the
business desired to be brought before the meeting and the reasons for conducting
such business at the meeting, (2) the name and address, as they appear on the
Corporation's books, of the stockholder proposing such business, (3) the class,
series and number of shares of the Corporation that are beneficially owned by
the stockholder, and (4) any material interest of the stockholder in such
business. In addition, the stockholder making such proposal shall promptly
provide any other information reasonably requested by the Corporation.
Notwithstanding anything in these Bylaws to the contrary, no business shall be
conducted at any meeting of the stockholders except in accordance with the
procedures set forth in this Section 1.12. The Chairman of any such meeting
shall direct that any business not properly brought before the meeting shall not
be considered.
ARTICLE II
Directors
SECTION 2.01. Management of Business. The business of the Corporation shall be
managed by its Board of Directors.
The Board of Directors, in addition to the powers and authority expressly
conferred upon it herein, by statute, by the Certificate of Incorporation of the
Corporation or otherwise, is hereby empowered to exercise all such powers as may
be exercised by the Corporation, except as expressly provided otherwise by the
statutes of the State of Delaware, by the Certificate of Incorporation of the
Corporation or by these By-Laws.
Without prejudice to the generality of the foregoing, the Board of Directors, by
resolution or resolutions, may create and issue, whether or not in connection
with the issue and sale of any shares of stock or other securities of the
Corporation, rights or options entitling the holders thereof to purchase from
the Corporation any shares of its capital stock of any class or classes or any
other
Tiffany & Co. (Delaware) Restated By-Laws 1/18/96 Page 5
<PAGE> 6
securities of the Corporation, such rights or options to be evidenced by or in
such instrument or instruments as shall be approved by the Board of Directors.
The terms upon which, including the time or times, which may be limited or
unlimited in duration, at or within which, and the price or prices at which, any
such rights or options may be issued and any such shares or other securities may
be purchased from the Corporation upon the exercise of any such right or option
shall be such as shall be fixed and stated in the resolution or resolutions
adopted by the Board of Directors providing for the creation and issue of such
rights or options, and, in every case, set forth or incorporated by reference in
the instrument or instruments evidencing such rights or options. In the absence
of actual fraud in the transaction, the judgment of the directors as to the
consideration for the issuance of such rights or options and the sufficiency
thereof shall be conclusive. In case the shares of stock of the Corporation to
be issued upon the exercise of such rights or options shall be shares having a
par value, the price or prices so to be received therefor shall not be less than
the par value thereof. In case the shares of stock to be issued shall be shares
of stock without par value, the consideration therefor shall be determined in
the manner provided in Section 153 of the General Corporation Law of the State
of Delaware.
SECTION 2.02. Qualifications and Number of Directors.
Directors need not be stockholders. The number of directors which shall
constitute the whole Board shall be nine (9), but such number as determined by
the Board of Directors may be increased or decreased and subsequently again from
time to time increased or decreased by an amendment to these By-Laws. In order
to qualify for election or appointment directors shall be younger than 72 years
when elected or appointed and a director may be removed by action of the Board
of Directors if such director shall have failed to submit his or her resignation
on or before the first meeting of the Board of Directors occurring following the
72nd birthday of such director, provided that the Board of Directors may in its
discretion, by specific resolution taken without the participation of the
director in question, waive the provisions of this sentence with respect to an
individual director whose continued service is deemed uniquely important to the
Corporation.
SECTION 2.03. Election and Term. The directors shall be elected at the annual
meeting of the stockholders, and each director shall be elected to hold office
until his successor shall be elected and qualified, or until his earlier
resignation or removal.
Tiffany & Co. (Delaware) Restated By-Laws 1/18/96 Page 6
<PAGE> 7
SECTION 2.04. Resignations. Any director of the Corporation may resign at any
time by giving written notice to the Corporation. Such resignation shall take
effect at the time specified therein, if any, or if no time is specified
therein, then upon receipt of such notice by the Corporation; and, unless
otherwise provided therein, the acceptance of such resignation shall not be
necessary to make it effective.
SECTION 2.05. Vacancies and Newly Created Directorships. Vacancies and newly
created directorships resulting from any increase in the authorized number of
directors may be filled by a majority of the directors then in office, though
less than a quorum, or by a sole remaining director, and the directors so chosen
shall hold office until their successors shall be elected and qualified, or
until their earlier resignation or removal. When one or more directors shall
resign from the Board, effective at a future date, a majority of the directors
then in office, including those who have so resigned, shall have power to fill
such vacancy or vacancies, the vote thereon to take effect when such resignation
or resignations shall become effective, and each director so chosen shall hold
office as herein provided in the filling of other vacancies.
SECTION 2.06. Quorum of Directors. At all meetings of the Board of Directors, a
majority of the entire Board, but not less than two directors, shall constitute
a quorum for the transaction of business, except that when a board of one
director is authorized, then one director shall constitute a quorum. The act of
a majority of the directors present at any meeting at which there is a quorum
shall be the act of the Board of Directors except as provided in Sections 2.05
and 2.12 hereof.
A majority of the directors present, whether or not a quorum is present, may
adjourn any meeting of the directors to another time and place. Notice of any
adjournment need not be given if such time and place are announced at the
meeting.
SECTION 2.07. Annual Meeting. The newly elected Board of Directors shall meet
immediately following the adjournment of the annual meeting of stockholders in
each year at the same place, within or without the State of Delaware, and no
notice of such meeting shall be necessary.
SECTION 2.08. Regular Meetings. Regular meetings of the Board of Directors may
be held at such time and place, within or without the State of Delaware, as
shall from time to time be fixed by the Board and no notice thereof shall be
necessary.
Tiffany & Co. (Delaware) Restated By-Laws 1/18/96 Page 7
<PAGE> 8
SECTION 2.09. Special Meetings. Special meetings may be called at any time by
the Chief Executive Officer, the President, any VicePresident, the Treasurer or
the Secretary or by resolution of the Board of Directors. Special meetings shall
be held at such place, within or without the State of Delaware, as shall be
fixed by the person or persons calling the meeting and stated in the notice or
waiver of notice of the meeting.
Special meetings of the Board of Directors shall be held upon notice to the
directors or waiver thereof. Unless waived, notice of each special meeting of
the directors, stating the time and place of the meeting, shall be given to each
director by delivered letter, by telegram or by personal communication either
over the telephone or otherwise, in each such case not later than the second day
prior to the meeting, or by mailed letter deposited in the United States mail
with postage thereon prepaid not later than the seventh day prior to the
meeting. Notices of special meetings of the Board of Directors and waivers
thereof need not state the purpose or purposes of the meeting.
SECTION 2.10. Action Without a Meeting. Any action required or permitted to be
taken at any meeting of the Board of Directors or of any committee thereof may
be taken without a meeting if all members of the Board or committee, as the case
may be, consent thereto in a writing or writings and the writing or writings are
filed with the minutes of proceedings of the Board or committee.
SECTION 2.11. Compensation. Directors shall receive such fixed sums and expenses
of attendance for attendance at each meeting of the Board or of any committee
and/or such salary as may be determined from time to time by the Board of
Directors; provided that nothing herein contained shall be construed to preclude
any director from serving the Corporation in any other capacity and receiving
compensation therefor.
SECTION 2.12. Executive Committee. The Board of Directors may, by resolution or
resolutions, passed by a majority of the whole Board, designate an Executive
Committee (and may discontinue the same at any time) to consist of one or more
of the directors of the Corporation. The members shall be appointed by the Board
and shall hold office during the pleasure of the Board. The Board may designate
one or more directors as alternate members of the Committee, who may replace an
absent or disqualified member at any meeting of the Committee. The Executive
Committee shall have and may exercise all the powers of the Board of Directors
(when the Board is not in session) in the management of the business and affairs
of the Corporation (and may authorize the seal of the Corporation to be affixed
to all papers which may require it), except that the Executive Committee shall
have no power (a) to elect directors; (b) to alter, amend or repeal these
By-Laws or any resolution or resolutions of the directors designating an
Executive Committee; (c) to declare any dividend or make any other
Tiffany & Co. (Delaware) Restated By-Laws 1/18/96 Page 8
<PAGE> 9
distribution to the stockholders of the Corporation; or (d) to appoint any
member of the Executive Committee. Regular meetings of the Executive Committee
may be held at such time and place, within or without the State of Delaware, as
shall from time to time be fixed by the Executive Committee and no notice
thereof shall be necessary. Special meetings may be called at any time by any
officer of the Corporation or any member of the Executive Committee. Special
meetings shall be held at such place, within or without the State of Delaware,
as shall be fixed by the person calling the meeting and stated in the notice or
waiver of the meeting. A majority of the members of the Executive Committee
shall constitute a quorum for the transaction of business and the act of a
majority present at which there is a quorum shall be the act of the Executive
Committee. Notice of each special meeting of the Executive Committee shall be
given (or waived) in the same manner as notice of a directors' meeting.
SECTION 2.13. Other Committees. The Board may, by resolution passed by a
majority of the whole Board, designate one or more committees, each committee to
consist of one or more of the directors of the Corporation. Any such committee,
to the extent provided in the resolution of the Board and subject to any
restrictions or limitations on the delegation of power and authority imposed by
applicable Delaware law, shall have and may exercise all the powers and
authority of the Board in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be affixed to all
papers which may require it. Any such committee shall keep written minutes of
its meetings and report such minutes to the Board at the next regular meeting of
the Board.
ARTICLE III
Officers
SECTION 3.01. Number. The officers of the Corporation shall be chosen by the
Board of Directors. The officers shall be a Chief Executive Officer, a
President, a Secretary and a Treasurer, and such number of Vice-Presidents,
Assistant Secretaries and Assistant Treasurers, and such other officers, if any,
as the Board may from time to time determine. The Board may choose such other
agents as it shall deem necessary. Any number of offices may be held by the same
person.
SECTION 3.02. Terms of Office. Each officer shall hold his office until his
successor is chosen and qualified or until his earlier resignation or removal.
Any officer may resign at any time by written notice to the Corporation.
Tiffany & Co. (Delaware) Restated By-Laws 1/18/96 Page 9
<PAGE> 10
SECTION 3.03. Removal. Any officer may be removed from office at any time by the
Board of Directors with or without cause.
SECTION 3.04. Authority. The Secretary shall record all of the proceedings of
the meetings of the stockholders and directors in a book to be kept for that
purpose, and shall have the authority, perform the duties and exercise the
powers in the management of the Corporation usually incident to the office held
by him, and/or such other authority, duties and powers as may be assigned to him
from time to time by the Board of Directors or the Chief Executive Officer. The
other officers, and agents, if any, shall have the authority, perform the duties
and exercise the powers in management of the Corporation usually incident to the
offices held by them, respectively, and/or such other authority, duties and
powers as may be assigned to them from time to time by the Board of Directors or
(except in the case of the Chief Executive Officer) by the Chief Executive
Officer.
SECTION 3.05. Voting Securities Owned by the Corporation. Powers of attorney,
proxies, waivers of notice of meeting, consents and other instruments relating
to securities owned by the Corporation may be executed in the name of and on
behalf of the Corporation by the Chief Executive Officer, the President or any
Vice-President and any such officer may, in the name of and on behalf of the
Corporation, take all such action as any such officer may deem advisable to vote
in person or by proxy at any meeting of security holders of any corporation in
which the Corporation may own securities and at any such meeting shall possess
and may exercise any and all rights and powers incident to the ownership of such
securities and which, as the owner thereof, the Corporation might have exercised
and possessed if present. The Board of Directors may, by resolution, from time
to time confer like powers upon any other person or persons.
ARTICLE IV
Capital Stock
Section 4.01. Stock Certificates. Every holder of stock in the Corporation shall
be entitled to have a certificate signed by, or in the name of the Corporation
by, the Chairman or Vice Chairman of the Board of Directors, or the Chief
Executive Officer, or the President or a Vice-President, and by the Treasurer or
an Assistant Treasurer, or the Secretary or an assistant Secretary, of the
Corporation, certifying the number of shares owned by him in the Corporation.
Where such certificate is signed (1) by a transfer agent other than the
Corporation or its employee, or (2) by a registrar other than the Corporation or
its employee, the signatures of the officers of the Corporation may be
facsimiles. In case any officer who has signed or whose facsimile signature has
been placed upon a certificate shall have ceased to be such officer before such
certificate is issued, it may be issued by the
Tiffany & Co. (Delaware) Restated By-Laws 1/18/96 Page 10
<PAGE> 11
Corporation with the same effect as if he were such officer at the date of
issue.
SECTION 4.02. Transfers. Stock of the Corporation shall be transferable in the
manner prescribed by the laws of the State of Delaware.
SECTION 4.03. Registered Holders. Prior to due presentment for registration of
transfer of any security of the Corporation in registered form, the Corporation
shall treat the registered owner as the person exclusively entitled to vote, to
receive notifications and to otherwise exercise all the rights and powers of an
owner, and shall not be bound to recognize any equitable or other claim to, or
interest in, any security, whether or not the Corporation shall have notice
thereof, except as otherwise provided by the laws of the State of Delaware.
SECTION 4.04. New Certificates. The Corporation shall issue a new certificate of
stock in the place of any certificate theretofore issued by it, alleged to have
been lost, stolen or destroyed, if the owner: (1) so requests before the
Corporation as notice that the shares of stock represented by that certificate
have been acquired by a bona fide purchaser; (2) files with the Corporation a
bond sufficient (in the judgment of the directors) to indemnify the Corporation
against any claim that may be made against it on account of the alleged loss or
theft of that certificate or the issuance of a new certificate; and (3)
satisfies any other requirements imposed by the directors that are reasonable
under the circumstances. A new certificate may be issued without requiring any
bond when, in the judgment of the directors, it is proper so to do.
ARTICLE V
Miscellaneous
SECTION 5.01. Offices. The registered office of the Corporation in the State of
Delaware shall be at Corporation Trust Center, 1209 Orange Street, Wilmington,
Delaware 19801. The Corporation may also have offices at other places within
and/or without the State of Delaware.
SECTION 5.02. Seal. The corporate seal shall have inscribed thereon the name of
the Corporation, the year of its incorporation and the words "Corporate Seal
Delaware."
SECTION 5.03. Checks. All checks or demands for money shall be signed by such
person or persons as the Board of Directors may from time to time determine.
SECTION 5.04. Fiscal Year. The fiscal year shall begin the first day of February
in each year and shall end on the thirty-first day
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<PAGE> 12
of January of the following year.
SECTION 5.05. Waivers of Notice: Dispensing with Notice. Whenever any notice
whatever is required to be given under the provisions of the General Corporation
Law of the State of Delaware, of the Certificate of Incorporation of the
Corporation, or of these By-Laws, a waiver thereof in writing, signed by the
person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto. Neither the business to be
transacted at, nor the purose of, any regular or special meeting of the
stockholders need be specified in any written waiver of notice.
Attendance of a person at a meeting of stockholders shall
constitute a waiver of notice of such meeting, except when the stockholder
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened.
Whenever any notice whatever is required to be given under the
provisions of the General Corporation Law of the State of Delaware, of the
Certificate of Incorporation of the Corporation, or of these By-Laws, to any
person with whom communication is made unlawful by any law of the United States
of America, or by any rule, regulation, proclamation or executive order issued
under any such law, then the giving of such notice to such person shall not be
required and there shall be no duty to apply to any governmental authority or
agency for a license or permit to give such notice to such person; and any
action or meeting which shall be taken or held without notice to any such person
or without giving or without applying for a license or permit to give any such
notice to any such person with whom communication is made unlawful as aforesaid,
shall have the same force and effect as if such notice had been given as
provided under the provisions of the General Corporation Law of the State of
Delaware, or under the provisions of the Certificate of Incorporation of the
Corporation or of these ByLaws. In the event that the action taken by the
Corporation is such as to require the filing of a certificate under any of the
other sections of this title, the certificate shall state, if such is the fact
and if notice is required, that notice was given to all persons entitled to
receive notice except such persons with whom communication is unlawful.
Tiffany & Co. (Delaware) Restated By-Laws 1/18/96 Page 12
<PAGE> 13
SECTION 5.06. Loans to and Guarantees of Obligations of Employees and Officers.
The Corporation may lend money to or guaranty any obligation of, or otherwise
assist any officer or other employee of the Corporation or of a subsidiary,
including any officer or employee who is a director of the corporation or a
subsidiary, whenever, in the judgment of the Board of Directors, such loan,
guaranty or assistance may reasonably be expected to benefit the Corporation.
The loan, guaranty or other assistance may be with or without interest, and may
be unsecured, or secured in such manner as the Board of Directors shall approve,
including without limitation, a pledge of shares of stock of the Corporation.
Nothing in this Section contained shall be deemed to deny, limit or restrict the
powers of guaranty or warranty of the Corporation at common law or under any
other statute.
SECTION 5.07. Amendment of By-Laws. These By-Laws may be altered, amended or
repealed at any meeting of the Board of Directors.
SECTION 5.08. Section Headings and Statutory References. The headings of the
Articles and Sections of these By-Laws, and the references in brackets to
relevant sections of the General Corporation Law of the State of Delaware, have
been inserted for convenience of reference only and shall not be deemed to be a
part of these By-Laws.
ARTICLE VI
SECTION 6.01. Indemnification of Directors and Officers. The Corporation shall,
to the fullest extent permitted by law, indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (including without limitation an action by or in the right of the
Corporation) by reason of the fact that he is or was a director or officer of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, that he had reasonable cause to believe that his conduct was
unlawful.
Tiffany & Co. (Delaware) Restated By-Laws 1/18/96 Page 13
<PAGE> 14
The right of indemnity provided herein shall not be exclusive and the
Corporation may provide indemnification to any person, by agreement or
otherwise, on such terms and conditions as the Board of Directors may approve.
Any agreement for indemnification of any director, officer, employee or other
person may provide indemnification rights which are broader or otherwise
different from those set forth herein.
No repeal or modification of this Article or of relevant provisions of the
Delaware General Corporation Law or any other applicable laws shall affect or
diminish in any way the rights of any person to indemnification under the
provisions hereof with respect to any action, suit, proceeding or investigation
arising out of, or relating to, any actions, transactions or facts occuring
prior to the final adoption of such repeal or modification.
SECTION 6.02. Insurance. The Corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise against any liability asserted against him and
incurred by him in any such capacity or arising out of his status as such,
whether or not the Corporation would have the power to indemnify him against
such liability under the provisions of this Article.
Tiffany & Co. (Delaware) Restated By-Laws 1/18/96 Page 14
<PAGE> 1
EXHIBIT 10.60
TIFFANY & CO.
1988 DIRECTOR OPTION PLAN
AS AMENDED MAY 18, 1995
PART 1. PLAN ADMINISTRATION AND ELIGIBILITY
I. PURPOSE
The purpose of this 1988 Director Option Plan (the "Plan") of Tiffany &
Co. (the "Company") is to encourage ownership in the Company by outside
directors of the Company whose continued services are considered essential to
the Company's continued progress and thus to provide such directors with a
further incentive to continue as directors of the Company.
II. ADMINISTRATION
An administrator (the "Administrator"), who shall be the Secretary of
the Company and not eligible to participate in the Plan, shall administer the
Plan. Grants of stock options under the Plan and the amount and nature of the
awards to be granted shall be automatic as described in Section VI. However, all
questions of interpretation of the Plan or of any options issued under it shall
be determined by the Administrator and such determination shall be final and
binding upon all persons having an interest in the Plan.
III. PARTICIPATION IN THE PLAN
Directors of the Company who are not employees of the Company or any
subsidiary of the Company shall be eligible to participate in the Plan.
Employees of the Company or any subsidiary of the Company shall not be eligible
to participate in the Plan.
IV. STOCK SUBJECT TO THE PLAN
The maximum number of shares which may be optioned under the Plan shall
be One Hundred Thousand (100,000) shares of the Company's $.01 par value Common
Stock. This limitation on the number of shares which may be optioned under the
Plan shall be subject to adjustment as provided in Section XI of the Plan.
If any outstanding option under the Plan for any reason expires or is
terminated without having been exercised in full, the shares allocable to the
unexercised portion of such option shall again become available for grant
pursuant to the Plan.
1988 Plan as Amended May 18, 1995 Page 1
<PAGE> 2
Upon the exercise of an option under the Plan, the Company may issue
shares of the Company's authorized but unissued Common Stock or the Company may
repurchase shares of its Common Stock in the open market or otherwise.
PART 2. DESCRIPTION OF OPTIONS
V. NON-STATUTORY STOCK OPTIONS
All options granted under the Plan shall be non-statutory options not
entitled to special tax treatment under Section 422A of the Internal Revenue
Code of 1986, as amended to date (the "Code").
VI. TERMS, CONDITIONS AND FORM OF OPTIONS
Each Option granted under this Plan shall be evidenced by a written
agreement in such form as the Administrator shall from time to time approve,
which agreements and the grant of options under the Plan shall comply with and
be subject to the following terms and conditions:
A. Option Grant Dates. Options shall be granted automatically on the
date of the tenth business day in January (a "Grant Date") of any year (except
that for the year in which the Plan is adopted the Grant Date shall be the date
of the Plan's adoption) to any eligible director who, on or prior to June 30th
of the year prior to the year in which said Grant Date occurs, files with the
Administrator an irrevocable election to receive a stock option in lieu of all
or fifty percent (50%) of retainer fees to be earned in the calendar year in
which said Grant Date occurs (a "Plan Year").
B. Option Formula. The number of option shares granted to any eligible
director shall be equal to the nearest number of whole shares determined in
accordance with the following formula:
Deferred Retainer Number
________________________ = of
(Fair Market Value x .5) Shares
"Deferred Retainer" shall mean the amount which the optionee would be entitled
to receive for serving as a director in the relevant Plan Year but for the
election referred to in Section VIA above. The term "Deferred Retainer" shall
not include fees associated with service on any committee of the Board of
Directors nor with any other services to be provided to the Company and shall
not include fees paid directors on a per-meeting-attended basis. "Fair Market
Value" shall mean the mean of the highest and lowest quoted selling prices for
the Company's Common Stock on the relevant Grant Date as reported on The New
York Stock Exchange Composite Tape.
1988 Plan as Amended May 18, 1995 Page 2
<PAGE> 3
C. Options Non-Transferable. Each option granted under the Plan by its
terms shall not be transferable by the optionee otherwise than by will or by the
laws of descent and distribution and shall be exercised during the lifetime of
the optionee only by him. No option or interest therein may be transferred,
assigned, pledged or hypothecated by the optionee during his lifetime, whether
by operation of law or otherwise, or be made subject to execution, attachment or
similar process.
D. Period of Option. No option may be exercised before the first
anniversary of the date upon which it was granted; provided, however, that any
option granted pursuant to the Plan shall become exercisable in full upon the
retirement of the director because of age or total and permanent disability,
upon the death of the optionee or upon the resignation or removal of the
optionee as a director of the Company following a Change in Control. A "Change
in Control" shall mean the acquisition of voting power in respect of thirty-five
percent (35%) of the shares of voting stock in the company by any person (or any
corporation, partnership, trust, estate or group of persons or entities, which
group was formed pursuant to any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of voting stock of the
Company). No option shall be exercisable after the expiration of fifteen (15)
years from the date upon which such option is granted. Each option shall be
subject to cancellation before its date of expiration as hereinafter provided in
Section XIV.
E. Exercise of Options. Options may be exercised only by written notice
to the Company at its head office accompanied by payment in cash, certified or
bank cashier's check of the full consideration for the shares as to which such
options are exercised. Unless otherwise prohibited, such consideration may be
paid by delivery of shares of the Company's Common Stock; any such shares shall
be valued at the fair market value of such shares on the date of exercise.
Options may be exercised in full or in part for whole shares (no fractional
shares will be issued) and any exercisable portion of an option grant not
exercised may be later exercised subject to the expiration date stated above.
F. Exercise by Representative Following Death of Director. A director,
by written notice to the Company, may designate one or more persons (and from
time to time change such designation) including his legal representative, who,
by reason of his death, shall acquire the right to exercise all or a portion of
the option. If the person or persons so designated wish to exercise any portion
of the option, they must do so within the term of the option as provided in
Subsection VID above. Any exercise by a representative shall be subject to the
provisions of this Plan.
G. Proration. In the event an optionee ceases for any reason to be a
director of the Company prior to such time as an option granted under this Plan
becomes exercisable, such option shall terminate in respect to the nearest whole
number of optioned shares as is the product of the total number of shares
subject to such option multiplied by a fraction, the numerator of which is the
number of months remaining in the Plan Year following the
1988 Plan as Amended May 18, 1995 Page 3
<PAGE> 4
month in which said optionee ceases to be a director and the denominator of
which is twelve (12).
VII. OPTION PRICE
The Option price per share for the shares covered by each option shall
be one-half (1/2) of the Fair Market Value on the Grant Date for each respective
option.
PART 3. GENERAL PROVISIONS
VIII. PROHIBITION ON ASSIGNMENT
The rights and benefits under this Plan may not be assigned except for
the designation of a beneficiary as provided in Section VI.
IX. TIME FOR GRANTING OPTIONS
All options for shares subject to this Plan shall be granted, if at
all, not later than ten (10) years after the adoption of this Plan by the
Company's stockholders.
X. LIMITATION OF RIGHTS
A. No Right to Continue as a Director. Neither the Plan, nor the
granting of an option nor any other action taken pursuant to the Plan shall
constitute or be evidence of any agreement or understanding, express or implied,
that the Company will retain a director for any period of time, or at any
particular rate of compensation.
B. No Stockholders' Rights for Option. An optionee shall have no rights
as a stockholder with respect to the shares covered by his options until the
date of the issuance to him of a stock certificate therefor, and no adjustment
will be made for dividends or other rights for which the record date is prior to
the date such certificate is issued.
XI. CHANGES IN PRESENT STOCK
In the event of any merger, consolidation, reorganization,
recapitalization, stock dividend, stock split, or other change in the corporate
structure or capitalization affecting the Company's present Common Stock,
appropriate adjustment shall be made in the number (including the aggregate
numbers specified in Section IV) and kind of shares which are or may become
subject to options granted or to be granted hereunder.
1988 Plan as Amended May 18, 1995 Page 4
<PAGE> 5
XII. EFFECTIVE DATE OF THE PLAN
The Plan shall take effect on the date of adoption by the directors of
the Company subject to and conditioned upon subsequent approval by the
stockholders of the Company. Options may be granted under the Plan at any time
after such adoption and prior to the termination of the Plan; provided, however,
that if the stockholders of the Company fail to approve the Plan by December 31,
1988, all options granted under the Plan and elections made pursuant to Section
VIA of the Plan shall be void ab initio and without further force or effect; and
provided further, that the Plan, all options granted under the Plan and all
elections made pursuant to Section VIA of the Plan shall be void ab initio and
without further force or effect if the staff of the Securities and Exchange
Commission fails to confirm, on or before January 20, 1989 the following views:
A. That the Plan meets the requirements of Rule 16b-3 as promulgated by
the Securities and Exchange Commission; and
B. That participation of non-employee directors in the Plan will not
disqualify such directors from being characterized as "disinterested persons"
under Rule 16b-3(b) and (d)(3) for the purpose of serving as administrators of
the Company's 1985 Stock Option Plan and 1986 Stock Option Plan, or of any
subsequently adopted employee stock plan in which the non-employee director is
not eligible to participate.
XIII. AMENDMENT OF THE PLAN
The Board of Directors may suspend or discontinue the Plan or amend it
in any respect whatsoever; provided, however, that without approval of the
stockholders no revision or amendment shall change the number of shares subject
to the Plan (except as provided in Section XI), change the designation of the
class of directors eligible to receive options, or materially increase the
benefits accruing to participants under the Plan.
XIV. NOTICE
Any written notice to the Company required by any of the provisions of
this Plan shall be addressed to the Secretary of the Company and shall become
effective when it is received.
XV. GOVERNING LAW
This Plan and all determinations made and actions taken pursuant hereto
shall be governed by Law of the State of New York and construed accordingly.
1988 Plan as Amended May 18, 1995 Page 5
<PAGE> 6
TIFFANY & CO.
STOCK OPTION AGREEMENT
UNDER THE 1988 DIRECTOR OPTION PLAN
GRANT NO. 000000
THIS AGREEMENT is made as of JANUARY XX, 199X (the "Grant Date"),
between TIFFANY & CO., a Delaware corporation (the "Company"), and
______________, (the "Optionee").
RECITALS
Optionee, being a director of the Company and not an employee of the
Company or any subsidiary of the Company and eligible to participate in the
Tiffany & Co. 1988 Director Option Plan (the "Plan") has elected to receive this
stock option to purchase shares of the common stock of the Company $.01 par
value ("Common Stock") in lieu of all or fifty percent of certain fees to be
earned for serving as a Director of the Company in calendar year 199X (the "Plan
Year").
AGREEMENT
In consideration of the foregoing and of the mutual covenants set forth
herein and other good and valuable consideration, the parties hereto agree as
follows:
1. SHARES GRANTED; OPTION PRICE. The Optionee may purchase all or any
part of an aggregate of X,XXX shares of Common Stock, at the price of $XX.XX per
share (the "Option Price") on the terms and conditions set forth herein.
2. OPTION TERM; TIMES OF EXERCISE. The option term shall end on
01/XX/XX, which in no case shall be greater than fifteen (15) years from the
date of grant of this option; at the conclusion of such option term this option
shall not be exercisable in whole or in part.
(a) Subject to the foregoing option term, to Paragraph 14 below and as
further limited by Paragraph 3 below, this option shall become
exercisable on or after the first anniversary of the Grant Date.
(b) Prior to the first anniversary of the Grant Date this option shall
not be exercisable, except as permitted by Paragraph 4 below.
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<PAGE> 7
(c) No fractional shares of the Common Stock shall be issued on
exercise of this option, in whole or in part.
3. CESSATION OF DIRECTORSHIP. In the event Optionee ceases for any
reason to be a director of the Company prior to such time as the option hereby
granted becomes exercisable, such option shall terminate in respect to the
nearest whole number of optioned shares as is the product of the total number of
shares subject to such option multiplied by a fraction, the numerator of which
is the number of months remaining in the Plan Year following the month in which
said optionee ceases to be a director and the denominator of which is twelve
(12).
4. EARLY EXERCISE. Notwithstanding Paragraph 2 (a) above, this option
shall become exercisable in full upon the retirement of Optionee as a director
of the Company because of age or total and permanent disability, upon the death
of Optionee or upon the resignation or removal of Optionee as a director of the
Company following a Change in Control. A "Change in Control" shall mean the
acquisition of voting power in respect of thirty-five percent (35%) of the
shares of voting stock in the Company by any person (or any corporation,
partnership, trust, estate or group of persons or entities, which group was
formed pursuant to any agreement, arrangement or understanding for the purpose
of acquiring, holding, voting or disposing of voting stock of the Company).
5. EXERCISE; PAYMENT FOR AND DELIVERY OF STOCK. This option may be
exercised only by the Optionee or Optionee's transferees by will or the laws of
descent and distribution. This option may be exercised by giving written notice
of exercise to the Company specifying the number of shares to be purchased and
the total Option Price, accompanied by payment in full by cash, a cashier's or
certified bank check to the order of the Company or, unless otherwise
prohibited, by delivery of shares of Common Stock in payment of such price. Any
such shares shall be valued at the fair market value of such shares on the date
of exercise.
6. LEGALITY. No shares of Common Stock may be issued or transferred
unless and until all legal requirements applicable to such issuance or transfer
have, in the opinion of the Company, been complied with. The Optionee shall, if
requested by the Company, give assurances satisfactory to the Company with
respect to such matters as the Company may deem desirable to assure compliance
with all applicable legal requirements, including, without limitation, such
assurances as the Company may deem advisable to ensure the availability of an
exemption from registration under the Securities Act of 1933, as amended, for
the Common Stock purchased on exercise of this option.
- Page 2 of 4 -
<PAGE> 8
7. ADJUSTMENTS IN STOCK. Subject to the provisions of the Plan, if the
outstanding shares of the Common Stock are increased or decreased, or are
changed into or exchanged for a different number or kind of shares or securities
as a result of one or more reorganizations, recapitalizations, stock splits,
stock dividends or other change in corporate structure or capitalization
affecting the Common Stock, appropriate adjustment shall be made in the number
and/or type of shares or securities subject to this option and the Option Price,
so that the total purchase price of the shares then subject to this option shall
remain unchanged.
8. NONTRANSFERABILITY OF OPTION. This option is not transferable
otherwise than by will or the laws of descent and distribution. This option
shall not be otherwise transferred, assigned, pledged, hypothecated or otherwise
disposed of in any way, whether by operation of law or otherwise, and shall not
be subject to execution, attachment or similar process. Upon any attempt to
transfer this option otherwise than by will or the laws of descent and
distribution or to assign, pledge, hypothecate or otherwise dispose of this
option, or upon the levy of any execution, attachment or similar process upon
this option, this option shall immediately terminate and become null and void.
Optionee, by written notice to Company, may designate one or more persons (and
from time to time change such designation) including his legal representative,
who, by reason of his death, shall acquire the right to exercise all or a
portion of this option. If the person or persons so designated wish to exercise
any portion of the option, they must do within the term of the option as
provided in Paragraph 2 above. Any exercise by a representative shall be subject
to the provisions of the Plan.
9. NOTICES. Any notice to be given to the Company shall be personally
delivered to or addressed to the Secretary of the Company, at its principal
office, and any notice to be given to the Optionee shall be addressed to him at
the address given beneath his signature hereto, or at such other address as the
Optionee may hereafter designate in writing to the Company. Any notice to the
Company is deemed given when received by the Company. Any notice to the Optionee
is deemed given when enclosed in a properly sealed envelope addressed as
aforesaid, registered or certified, and deposited, postage and registration or
certification fee prepaid, in a post office or branch post office regularly
maintained by the United States.
10. WITHHOLDING. The Company may make such provisions as it may deem
appropriate for the withholding of any taxes which the Company determines it is
required to withhold in order to be entitled to a deduction for federal income
taxes in connection with this Agreement and the transactions contemplated
hereby.
- Page 3 of 4 -
<PAGE> 9
11. STOCK OPTION PLAN. This option is subject to all of the terms and
conditions of the Plan as previously amended and as the same shall be amended
from time to time in accordance with the terms thereof, but no such amendment
shall adversely affect the Optionee's rights under this option.
11. NO RIGHT TO CONTINUE AS DIRECTOR. Nothing in the Plan or in this
Agreement shall confer upon the Optionee any right to continue as a director of
the Company or a subsidiary.
13. NO STOCKHOLDERS' RIGHTS FOR OPTION. An optionee shall not have
rights as a stockholder with respect to the shares covered by this Option until
the date of the issuance to him of a stock certificate therefor, and no
adjustment will be made for dividends or other rights for which the record date
is prior to the date such certificate is issued.
14. LAWS APPLICABLE TO CONSTRUCTION. This Agreement shall be construed
and enforced in accordance with the laws of the State of New York.
TIFFANY & CO. OPTIONEE
By: ________________________ By: __________________________
William R. Chaney
Chairman
- Page 4 of 4 -
<PAGE> 1
EXHIBIT 10.119
AMENDED AND RESTATED
LEASE AGREEMENT
dated as of
December 1, 1995,
effective as of
August 1, 1995,
by and between
First Fidelity Bank, National Association, not in its individual capacity,
but solely as the trustee under that certain
Trust Agreement 1995-1 dated as of July 1, 1995, as amended, as Owner-Lessor
and
Tiffany and Company, a New York corporation, as Lessee
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. DEFINITIONS...................................................... 3
2. AGREEMENT TO LEASE............................................... 4
3. TERM............................................................. 4
4. CONDITIONS PRECEDENT PRIOR TO BASIC TERM COMMENCEMENT DATE....... 4
5. RENTAL........................................................... 5
6. USE.............................................................. 7
7. NET LEASE; NONTERMINABILITY...................................... 7
8. TAXES AND OTHER CHARGES; LAWS AND AGREEMENTS..................... 8
9. LIENS. ......................................................... 10
10. OWNERSHIP OF THE LEASED PROPERTY. .............................. 11
11. OWNER'S DISCLAIMER; ACKNOWLEDGEMENT BY LESSEE. ................. 12
12. REPRESENTATIONS OF PARTIES. ..................................... 13
13. MAINTENANCE; QUIET ENJOYMENT..................................... 16
14. COMPLIANCE WITH LEGAL REQUIREMENTS............................... 18
15. INSURANCE. ..................................................... 19
16. LOSS, DAMAGE OR DESTRUCTION. .................................... 21
17. ADDITIONS AND IMPROVEMENTS; REMOVAL.............................. 25
18. RIGHT OF ENTRY................................................... 26
19. ASSIGNMENTS AND SUBLEASING....................................... 26
20. ENVIRONMENTAL MATTERS............................................ 29
21. ENVIRONMENTAL INDEMNITY.......................................... 32
22. INDEMNIFICATION AND HOLD HARMLESS AGREEMENT...................... 33
23. EVENTS OF DEFAULT................................................ 35
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
24. REMEDIES UPON DEFAULT............................................ 37
25. OWNER'S RIGHT TO PERFORM FOR LESSEE.............................. 40
26. EXPENSES......................................................... 40
27. FURTHER ASSURANCES............................................... 41
28. NOTICES.......................................................... 41
29. LESSEE'S EXTENSION LEASE OPTIONS AND END OF TERM PURCHASE
OPTIONS.......................................................... 42
30. THIRD PARTY SALE OF LEASED PROPERTY.............................. 44
31. END OF TERM ADJUSTMENT........................................... 45
32. PROCEDURE FOR OWNER CONVEYANCE................................... 47
33. TIME OF THE ESSENCE; MANNER OF PAYMENT........................... 48
34. RETURN OF LEASED PROPERTY........................................ 48
35. FINANCIAL INFORMATION............................................ 50
36. RECORDING........................................................ 50
37. NO RELIANCE...................................................... 51
38. MISCELLANEOUS.................................................... 51
39. VENUE; GOVERNING LAW............................................. 51
40. ESTOPPEL CERTIFICATE............................................. 52
41. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS............ 52
42. NONRECOURSE...................................................... 52
EXHIBIT A - LAND DESCRIPTION
EXHIBIT A1 - IMPROVEMENTS DESCRIPTION
EXHIBIT B1 - INTERIM RENTAL PAYMENT SCHEDULE
EXHIBIT B2 - BASE RENTAL PAYMENT SCHEDULE
EXHIBIT C - MAXIMUM LESSEE RISK AMOUNT AND MAXIMUM OWNERS RISK AMOUNT [PRIOR
</TABLE>
ii
<PAGE> 4
TO BASIC LEASE TERM COMMENCEMENT DATE]
EXHIBIT D - TERMINATION VALUE
EXHIBIT E - PURCHASE PRICE
EXHIBIT F - MAXIMUM LESSEE RISK AMOUNT AND MAXIMUM OWNER RISK AMOUNT AFTER
BASIC LEASE TERM COMMENCEMENT DATE
iii
<PAGE> 5
LEASE AGREEMENT
THIS AMENDED AND RESTATED LEASE AGREEMENT, dated as of December 1, 1995
effective as of August 1, 1995, by and between First Fidelity Bank, National
Association, a national banking association, not in its individual capacity,
except as expressly set forth herein, but solely as trustee under that certain
Trust Agreement 1995-1 dated as of July 1, 1995, as amended, as owner-lessor
hereunder ("Owner") and Tiffany and Company, a corporation organized and
operated under the laws of the State of New York, as lessee hereunder
("Lessee").
PRELIMINARY STATEMENT
Lessee entered into an Agreement for Purchase and Sale of Real Estate
by and between Pru Beta-3, as seller, and Lessee, as purchaser, dated as of
November 4, 1994 (the "P&S") to acquire a parcel of land consisting of
approximately 40.713 acres, more or less, located in the Township of
Parsippany-Troy Hills, Morris County, New Jersey, more particularly described in
Exhibit A attached hereto (the "Land"). Lessee wishes to cause the construction
of an office building, distribution center, warehouse facility and light
manufacturing facility more particularly described in Exhibit A-1 hereof (all
site improvements, base building, building systems, equipment and related
fixtures now or hereafter existing on the Land, and any substitutions or
replacements of or additions to the same are referred to as the "Improvements").
Lessee determined that the most advantageous financing for the acquisition of
the Land and the design and construction of the Improvements would be realized
by assigning it's rights under the P&S to Owner, having Owner purchase the Land,
contracting with Owner to construct the Improvements as Owner's agent and
leasing the Land and Improvements (collectively, with all easements, privileges,
rights and appurtenances thereto, the "Leased Property") from Owner pursuant to
that certain Lease Agreement, dated as of August 1, 1995, by and between Owner
and Lessee (the "Existing Lease," as amended and restated by this Amended and
Restated Lease Agreement, this "Lease"). Concurrently with the assignment of the
P&S by Lessee to Owner, and Owner's purchase of the Land, Owner and Lessee
entered into the Existing Lease for the Leased Property. This Lease is intended
to be an operating lease for accounting purposes under GAAP.
On August 1, 1995, Owner purchased the Land pursuant to the P&S for a
purchase price of $4,800,000 and paid a broker's commission equal to eight
percent (8%) of said purchase price to Cushman & Wakefield of New Jersey, Inc.,
a portion of which amount was provided by the beneficiary of Owner, First
Fidelity Bank, National Association, not in its individual capacity but solely
as trustee under that certain Trust Agreement 1995-2 dated as of July 1, 1995,
as amended (the "Beneficiary"), from the proceeds of a loan (the "Investor
Loan") in the amount of $1,925,000 made to the Beneficiary by Stellar Capital
Corporation ("Construction Lender"). Lessee and Owner entered into a
Construction Agency Agreement on the Commencement Date which provides, among
other things, that Lessee will construct the Improvements upon the Land as agent
for Owner. Owner financed the purchase of the Land and payment of the brokerage
commission therefor (to the extent the proceeds of the Investor Loan were
insufficient) and obtained financing to
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<PAGE> 6
complete the construction of the Improvements from the proceeds of a
construction loan made to Owner by the Construction Lender in an amount not to
exceed $36,575,000.
Contemporaneously with the execution and delivery hereof, the Owner
will enter into (a) those separate Note Purchase Agreements (collectively, as
the same may from time to time be amended, the "Owner Note Purchase Agreement"),
each dated as of December 1, 1995, between the Owner and each of the Persons on
Annex 1 thereto (the "Purchasers") pursuant to which the Owner will sell, and
the Purchasers will purchase the Owner Notes, (b) that certain Collateral Trust
Indenture (as it may be amended from time to time, the "Owner Trust Indenture"),
dated as of December 1, 1995, between the Owner and Fleet National Bank of
Connecticut (in its capacity as trustee under the Owner Trust Indenture herein
referred to as "the "Owner Collateral Trustee") and (c) each of the other Owner
Financing Documents. The proceeds of the Owner Notes will be used to (i) repay
the outstanding indebtedness of the Owner to the Construction Lender under the
Construction Loan and (ii) fund the Construction Account in accordance with the
Owner Trust Indenture and the Construction Agency Agreement. In order to secure
repayment of the Owner Notes, the Owner will, among other things, mortgage and
assign to the Owner Collateral Trustee, for the benefit of the holders of the
Owner Notes, its interests in this Lease and the Construction Agency Agreement.
Contemporaneously with the execution and delivery hereof, the
Beneficiary will enter into (a) those separate Note Purchase Agreements
(collectively, as the same may from time to time be amended, the "Beneficiary
Note Purchase Agreement"), each dated as of December 1, 1995, between the
Beneficiary and each of the Purchasers pursuant to which the Beneficiary will
sell, and the Purchasers will purchase the Beneficiary Notes (the Beneficiary
Notes together with the Owner Notes collectively referred to herein as, the
"Notes"), (b) that certain Collateral Trust Indenture (as it may be amended from
time to time, the "Beneficiary Trust Indenture"), dated as of December 1, 1995,
between the Beneficiary and Fleet National Bank of Connecticut (in its capacity
as trustee under the Beneficiary Trust Indenture herein referred to as "the
"Beneficiary Collateral Trustee") and (c) each of the other Beneficiary
Financing Documents. The proceeds of the Beneficiary Notes will be used repay
the outstanding indebtedness of the Beneficiary owed to Construction Lender,
which indebtedness was incurred to permit Beneficiary to contribute its equity
investment in Owner. In order to secure repayment of the Beneficiary Notes, the
Beneficiary will, among other things, grant a security interest in and
collaterally assign to the Beneficiary Collateral Trustee, for the benefit of
the holders of the Beneficiary Notes, all of its interests in the Owner Trust
Estate.
Lessee and Owner have agreed with the Financing Parties that the Lessee
will construct and complete the Improvements in accordance with the Project
Budget. To the extent additional funds are needed for Development Costs in
excess of those shown on the Project Budget (or are not available under the
terms hereof or under the terms of Section 3.3 of the Owner Trust Indenture as a
result of the failure to satisfy the conditions for advances thereunder or
because there are no funds remaining in the Construction Account, Lessee shall
solely be responsible for provision of all such additional funds as provided in
the Construction Agency Agreement. The Project Budget includes three major
subcategories of Development Costs including "Acquisition Costs", "Hard Costs"
and "Soft Costs". The Project Budget does not include any amounts allocated for
the cost of
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<PAGE> 7
furniture, fixtures and equipment, other than equipment which forms a part of
the building systems.
This Lease provides for an Interim Lease Term during which the
Improvements are to be completed by Lessee (provided, however, such completion
shall take place on or before January 31, 1997, subject to extension pursuant to
Section 4(a) of the Lease). If Lessee satisfies all of the conditions set forth
in Section 4(a) of the Lease on or prior to the date set forth therein and has
not previously given notice to the Owner that it has elected not to enter into
the Basic Lease Term, the Basic Lease Term shall commence and continue until the
Basic Lease Term Expiration Date. Upon the expiration of the Basic Lease Term,
Lessee will have options to extend the Lease for nine (9) consecutive one
(1)-year Extension Lease Terms. At the end of the Interim Lease Term, Basic
Lease Term or any Extension Lease Term, Lessee has an option to purchase the
Leased Property for the Purchase Price (together with the other amounts payable
by the Lessee under Section 29(b)) set forth in this Lease. If Lessee does not
exercise its option to purchase the Leased Property, Lessee is obligated to
solicit bids for the purchase of the Leased Property from third parties. If the
Leased Property is sold to a third party pursuant to the provisions of this
Lease or is returned to the Owner upon the completion of the Interim Lease Term,
the Basic Lease Term or any Extension Lease Term or upon any Termination Date,
Lessee will be obligated to pay the applicable End of Term Adjustment provided
for in this Lease to Owner.
BOT Financial Corporation or a designee thereof ("LC Issuer") has
entered into the Reimbursement and Remarketing Agreement with the Beneficiary
pursuant to which the LC Issuer issued its Letter of Credit for the benefit of
the holders of the Beneficiary Notes in an amount up to the Maximum Owner Risk
Amount.
The construction of the Improvements shall be undertaken by Lessee, as
agent under the Construction Agency Agreement. In connection therewith, Lessee
has previously entered into and assigned to Owner the Approved Construction
Documents.
On the Commencement Date, Lessee, as agent for Owner under the
Construction Agency Agreement, accepted the assignment of the Development
Services Agreement made as of the 4th day of November, 1994 between Lessee and
PIC Realty, a Delaware corporation having an office at 751 Broad Street, Newark,
New Jersey and Lessee shall be reimbursed for all costs incurred under such
Development Services Agreement (to the extent of such expense as shown on the
Project Budget) pursuant to the terms of the Construction Agency Agreement.
The purpose of this Lease is to amend and restate in full the Existing
Lease and by execution and delivery hereof said Existing Lease is hereby so
amended and restated.
In consideration of the mutual covenants and agreements herein
contained, the parties hereto agree as follows:
1. DEFINITIONS.
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<PAGE> 8
Unless the context otherwise requires, and except as specifically
provided herein, each of the capitalized terms shall have the meaning set forth
in the Definitions Appendix attached to this Lease, as the same may be amended,
modified or supplemented from time to time.
Unless otherwise expressly stated, the words "this Lease," "herein,"
"hereunder," "hereof" or other like words mean and include this Lease, all
exhibits hereto and each amendment and supplement hereto.
2. AGREEMENT TO LEASE.
Owner hereby leases, lets and demises unto Lessee, and Lessee hereby
leases, rents and takes possession from Owner, all of the Owner's right, title
and interest in (i) the Land, (ii) all Improvements now or hereafter constructed
thereon and (iii) all easements, privileges, rights and appurtenances thereto
(the Land, Improvements and all such easements, privileges, rights and
appurtenances are collectively referred to herein as the "Leased Property"), to
have and to hold the same for the Term, subject to the covenants, agreements,
terms, conditions, limitations and provisions hereinafter set forth.
3. TERM.
This Lease commenced on August 1, 1995 (the "Commencement Date"), and,
unless this Lease is sooner terminated pursuant to the provisions hereof, shall
end on the day immediately preceding the Basic Term Commencement Date (such
period herein referred to as the "Interim Lease Term"). Subject to the
conditions set forth in Section 4(a) below and the exercise of Lessee's rights
pursuant to Section 29(a) hereof, the Term of this Lease may be extended by
Lessee (a) for a period commencing on the Basic Term Commencement Date, and,
unless this Lease is sooner terminated pursuant to the provisions hereof, ending
on the Basic Lease Term Expiration Date (such period herein referred to as the
"Basic Lease Term"), and (b) at the expiration of the Basic Lease Term, for nine
(9) separate consecutive one (1) year periods (each an "Extension Lease Term").
4. CONDITIONS PRECEDENT PRIOR TO BASIC TERM COMMENCEMENT DATE.
(a) COMPLETION OF CONSTRUCTION AND COMMENCEMENT OF BASIC LEASE TERM.
Unless otherwise waived in writing by the Owner and the Owner Collateral
Trustee, the right of Lessee to extend this Lease beyond the Interim Lease Term
is subject to the fulfillment of each of the following conditions: (i) Lessee
shall have performed all of its obligations under the Construction Agency
Agreement, as agent or for itself, during the Interim Lease Term; (ii) no event
or condition which is a Default or an Event of Default hereunder or under the
Construction Agency Agreement shall have occurred and be continuing; (iii) Owner
shall have received a certificate from the Architect that the Improvements are
Substantially Complete and shall also have received such other documents,
appraisals, opinions, certificates and waivers, as Owner may require in the
exercise of reasonable business judgment, including, if requested, certificates
from the Architect and General Contractor, in form and substance reasonably
satisfactory to assure Owner that the Improvements are ready for occupancy and
that no liens or claims are outstanding against the Leased Property (other than
Permitted Liens); and (iv) Lessee shall
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<PAGE> 9
have satisfied, or caused to be satisfied, each of the foregoing conditions on
or before January 31, 1997, provided, however, that if an act or event of Force
Majeure shall have occurred prior to January 31, 1997 which prevents Lessee from
completing the Improvements by January 31, 1997, Lessee shall be entitled to an
extension beyond January 31, 1997 in which to satisfy, or cause to be satisfied,
such conditions, but in no event shall such extension extend beyond the earlier
to occur of July 31, 1997 or the date which is the number of days which the act
or event of Force Majeure delayed completion of the Improvements beyond January
31, 1997.
(b) LESSEE PAYMENT DUE IF BASIC LEASE TERM DOES NOT COMMENCE. If such
conditions set forth in Section 4(a) above have not been met in full to the
satisfaction of Owner by January 31, 1997 (or such later date determined in
accordance with paragraph (a) above for delays due to an act or event of Force
Majeure) and regardless of whether Lessee has elected not to enter the Basic
Lease Term pursuant to Section 29(a) hereof, Owner may declare by written notice
to Lessee that an amount equal to the sum, without duplication, of (i) all
unpaid Interim Rental and Additional Rental due with respect to the Interim
Lease Term through the date specified in such written notice, plus (ii) an
amount equal to the Termination Value, together with the Reinvestment Premium as
of the date of payment of the Termination Value, plus, (iii) all interest,
costs, fees, reimbursements and all other amounts due and payable by Lessee to
any one or more of the Owner and the Financing Parties under the Transaction
Documents, including, without limitation, the costs to complete the Improvements
incurred to the date of payment, shall be due and payable on the date specified
by Owner in such written notice. Upon payment of such amount to, or for the
benefit of, Owner by Lessee, Owner shall transfer to Lessee all of the Owner's
interest in the Leased Property to Lessee in accordance with the terms and
provisions of Section 32 hereof, and this Lease shall terminate without any
further action being required, and all rights and obligations hereunder and
thereunder shall cease, except for those which by their terms survive the
termination of this Lease.
5. RENTAL.
Lessee shall pay to Owner (or as otherwise directed in writing by Owner
as to place and manner of payment) the Interim Rental, Base Rental and
Additional Rental in the amounts, at the times and in the manner set forth
below, such amounts constituting in the aggregate the total of the rental
payable under this Lease, as follows:
(a) (i) RENTAL DURING CONSTRUCTION PERIOD. Lessee hereby agrees to pay
during the Interim Lease Term interim rental (herein referred to as
"Interim Rental") in arrears on January 31, 1996, July 31, 1996 and
January 31, 1997 (each an "Interim Rental Payment Date") in the amount
set forth opposite such Interim Rental Payment Date on Exhibit B1
attached hereto. The Lessee may pay such Interim Rental from
disbursements to be made from amounts on deposit in the Construction
Account in accordance with the terms and conditions of the Owner Trust
Indenture and the Construction Agency Agreement.
(ii) BASE RENTAL AFTER CONSTRUCTION PERIOD. Lessee hereby agrees to
pay during the Basic Lease Term and each Extension Lease Term base
rental (herein referred to as "Base Rental") semi-annually in arrears
on each Base Rent Payment
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<PAGE> 10
Date, commencing on July 31, 1997, in the amount set forth opposite
such Base Rent Payment Date on Exhibit B2 attached hereto.
(b) ADDITIONAL RENTAL. In addition to the Interim Rental and Base
Rental, Lessee agrees during the Term to pay as Additional Rental to the Owner
or the Person entitled to receive the same all of the following, in each case
when such amounts are due:
(i) All "taxes and other impositions" (as defined in Section
8(a) hereof);
(ii) Insurance premiums, if any, on all insurance required to
be obtained and maintained in force and effect by Lessee under the
provisions of Section 15 of this Lease;
(iii) All other costs and expenses of every nature whatsoever
incurred by Lessee incident to the ownership, management, maintenance,
repair, replacement, restoration, and operation of the Leased Property;
(iv) All indemnities, fees and expenses (not otherwise paid or
provided for out of the proceeds of the Notes or the Owner's Equity)
incurred by Owner or which the Owner is obligated to pay in connection
with the transactions contemplated in this Lease or under the Financing
Documents;
(v) All amounts, liabilities and obligations which Lessee
assumes or agrees to pay hereunder to Owner or others, including, if
any, payments of Termination Value, indemnities, Purchase Price, End of
Term Adjustment and any Reinvestment Premium that may become payable by
Lessee hereunder, in addition to any other amounts due as Interim
Rental, Base Rental and Additional Rental hereunder; and
(vi) In the event Lessee shall fail to pay Interim Rental,
Base Rental or Additional Rental or any other payment (including,
without limitation, the Maximum Lessee Risk Amount, Termination Value,
Purchase Price, End of Term Adjustment or the Reinvestment Premium)
owing in respect hereof in accordance with the terms of this Lease on
the date fixed for such payment or upon the occurrence of an Event of
Default, an additional amount for each day from and after the date
fixed for payment until paid or from the occurrence of the Event of
Default and during the continuance thereof, as the case may be, equal
to the product of (A) a fraction, the numerator of which is the then
effective Default Rate and the denominator of which is 360 multiplied
by (B) the Termination Value at such time. Amounts constituting
Additional Rental under this clause (vi) shall be payable by Lessee
immediately upon demand, or if no demand is made, upon the first day of
each month.
Amounts constituting Additional Rental payable pursuant to
clauses (i), (ii), (iii) and (iv) of this Section 5(b) shall be paid by
Lessee directly to the person or persons to whom such amounts are
payable. The obligation of Lessee to pay all such amounts shall survive
the termination of this Lease.
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<PAGE> 11
(c) SPECIFIED PAYMENT AMOUNTS. Exhibit C sets forth the Maximum Lessee
Risk Amount and Maximum Owner Risk Amount applicable prior to the Basic Term
Commencement Date. The Termination Value, Purchase Price, Maximum Lessee Risk
Amount and Maximum Owner Risk Amount effective as of the Basic Term Commencement
Date for the Maximum Term are set forth as exhibits to this Lease as follows:
Termination Value (Exhibit D), Purchase Price (Exhibit E), Maximum Lessee Risk
Amount (Exhibit F) and Maximum Owner Risk Amount (Exhibit F) after such
adjustment.
(d) MECHANICS OF LESSEE PAYMENTS. All payments of Interim Rental, Base
Rental and Additional Rental required to be made by Lessee to, or on behalf of,
Owner shall be made in immediately available funds. While any of the Owner Notes
remains outstanding, all payments hereunder payable to Owner, whether Interim
Rental, Base Rental, Additional Rental or otherwise, shall be paid in
immediately available funds to the Owner Collateral Trustee. If none of the
Owner Notes are outstanding, all payments hereunder shall be paid in such manner
as designated by Owner or any other Assignee.
6. USE.
Lessee will use the Leased Property as Lessee's primary warehouse and
distribution center serving Lessee's worldwide retail, wholesale and direct
marketing businesses, and to house its financial offices and computer center,
including use for office purposes, distribution, warehousing, light
manufacturing, research and development (or any one or more of such uses).
7. NET LEASE; NONTERMINABILITY.
(a) THIS LEASE IS A "NET LEASE." ALL COSTS, EXPENSES AND OBLIGATIONS OF
EVERY KIND AND NATURE WHATSOEVER RELATING TO THE LEASED PROPERTY AND THE
APPURTENANCES THERETO AND THE USE AND OCCUPANCY THEREOF BY LESSEE OR ANYONE
CLAIMING BY, THROUGH OR UNDER LESSEE WHICH MAY ARISE OR BECOME DUE DURING OR
WITH RESPECT TO THE PERIOD CONSTITUTING THE TERM HEREOF SHALL BE PAID BY LESSEE,
AND LESSEE SHALL INDEMNIFY THE INDEMNIFIED PARTIES AGAINST ANY OF THE FOREGOING
AS PROVIDED IN SECTION 8 BELOW. LESSEE ASSUMES, DURING THE TERM OF THIS LEASE,
THE SOLE RESPONSIBILITY FOR THE CONDITION, USE, OPERATION, MAINTENANCE,
SUBLETTING AND MANAGEMENT OF THE LEASED PROPERTY, NEITHER OWNER NOR ANY OTHER
INDEMNIFIED PARTY SHALL HAVE ANY RESPONSIBILITY IN RESPECT THEREOF, NOR SHALL
OWNER NOR ANY OTHER INDEMNIFIED PARTY HAVE ANY LIABILITY FOR DAMAGE INCURRED BY
ANY PERSON OR FOR DAMAGE TO THE PROPERTY OF LESSEE OR ANY SUBLESSEE OF LESSEE
FOR ANY REASON WHATSOEVER. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING,
DURING THE TERM OF THIS LEASE, LESSEE SHALL PERFORM ALL OF THE OBLIGATIONS OF
THE SUBLESSOR UNDER ANY SUBLEASES AFFECTING ALL OR ANY PART OF THE LEASED
PROPERTY WHICH LESSEE MAY HEREINAFTER ENTER INTO AS SUBLESSOR TO THE EXTENT THAT
LESSEE'S FAILURE TO PERFORM SUCH OBLIGATIONS COULD RESULT IN THE OCCURRENCE OF
AN EVENT OF DEFAULT UNDER THIS LEASE.
(b) LESSEE ACKNOWLEDGES AND AGREES THAT ITS OBLIGATIONS HEREUNDER,
INCLUDING, WITHOUT LIMITATION, ITS OBLIGATIONS TO PAY INTERIM RENTAL, BASE
RENTAL AND ADDITIONAL RENTAL, SHALL BE UNCONDITIONAL AND IRREVOCABLE UNDER ANY
AND ALL CIRCUMSTANCES AND SHALL NOT BE SUBJECT TO CANCELLATION, TERMINATION,
MODIFICATION OR REPUDIATION BY LESSEE. THIS LEASE SHALL NOT TERMINATE, NOR SHALL
LESSEE HAVE ANY RIGHT TO TERMINATE THIS LEASE, AND LESSEE
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SHALL PERFORM ALL OBLIGATIONS HEREUNDER, INCLUDING THE PAYMENT OF ALL INTERIM
RENTAL, BASE RENTAL AND ADDITIONAL RENTAL, WITHOUT NOTICE, DEMAND, COUNTERCLAIM,
SET-OFF, DEDUCTION, DEFENSE OR RECOUPMENT, AND WITHOUT ABATEMENT, SUSPENSION,
DEFERMENT, DIMINUTION OR REDUCTION FOR ANY REASON, INCLUDING, WITHOUT
LIMITATION, ANY PAST, PRESENT OR FUTURE CLAIMS WHICH LESSEE MAY HAVE AGAINST THE
OWNER, THE FINANCING PARTIES, LC ISSUER, BFS OR ANY OTHER PERSON FOR ANY REASON
WHATSOEVER; ANY DEFECT IN THE LEASED PROPERTY OR ANY PORTION THEREOF, OR IN THE
TITLE, CONDITION, DESIGN, CONSTRUCTION, HABITABILITY OR FITNESS FOR A PARTICULAR
USE THEREOF; ANY DAMAGE TO OR DESTRUCTION OR LOSS OF ALL OR PART OF THE LEASED
PROPERTY; ANY RESTRICTION, DEPRIVATION (INCLUDING EVICTION) OR PREVENTION OF, OR
ANY INTERFERENCE WITH OR INTERRUPTION OF, ANY USE OR OCCUPANCY OF THE LEASED
PROPERTY (WHETHER DUE TO ANY DEFECT IN OR FAILURE OF OWNER'S TITLE TO THE LEASED
PROPERTY, ANY OWNER LIEN OR OTHERWISE); ANY CONDEMNATION, REQUISITION OR OTHER
TAKING OR SALE OF THE USE, OCCUPANCY OR TITLE TO THE LEASED PROPERTY; ANY
ACTION, OMISSION OR BREACH ON THE PART OF THE OWNER UNDER THIS LEASE (INCLUDING
WITHOUT LIMITATION, ANY BREACH OF THE OWNER'S REPRESENTATIONS AND WARRANTIES SET
FORTH IN SECTION 12 HEREOF) OR UNDER ANY OTHER AGREEMENT BETWEEN OWNER AND
LESSEE, OR ANY OTHER INDEBTEDNESS OR LIABILITY, HOWSOEVER AND WHENEVER ARISING,
OF OWNER, ANY ASSIGNEE OR LESSEE TO ANY OTHER PERSON, OR BY REASON OF
INSOLVENCY, BANKRUPTCY OR SIMILAR PROCEEDINGS BY OR AGAINST OWNER, ANY ASSIGNEE
OR LESSEE; THE INADEQUACY OR INACCURACY OF THE DESCRIPTION OF THE LEASED
PROPERTY OR THE FAILURE TO DEMISE AND LET TO LESSEE THE PROPERTY INTENDED TO BE
LEASED HEREBY; LESSEE'S ACQUISITION OF OWNERSHIP OF THE LEASED PROPERTY OR ANY
SALE OR OTHER DISPOSITION OF THE LEASED PROPERTY; THE IMPOSSIBILITY OR
ILLEGALITY OF PERFORMANCE BY OWNER OR LESSEE OR BOTH; THE FAILURE OF OWNER TO
DELIVER POSSESSION OF THE LEASED PROPERTY ON THE COMMENCEMENT DATE; ANY ACTION
OF ANY COURT, ADMINISTRATIVE AGENCY OR OTHER GOVERNMENTAL AUTHORITY; OR ANY
OTHER CAUSE, WHETHER SIMILAR OR DISSIMILAR TO THE FOREGOING, ANY PRESENT OR
FUTURE LAW NOTWITHSTANDING; IT BEING THE INTENTION OF THE PARTIES HERETO THAT
ALL INTERIM RENTAL, BASE RENTAL AND ADDITIONAL RENTAL PAYABLE BY LESSEE
HEREUNDER SHALL CONTINUE TO BE PAYABLE IN ALL EVENTS AND IN THE MANNER AND AT
THE TIMES HEREIN PROVIDED, WITHOUT NOTICE OR DEMAND, UNLESS THE OBLIGATION TO
PAY THE SAME SHALL BE TERMINATED PURSUANT TO THE EXPRESS PROVISIONS OF THIS
LEASE.
(c) LESSEE WILL REMAIN OBLIGATED UNDER THIS LEASE IN ACCORDANCE WITH
ITS TERMS, AND WILL NOT TAKE ANY ACTION TO TERMINATE, RESCIND OR AVOID THIS
LEASE FOR ANY REASON, NOTWITHSTANDING ANY BANKRUPTCY, INSOLVENCY,
REORGANIZATION, LIQUIDATION, DISSOLUTION OR OTHER PROCEEDING AFFECTING OWNER, OR
ANY ASSIGNEE OF OWNER, OR ANY ACTION WITH RESPECT TO THIS LEASE WHICH MAY BE
TAKEN BY ANY RECEIVER, TRUSTEE OR LIQUIDATOR, OR ANY ASSIGNEE OF OWNER OR BY ANY
COURT IN ANY SUCH PROCEEDING. LESSEE WAIVES ALL RIGHTS AT ANY TIME CONFERRED BY
STATUTE OR OTHERWISE TO QUIT, TERMINATE OR SURRENDER THIS LEASE OR THE LEASED
PROPERTY (EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN SECTIONS 16(C) OR 29
HEREOF), OR TO ANY ABATEMENT, REDUCTION, DEFERMENT OR SET-OFF OF ANY INTERIM
RENTAL, BASE RENTAL, ADDITIONAL RENTAL OR OTHER SUM PAYABLE BY LESSEE HEREUNDER,
FOR DAMAGE, LOSS OR EXPENSE SUFFERED BY LESSEE ON ACCOUNT OF ANY CAUSE REFERRED
TO IN THIS SECTION 7 OR OTHERWISE.
8. TAXES AND OTHER CHARGES; LAWS AND AGREEMENTS.
(a) LESSEE OBLIGATION TO PAY TAXES. Lessee agrees to pay, defend and
indemnify and hold each Indemnified Party harmless on an after-tax basis from
any and all Federal, state, local and foreign taxes, fees, withholdings, levies,
imposts, duties, assessments and charges of any kind and nature whatsoever,
including, without limitation, all amounts
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payable hereunder as Additional Rental hereunder, together with any penalties,
fines or interest thereon (herein called "taxes or other impositions")
attributable to any given period prior to or within the Indemnification Period,
howsoever imposed, whether levied or imposed upon or asserted against Owner,
Trust Company, Beneficiary, W. Jeffrey Kramer ("Kramer"), any Assignee, Lessee,
the Leased Property, or any portion thereof (including, without limitation,
taxes and assessments referred to in clause (i) of Section 5(b) hereof) or any
other Indemnified Party, by any Federal, state or local government or taxing
authority in the United States, or by any taxing authority or governmental
subdivision of a foreign country, upon or with respect to (i) the Leased
Property or any portion thereof (including, without limitation, all fixtures,
equipment and personal property which forms a part of the Leased Property), (ii)
the acquisition, manufacture, construction, ordering, purchase, ownership,
delivery, leasing, subleasing, re-leasing, possession, use, maintenance,
registration, re-registration, titling, re-titling, licensing, documentation,
return, repossession, foreclosure, condemnation, conveyance, assignment, sale or
other application or disposition of the Leased Property or any other portion
thereof, (iii) the rentals, receipts or earnings arising from the Leased
Property or other portion thereof, or (iv) this Lease, the Interim Rental, Base
Rental or Additional Rental payable by Lessee hereunder or any of the
Transaction Documents, provided, however, that the foregoing indemnity shall not
apply to and nothing in this Lease shall require the payment by the Lessee of
(A) any taxes or impositions based upon or measured solely by any Principal
Party's gross, net or taxable income, tax preferences or dividends paid or taxes
payable in the nature of capital gains, excess profits, accumulated earnings or
personal holding company taxes of such Principal Party, unless any such tax is
in lieu of or in substitute for any other taxes of such Principal Party or
impositions upon or with respect to the Leased Property which, if such other
taxes or impositions were in effect, would be payable by Lessee hereunder; (B)
any franchise, estate, inheritance, succession, capital stock tax, unless any
such tax is in lieu of or in substitute for any other taxes of such Principal
Party or impositions upon or with respect to the Leased Property which, if such
other taxes or impositions were in effect, would be payable by Lessee hereunder;
(C) any taxes of the Trust Company or the Beneficiary imposed on or measured by
the administrative fees earned by such Persons in connection with the
transaction contemplated herein; (D) any taxes of an Indemnified Party arising
by reason of any voluntary transfer of the Lease or Leased Property or part
thereof other than (I) a transfer by Owner pursuant to an exercise of remedies
which are enforceable after the occurrence of an Event of Default hereunder,
(II) a transfer constituting an Owner Conveyance hereunder, or (III) a
subsequent transfer by the Owner Collateral Trustee or any nominee, designee or
affiliate thereof if such entity purchases the Leased Property at a foreclosure
sale or accepts a deed-in-lieu of foreclosure to the Leased Property; and (E)
any taxes of an Indemnified Party arising by reason of the voluntary transfer by
the Beneficiary of its interests held pursuant to the Owner Trust Agreement. As
used herein, the term "Indemnification Period" means the period commencing on
the Commencement Date and ending on the date that the Owner or any Assignee
sells, transfers or otherwise conveys such Person's interest in and to the
Leased Property to the Lessee or a third person. "Principal Party" means any
Indemnified Party other than the Owner, the Beneficiary, the Trust Company or
Kramer. Lessee will promptly notify Owner of all reports or returns required to
be made with respect to any tax or other imposition with respect to which Lessee
is required to indemnity hereunder, and will promptly provide each of them with
all information necessary for the making and timely filing of such reports or
returns by Owner. If Owner requests that any such reports or returns be prepared
and filed by Lessee, Lessee
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will prepare and file the same if permitted by applicable law to file the same,
and if not so permitted, Lessee shall prepare such report or returns for
signature by Owner, and shall forward the same, together with immediately
available funds for payment of any tax or other imposition due, to Owner, at
least ten (10) days in advance of the date such payment is due. Upon written
request, Lessee shall furnish Owner with copies of all paid receipts or other
appropriate evidence of payment for all taxes or other impositions paid by
Lessee pursuant to this Section 8. All of the indemnities contained in this
Section 8 shall continue in full force and effect notwithstanding the expiration
or earlier termination of this Lease in whole or in part, including the
expiration or termination of the Term with respect to the Leased Property, and
are expressly made for the benefit of, and shall be enforceable by, Owner and
each Assignee.
(b) LESSEE RIGHT TO CONTEST TAXES. Notwithstanding the provisions of
paragraph (a) of this Section 8 and the provisions of Section 9 and so long as
no Default or Event of Default shall have occurred and be continuing, Lessee
shall have the right to contest, by appropriate legal proceedings, any tax,
charge, levy, assessment, lien or other encumbrance affecting the Leased
Property, and to postpone payment of or compliance with the same during the
pendency of such contest, provided that (i) the commencement and continuation of
such proceedings shall suspend the collection thereof from, and suspend the
enforcement thereof against, the Person on whom such tax, charge, levy,
assessment, lien or other encumbrance is sought to be imposed and/or the Leased
Property, (ii) no part of the Leased Property nor any Interim Rental, Base
Rental or Additional Rental or other sums payable by Lessee hereunder shall be
in danger of being sold, forfeited, attached or lost, (iii) there shall not
exist (A) any interference with the use and occupancy of the Leased Property or
any part thereof, or (B) any interference with the payment of Interim Rental,
Base Rental or any Additional Rental (other than the portion of Additional Rent
subject to the contest), (iv) Lessee shall promptly prosecute such contest to a
final settlement or conclusion, or if Lessee deems it advisable to abandon such
contest, Lessee shall promptly pay or perform the obligation which was the
subject of such contest and (v) at no time during the permitted contest shall
there be a risk of the imposition of criminal liability on Owner for failure to
comply therewith. If (I) any such contest shall involve an amount of money or
potential loss (including penalties and similar charges) in excess of $250,000,
and (II) either the Parent is not then Investment Grade or a Default or an Event
of Default shall have occurred and be continuing, then Lessee shall either (x)
deposit with the Owner an amount equal to 125% of the tax, charge, levy,
assessment, lien or other encumbrance affecting the Leased Property, or (y) post
an equivalent bond for security issued by a surety or other issuer reasonably
acceptable to Owner and containing such terms which are reasonably acceptable to
Owner. Lessee shall not postpone the payment of any such tax, charge, levy,
assessment, lien or other encumbrance for such length of time as shall permit
the Leased Property, or any lien thereon created by such item being contested,
to be sold or foreclosed by federal, state, county or municipal authority for
the non-payment thereof. Lessee shall not postpone compliance with any such law,
rule, order, ordinance, regulation or other governmental requirement if Owner
will thereby be subject to criminal prosecution, or if any municipal or other
governmental authority shall be in a position according to applicable law to
commence and carry out any action which would prevent compliance with the same
or to foreclose or sell any lien affecting all or part of the Leased Property
which shall have arisen
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by reason of such postponement or failure of compliance. Owner agrees to provide
Lessee with a copy of any of its tax returns upon the written request of Lessee.
9. LIENS.
Lessee represents and warrants that on the Commencement Date, fee
simple title in the Leased Property was vested in Owner subject only to
Permitted Liens. Subject to the provisions of paragraph (b) of Section 8, Lessee
will promptly, but in any event no later than 60 days after Lessee acquires
actual knowledge of the filing thereof but in any event prior to the enforcement
of the same, at its own expense, remove and discharge of record, by bond or
otherwise, any charge, lien, security interest or encumbrance upon the Leased
Property, upon any Interim Rental or Base Rental, or upon any Additional Rental
or other sums payable by Lessee under this Lease which arises for any reason
(except for Owner Liens) including all liens which arise out of Lessee's
possession, use, construction, operation and occupancy of the Leased Property,
but not including any Permitted Liens. Nothing contained in this Lease shall be
construed as constituting the consent or request of Owner, express or implied,
to or for the performance by any contractor, laborer, materialman, or vendor of
any labor or services or for the furnishing of any materials for construction,
alteration, addition, repair or demolition of or to the Leased Property or any
part thereof. Notice is hereby given that Owner will not be liable for any
labor, services or materials furnished or to be furnished to Lessee, or to
anyone holding an interest in the Leased Property or any part thereof by,
through or under Lessee, and that no mechanic's or other liens for any such
labor, services or materials shall attach to or affect the interest of Owner in
and to the Leased Property. In the event of the failure of Lessee to discharge
any charge, lien, security interest or encumbrance within the time period set
forth above and otherwise as aforesaid, except during the pendency of any
contest permitted and conducted pursuant to paragraph (b) of Section 8, Owner
may (but shall not be required to) discharge such items by payment or bond or
both, and Lessee will repay to Owner, upon demand, any and all amounts paid
therefor, or by reason of any liability on such bond, and also any and all
reasonable incidental expenses, including reasonable attorney's fees, incurred
by Owner in connection therewith.
10. OWNERSHIP OF THE LEASED PROPERTY.
(a) CHARACTER OF LEASE. The Owner and the Lessee intend that (i) for
financial accounting purposes with respect to the Lessee, this Lease will be
treated as an "operating lease" pursuant to Statement of Financial Accounting
Standards No. 13, as amended, but (ii) for federal and all state and local
income tax purposes, (A) this Lease will be treated as a financing arrangement,
(B) the indebtedness evidenced by the Owner Notes will be deemed indebtedness of
the Lessee, which indebtedness is secured by all of the Leased Property, and (C)
the Lessee will be treated as the owner of all of the Leased Property and will
be entitled to all tax benefits ordinarily available to an owner of a property
similar to the Leased Property for such tax purposes. Neither Owner, nor
Beneficiary, nor Lessee shall take any action inconsistent with such intent for
tax purposes, provided that nothing in this Section 10(a) shall deemed to
restrict the Owner's right to exercise any remedies after the occurrence of an
Event of Default.
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(b) LEASE AS SECURITY. This Lease is a lease intended as security. To
secure payment of the Interim Rental, Base Rental and Additional Rental, and the
performance of all of Lessee's other obligations hereunder, Lessee does hereby
give, grant, sell, claim, enfeoff, revise, release, convey, confirm, assign,
transfer, mortgage, hypothecate, pledge, deliver, set over, warrant and confirm
to Owner, its successors and assigns forever, and grant to Owner, its successors
and assigns a mortgage and security interest in, all of the Lessee's right,
title and interest, of whatever kind or nature to the extent such right, title
or interest shall be determined to exist by a court of competent jurisdiction,
in and to the Leased Property (including, without limitation, all site
improvements, base building, building systems, equipment and related fixtures
now or hereafter existing on the Land), together with any substitutions,
replacements and additions thereto, all of the Lessee's rights in and to the
Approved Construction Documents and all contract rights and general intangibles
related to the Leased Property and all of Lessee's rights, claims and damages
arising from warranties (whether express or implied) of architects, contractors
and subcontractors with respect to the development and construction of the
Improvements, and all proceeds of the conversion, voluntary or involuntary, of
the foregoing into cash, investments, instruments, securities or other property,
whether in cash, investments, instruments, securities or other property together
with all books and records relating to the foregoing. Without limiting the force
or effectiveness of the foregoing, the Owner and the Lessee shall, at Owner's
request, take such actions and execute, deliver, file and record such other
documents, financing statements, mortgages and deeds of trust as may be
necessary to ensure that, if this Lease were deemed to constitute a mortgage and
create a security interest in the Leased Property in accordance with this
Section 10, such mortgage and security interest would be deemed to be a
perfected mortgage and security interest of first priority under applicable
federal, state and local law, subject only to Permitted Liens, securing the
payment and performance of the aforesaid indebtedness and obligations.
(c) LEASE IN BANKRUPTCY. It is the intent of the parties that in any
bankruptcy proceeding of Lessee or Owner under any chapter of the Bankruptcy
Code, this Lease shall be treated as a lease intended as security and Lessee
shall be the owner of the Leased Property and the other Collateral subject to a
security interest in the Leased Property and the other Collateral in favor of
Owner, its successors and assigns, as provided for in this Section 10.
11. OWNER'S DISCLAIMER; ACKNOWLEDGEMENT BY LESSEE.
The Leased Property is demised and let in its present condition without
representation and warranty by Owner subject to (a) Permitted Liens, (b) the
rights of parties in possession, (c) the state of title transferred to Owner on
the Commencement Date pursuant to the P&S, (d) any state of facts which an
accurate survey or physical inspection might show, (e) the existing
environmental condition of the Leased Premises, (f) all applicable laws, rules,
regulations, ordinances and restrictions, including, without limitation, all
Environmental Legal Requirements, now in effect or hereafter adopted by any
governmental authority having jurisdiction, and (g) any violation of such laws,
rules, regulations, ordinances and restrictions occurring on or before the
Commencement Date. Lessee has examined the Leased Property and the Owner's title
and interest thereto and has found as between Lessee and Owner (and each Person
claiming by, through or under Owner) the same to be satisfactory for all
purposes.
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LESSEE REPRESENTS, WARRANTS AND ACKNOWLEDGES THAT THE CONSTRUCTION OF
THE IMPROVEMENTS ON THE LAND WILL BE WITHIN THE EXCLUSIVE CONTROL OF, AND WILL
BE THE SOLE RESPONSIBILITY OF, LESSEE. OWNER HAS NOT MADE AN INSPECTION OF THE
LEASED PROPERTY AND MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED,
WITH RESPECT TO THE LEASED PROPERTY OR ANY PORTION THEREOF OR THE LOCATION, USE,
DESCRIPTION, DESIGN, MERCHANTABILITY, HABITABILITY, ENVIRONMENTAL CONDITION,
COMPLIANCE WITH SPECIFICATIONS, CONDITION, OPERATION, ABSENCE FROM DEFECTS
(PATENT OR LATENT), DURABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF THE LEASED
PROPERTY OR ANY PORTION THEREOF; AND ALL RISKS INCIDENTAL TO THE LEASED PROPERTY
SHALL BE BORNE BY THE LESSEE AND THE OWNER SHALL HAVE NO RESPONSIBILITY WITH
RESPECT THERETO. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, IN THE EVENT
OF ANY DEFECT OR DEFICIENCY OF ANY NATURE IN THE LEASED PROPERTY OR ANY PORTION
THEREOF, WHETHER PATENT OR LATENT, WHETHER DISCOVERABLE BY LESSEE, OWNER SHALL
NOT HAVE ANY RESPONSIBILITY OR LIABILITY WITH RESPECT THERETO OR FOR ANY DIRECT
OR INDIRECT DAMAGE TO PERSONS OR PROPERTY RESULTING THEREFROM, OR FOR LESSEE'S
LOSS OF USE OF THE LEASED PROPERTY, OR ANY PORTION THEREOF, OR FOR ANY
INTERRUPTION IN LESSEE'S BUSINESS CAUSED BY LESSEE'S INABILITY TO USE THE LEASED
PROPERTY, OR ANY PORTION THEREOF, FOR ANY REASON WHATSOEVER. THE PROVISIONS OF
THIS SECTION 11 HAVE BEEN NEGOTIATED BY LESSEE AND OWNER AND ARE INTENDED TO BE
A COMPLETE EXCLUSION AND DISCLAIMER BY OWNER OF ANY AND ALL WARRANTIES BY OWNER
WITH RESPECT TO THE LEASED PROPERTY OR ANY PORTION THEREOF, WHETHER EXPRESS OR
IMPLIED, AND WHETHER ARISING UNDER THE UNIFORM COMMERCIAL CODE, ANY OTHER
APPLICABLE LAW OR OTHERWISE. LESSEE REPRESENTS AND WARRANTS TO OWNER THAT THE
PROVISIONS OF THIS SECTION 11 ARE ENFORCEABLE BY OWNER AGAINST LESSEE (AND THOSE
CLAIMING BY, THROUGH OR UNDER LESSEE) AND THAT OWNER SHALL NOT HAVE ANY
LIABILITY FOR ANY OF THE MATTERS SUBJECT TO THIS DISCLAIMER.
12. REPRESENTATIONS OF PARTIES.
Lessee hereby represents and warrants to Owner that as of the
Commencement Date and at all times during the Term as follows:
(a) Lessee is a corporation duly organized, validly existing and in
good standing under the laws of the State of New York, with full corporate power
and authority to own its properties and to conduct its business as currently
conducted.
(b) Lessee is qualified to do business as a foreign corporation and is
in good standing in the State of New Jersey.
(c) Lessee has the corporate power and authority to enter into this
Lease and the Transaction Documents to which it is a party and to carry out and
perform the obligations of Lessee under the terms hereof and thereof.
(d) The execution, delivery and performance by Lessee of this Lease and
the Transaction Documents to which it is a party have been duly authorized by
all the
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necessary corporate action of Lessee and do not (i) violate any provision of any
law, rule, regulation, order, writ, judgment, injunction, decree, determination
or award applicable to Lessee, (ii) result in a breach of or constitute a
default under any indenture or loan or credit agreement or any other agreement,
lease or instrument to which Lessee is a party or by which it or its properties
are bound, or (iii) result in, or require, the creation or imposition of any
mortgage, deed of trust, pledge, lien, security interest or other charge or
encumbrance. Lessee is not in violation of or in default under any such law,
rule, regulation, order, writ, judgment, injunction, decree, determination or
reward or any such indenture, agreement, lease or instrument described in this
paragraph.
(e) The Lease and the Transaction Documents to which Lessee is a party
have been duly executed and delivered by Lessee and constitute the legal, valid
and binding obligations of Lessee enforceable against Lessee in accordance with
their terms, including, without limitation, the choice of laws provisions
therein.
(f) Neither the execution and delivery of this Lease, nor the payment
and performance by Lessee of all of its obligations hereunder, require the
consent or approval of, the giving of notice to, or the registration, filing or
recording with, or the taking of any other action in respect of, any Federal,
state, local or foreign government or governmental authority or agency or other
Person other than the recording of the Memorandum of Lease.
(g) All balance sheets, statements of profit and loss and other
financial data that have been delivered to Owner and the Financing Parties with
respect to Parent (i) are complete and correct in all material respects, (ii)
accurately present the financial condition of Parent on the dates for which, and
the results of its operations for the periods for which, the same have been
furnished, and (iii) have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods covered
thereby, and there has been no material adverse change in the condition of
Lessee or Parent, financial or otherwise, since the date of the most recent
financial statements delivered to Owner with respect to Parent.
(h) Except as otherwise stated in Schedule I (the "Listed Permits"),
Lessee holds all licenses, certificates and permits (including any applicable
environmental permits) from governmental authorities necessary to complete the
Improvements pursuant to the Construction Agency Agreement and/or required to
construct the Improvements as contemplated in the Approved Construction
Documents and prior to the Basic Term Commencement Date, shall obtain all
licenses, certificates and permits (including applicable environmental permits)
from governmental authorities necessary to occupy and use the Leased Property
for its intended purposes. All such licenses, certificates and permits will
remain in full force and effect and be complied with in all respects.
(i) No litigation or administrative proceedings of or before any court,
tribunal or governmental body is pending, or, to the knowledge of Lessee,
threatened against Lessee or any of its properties or with respect to this Lease
which, if adversely determined, would have a material adverse effect on the
business, assets or financial condition of Lessee or upon its right to enter
into this Lease or the validity or effectiveness thereof.
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(j) Lessee is not in default in the payment or performance of any of
its material obligations or in the performance of any material contract,
agreement or other instrument to which it is a party or by which it or any of
its assets may be bound and which will continue to exist subsequent to the date
hereof.
(k) The Leased Property is not subject to any mortgage, lien, pledge,
charge, encumbrance, security interest or title retention or other security
agreement or arrangement of any nature whatsoever, except for Permitted Liens.
(l) Lessee has not incurred or become liable for any broker's
commission or finder's fee relating to or in connection with the transaction
contemplated in this Lease or the other Transaction Documents, except for the
fee payable to Cushman and Wakefield, which fee is listed on the Project Budget
and was paid promptly upon becoming due in accordance with the Construction
Agency Agreement.
Owner hereby represents and warrants to Lessee that as of the
Commencement Date and at all times during the Term as follows:
(a) Trust Company is a national banking association duly organized,
validly existing and in good standing under the laws of the United States of
America with full corporate power and authority to own its properties and to
conduct the business contemplated under the Transaction Documents.
(b) Trust Company is either qualified to do business and is in good
standing in the State of New Jersey or because of the nature of its activities,
Owner is not required to be qualified to do business in the State of New Jersey.
(c) Owner has the power and authority under its Owner Trust Agreement
to enter into this Lease and the Transaction Documents to which it is a party
and to carry out and perform the obligations of Owner under the terms hereof and
thereof.
(d) The execution, delivery and performance by Owner of this Lease and
the Transaction Documents to which it is a party have been duly authorized and
do not (i) violate any provision of any law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award applicable to Owner, (ii)
result in a breach of or constitute a default under any indenture or loan or
credit agreement or any other agreement, lease or instrument to which Owner is a
party or by which it or its properties are bound, or (iii) result in, or
require, the creation or imposition of any mortgage, deed of trust, pledge,
lien, security interest or other charge or encumbrance. Owner is not in
violation of or in default under any such law, rule, regulation, order, writ,
judgment, injunction, decree, determination or reward or any such indenture,
agreement, lease or instrument described in this paragraph.
(e) The Lease and the Transaction Documents to which Owner is a party
have been duly executed and delivered by Owner and constitute the legal, valid
and binding obligations of Owner enforceable against Owner in accordance with
their terms, including, without limitation, the choice of laws provisions
therein.
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(f) Neither the execution and delivery of this Lease, nor the
performance by Owner of all of its obligations hereunder, requires the consent
or approval of, the giving of notice to, or the registration, filing or
recording with, or the taking of any other action in respect of, any Federal,
state, local or foreign government or governmental authority or agency or other
Person other than the recording of the Memorandum of Lease.
(g) No litigation or administrative proceedings of or before any court,
tribunal or governmental body is pending, or, to the knowledge of Owner,
threatened against Owner or any of its properties or with respect to this Lease
which, if adversely determined, would have a material adverse effect on the
business, assets or financial condition of Owner or upon its right to enter into
this Lease or the validly or effectiveness thereof.
(h) Owner has not contracted with a broker or a finder relating to or
in connection with the transactions contemplated in this Lease or the other
Transaction Documents.
(i) Owner will not, during the entire Term of this Lease, engage in any
business other than the business of owning the Leased Property and will not
incur any debts other than the debts contemplated in the Transaction Documents
and debts incurred to satisfy and discharge such debts.
13. MAINTENANCE; QUIET ENJOYMENT.
(a) LESSEE'S OBLIGATION TO MAINTAIN LEASED PROPERTY. In addition to the
other covenants contained in this Lease, Lessee hereby further covenants and
agrees that during the Term of this Lease:
(i) Lessee acknowledges that on and as of the Basic Term
Commencement Date, all Improvements will be in new condition, repair
and appearance, subject only to the completion of the Punch List Items
set forth in writing on such date and referenced in Section 10.15 of
the Construction Agency Agreement. Lessee shall, at its cost and
expense, keep and maintain the Improvements, including any altered,
rebuilt, additional or substituted buildings, structured and other
improvements thereto, in the same condition as on the Basic Term
Commencement Date (or with respect to any Punch List Items acquired or
constructed subsequent thereto, in the same condition as on the date
that such Punch List Items have been Substantially Completed and the
provisions of Section 10.15 of the Construction Agency Agreement in
respect thereof have been satisfied), ordinary wear and tear excepted,
and on a basis consistent with the operation and maintenance of first
class office buildings, warehouse facilities and/or light manufacturing
facilities and other uses permitted under Section 6 hereof, as the case
may be, comparable in style and location to the Leased Property and in
no event less than the standards applied by Lessee or Affiliates in the
operation of other comparable properties owned or leased by Lessee or
Affiliates. Lessee will make all structural and nonstructural, and
ordinary and extraordinary changes, repairs and replacements, foreseen
or unforeseen, which may be required, whether or not caused by its act
or omission, to be made upon or in connection with the Improvements in
order to keep the same in such condition, including taking, or
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causing to be taken, action necessary to maintain the Leased Property
in compliance with the provisions of any insurance policy with respect
to the Leased Property and any applicable Legal Requirements, including
all applicable Environmental Legal Requirements. Lessee shall provide
or cause to be provided all security service, custodial service,
janitorial service and other services necessary for the proper upkeep
and maintenance of the Leased Property.
(ii) Lessee covenants to perform or observe all terms,
covenants or conditions of any Permitted Liens, easement or maintenance
agreements to which it may at any time be a party or to which the
Leased Property or any portion thereof is subject at any time or any
other like matters which now or hereafter affect the Leased Property,
the Owner, the Lease or any one of the foregoing. Lessee shall, at its
expense, use its reasonable efforts, consistent with sound business
practice, to enforce compliance with any Permitted Liens, easement, or
maintenance agreements or similar agreements benefiting the Leased
Property or any portion thereof by any other Person subject to such
agreement, provided, however, that if a failure to comply with any of
the foregoing would adversely affect the utility, fair market value or
useful life of the Leased Property, the Lessee shall enforce compliance
with the same. Lessee expressly waives the right to make repairs at the
expense of the Owner pursuant to any law at any time in effect that
would impose any such obligations on a lessor or give any such rights
to a lessor. Lessee shall not abandon the Leased Property or any
portion thereof or commit waste thereon.
(iii) If any Improvements situated on the Leased Property at
any time during the Term of this Lease shall encroach upon any
property, street or right-of-way adjoining or adjacent to the Leased
Property, or shall violate the agreements or conditions contained in
any restrictive covenant affecting the Leased Property or any part
thereof, or shall impair the rights of others under or obstruct any
easement or right-of-way to which the Leased Property is subject, then,
promptly after the written request of Owner or any Person affected by
any such encroachment, violation, impairment or obstruction, Lessee
shall, at its expense, either (A) obtain effective waivers or
settlements of all claims, liabilities and damages resulting from each
such encroachment, violation, impairment or obstruction whether the
same shall affect Owner, Lessee, the Owner Collateral Trustee or the LC
Issuer or any one or more of the foregoing, or (B) make such changes in
the Improvements on the Leased Property and take such other action as
shall be necessary to remove such encroachments or obstructions and to
end such violations or impairments, including, if necessary, the
alteration or removal of any Improvement on the Leased Property. Any
such alteration or removal shall be made in conformity with the
requirements of Section 17 to the same extent as if such alteration or
removal were an alteration under Section 17 of this Lease and there
shall be no abatement of Interim Rental, Basic Rental or Additional
Rental by reason of such alteration or removal.
(iv) Owner shall have no obligation to incur any expense of
any kind or character in connection with the management, operation or
maintenance of the Leased Property during the Term of this Lease. Owner
shall not be required at any time to make any improvements,
alterations, changes, additions, repairs or replacements of any nature
whatsoever in or to the Leased Property. Lessee shall
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use and operate the Leased Property or cause it to be used and operated
only by personnel authorized by Lessee, and Lessee shall use reasonable
precautions to prevent loss or damage to the Leased Property from fire
and other hazards.
(v) Lessee shall pay all charges for utility, communication
and other services on or about the Leased Property, whether or not
payment therefor shall become due after the Term of this Lease.
(vi) Other than the provisions of Section 13(b) hereof, Lessee
shall perform all covenants and agreements (except for those covenants
and agreements which are by their express terms capable of being, or
specifically required to be, performed by Owner acting alone) which it
and/or Owner agree to perform under the Owner Financing Documents, the
Construction Agency Agreement and the other Transaction Documents.
(b) LESSEE'S RIGHT TO QUIET ENJOYMENT. Owner hereby covenants and
agrees that during the Term of this Lease it shall not take any affirmative
action which will interfere with the quiet use and enjoyment of the Leased
Property by Lessee, that it will not fail to take any affirmative action
required to prevent interference with the quiet use and enjoyment of the Leased
Property as contemplated under this Lease by Lessee, unless such interference
arises out of a Default or Event of Default by Lessee and that each lender whose
debt is secured by a lien on the Leased Property shall enter into an agreement
with Lessee to such effect that such lender shall not disturb Lessee's occupancy
of the Leased Property and shall respect all Lessee's right under this Lease,
including Lessee's right to purchase as provided in Section 29(b) below, so long
as no Default or Event of Default shall have occurred and be continuing under
this Lease and provided that Lessee shall have entered into an agreement,
satisfactory in all respects to Lessee, subordinating its interest in the Leased
Property to the lien of such lender and agreeing to attorn to such lender in the
event of foreclosure. Owner further covenants and agrees that, so long as no
Default or Event of Default shall have occurred and be continuing and provided
that Lessee shall bear all associated costs, it shall take all reasonably
necessary actions as owner of the Leased Property (i) to permit Lessee or its
nominee to exercise Owner's voting rights as a member of the Campus Conservation
and Management Association, Inc., a New Jersey not-for-profit corporation (the
"Association"), and serve as Owner's representative on the Association's Design
Review Committee, provided that such exercise and representation shall be
consistent with and permitted by the By-Laws and Articles of Incorporation of
the Association; and (ii) to grant and/or to convey such necessary utility
easements or rights of passage over the Leased Property as may be necessary to
enable the Lessee to operate the Leased Property for the uses permitted under
Section 6 hereof.
14. COMPLIANCE WITH LEGAL REQUIREMENTS.
Lessee shall at all times, at Lessee's own cost and expense, perform
and comply with all Legal Requirements with respect to or relating to the Leased
Property, or the improvements thereon, or the facilities or equipment thereon or
therein, or the streets, sidewalks, vaults, vault spaces, curbs and gutters
adjoining the Leased Property, or the appurtenances to the Leased Property, or
the franchise and privileges connected therewith, whether or not such Legal
Requirements so involved shall necessitate structural changes,
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improvements, interference with use and enjoyment of the Leased Property,
replacements or repairs, extraordinary as well as ordinary, and Lessee shall so
perform and comply, whether or not such Legal Requirements shall now exist or
shall hereafter be enacted or promulgated, and whether or not such Legal
Requirements can be said to be within the present contemplation of the parties
hereto. Lessee shall, at its expense, comply with all provisions of insurance
policies required pursuant to Section 15 hereof, and with the provisions of all
Permitted Liens and all contracts, agreements, instruments and restrictions
existing at the commencement of this Lease or thereafter suffered or permitted
by Lessee, affecting the Leased Property or any part thereof or the ownership,
occupancy, use, operation or possession thereof. Lessee shall at all times
comply with the terms of and perform its obligations under any assignment of
this Lease to the Owner Collateral Trustee, or any other Assignee, and any
consent of Lessee to such assignment.
Notwithstanding the foregoing provisions of this Section 14 and so long
as no Default or Event of Default shall have occurred and be continuing, Lessee
shall have the right to contest by appropriate legal proceedings, any order or
other direction issued by any federal, state or local governmental agency which
order or direction affects the Lessee or the Leased Property, and to postpone
compliance with the same during the pendency of such contest, provided that (a)
the commencement and continuation of such proceedings shall suspend the
enforcement of such order or direction, (b) no part of the Leased Property nor
any Interim Rental, Base Rental or Additional Rental or other sums payable by
Lessee hereunder shall be in danger of being sold, forfeited, attached or lost,
(c) there shall not exist (i) any interference with the use or occupancy of the
Leased Property or any part thereof, or (ii) any interference with the payment
of Interim Rental, Base Rental or Additional Rental, (d) Lessee shall promptly
prosecute such contest to a final settlement or conclusion, or if Lessee deems
it advisable to abandon such contest, Lessee shall promptly pay or perform the
obligation which was the subject to such contest and (e) at no time during the
permitted contest shall there be a risk of the imposition of criminal liability
on Owner for failure to comply therewith. If (A) any such contest shall involve
an amount of money, or potential loss (including penalties and similar charges)
in excess of $100,000, and (B) either Parent is not then Investment Grade or a
Default or an Event of Default shall have occurred and be continuing, then
Lessee shall either (I) deposit with the Owner an amount equal to 125% of the
amount of money or potential loss involved in such contest or (II) post an
equivalent bond for security issued by a surety or other issuer reasonably
acceptable to Owner and containing such terms which are reasonably acceptable to
Owner. In no event shall Lessee postpone the payment or performance of the order
or direction for such length of time as shall permit the Leased Property, or any
lien thereon created by such order or direction being contested, to be sold or
foreclosed by any federal, state, county or municipal authority for the
nonpayment or nonperformance thereof. Lessee shall not postpone compliance with
any such order or direction if Owner will thereby be subject to criminal
prosecution, or if any governmental authority shall be in a position according
to applicable law to commence or carry out any action which would then prohibit
compliance with same or to foreclose or sell any lien affecting all or a part of
the Leased Property which shall have arisen by reason of such postponement or
failure of compliance.
15. INSURANCE.
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Lessee shall during the Term obtain and maintain, or cause to be
obtained and maintained, at all times the following insurance:
(a) A policy or policies of insurance against loss or damage to the
Leased Property and all replacement and additions thereto known as "all risk"
without exception (other than those approved by Owner in writing). During the
Construction Period, the Lessee shall maintain builder's risk insurance in
"completed value non-reporting form" (and which shall include all insurance
required to be carried by Lessee, as "owner," under the provisions of the
construction contracts let by Lessee). Such insurance shall insure the
Improvements, including all materials in storage and while in transit during the
Interim Lease Term, against loss or damage by fire or other casualty, with
extended coverage and with coverage for such other hazards (including
"collapse," "explosion," "underground hazards," "vandalism and malicious
mischief," and coverage in so-called "all-risk" form) as the Owner and the Owner
Collateral Trustee may from time to time require. All such insurance shall
contain a replacement cost endorsement (which shall evidence coverage of 100% of
full replacement cost, with only those deductibles approved by Owner, the Owner
Collateral Trustee and LC Issuer) and, if required by the Owner and the Owner
Collateral Trustee, an agreed amount endorsement.
(b) If any portions of the Leased Property is located in an area
designated by the Secretary of Housing and Urban Development as having special
flood hazards, flood insurance in the maximum available amount.
(c) Comprehensive public liability insurance, naming Owner,
Beneficiary, Kramer and Trust Company, each as insured and the Owner Collateral
Trustee and LC Issuer, each as additional insured, against legal liability for
claims for death, personal injury, bodily injury, or property damage occurring
on, in or about the Leased Property and the adjoining land, streets, sidewalks
or ways or occurring as a result of construction and use of the Improvements on
the Land or as a result of any activities taking place on the Leased Property
after construction, with liability insurance limits of not less than $20,000,000
combined single limit for personal injury and property damage.
(d) Boiler and machinery insurance commencing at such time as fixtures
and equipment are connected and ready for use.
(e) Workers' compensation insurance issued by a responsible carrier
authorized under the laws of the State of New Jersey to insure employers against
liability for compensation or in lieu thereof, such workers' compensation
insurance to cover all persons employed by Lessee in connection with the Leased
Property and to cover full liability for compensation under any such act
aforesaid.
(f) Business interruption insurance to cover loss resulting from delay
of the completion of the Improvements. At all times during the Term of this
Lease after the Basic Term Commencement Date, such insurance shall cover loss of
use, total or partial, of any part of the Leased Property in an amount
sufficient at all times to pay the total Base Rental and Additional Rental
payable under this Lease with respect to the Leased Property for a period
adequate to cover the period of loss of use of any part of the Leased Property.
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Such policy shall provide that the amount payable thereunder shall not be less
than an amount equal to one (1) year's Base Rental and Additional Rental.
(g) Such other insurance coverages in such amounts as the Owner may
reasonably request consistent with the customary practices of prudent developers
and owners of similar properties or which Owner is required to maintain under
the Owner Financing Documents.
The originals or duplicate originals of such policies required shall be
deposited with the Owner by Lessee on the Commencement Date and thereafter, no
less frequently than annually and in no event later than thirty (30) days prior
to the commencement of the Basic Lease Term and each Extension Lease Term. With
respect to the policies described under subparagraphs (a), (b), (d) and, if
applicable, (g), the Lessee also shall deliver originals or duplicate originals
evidencing the coverage required under said subparagraphs to the Owner
Collateral Trustee; with respect to all other insurance, the Lessee shall
deliver insurance certificates naming the Owner Collateral Trustee as the
certificateholder, the form and substance of such certificates to be
satisfactory to the Owner Collateral Trustee and shall be issued by the insurer
or a duly authorized agent of the insurer and shall be accompanied by evidence
of the full payment of premiums.
All policies of property insurance provided for therein shall name the
Owner and Trust Company as insured, and all liability policies shall name the
Owner, Trust Company, the Owner Collateral Trustee and LC Issuer as additional
insured, as its interests may appear and the policies required under
subparagraphs (a), (b), (d) and (f) above shall identify the Owner as the owner
of the Leased Property. The Lessee shall deliver to Owner copies of the
insurance certificates received from its architects and engineers evidencing
professional liability insurance covering such Persons in the form required
under the Lessee's agreements with such parties. In addition, all insurance
required under this Lease shall be with companies and in form, amounts and with
coverage and deductibles satisfactory to the Owner Collateral Trustee, and
containing a standard mortgagee clause form endorsement naming the Owner
Collateral Trustee as loss payee and mortgagee. All insurance carriers shall
have a Best Insurance Guide rating of "A-XI" or better (or an equivalent rating
from another publication of a similar nature as shall be in current use and
approved by the Owner and the Owner Collateral Trustee) and shall be qualified
to do business in the State of New Jersey. All policies required under this
Section 15 shall provide that (i) the insurance evidence thereby shall not be
cancelled or modified without at least thirty (30) days' prior written notice
from the insurance carrier to the Owner and the Owner Collateral Trustee, (ii)
no act or omission on the part of the Lessee shall invalidate the coverage as to
the Owner, Trust Company and LC Issuer and no act or omission on the part of the
Owner or the Lessee shall invalidate the coverage as to the Owner Collateral
Trustee and (iii) no claims shall be paid thereunder without ten (10) days'
advance written notice to the Owner and the Owner Collateral Trustee.
Furthermore, the Lessee shall be required to deliver renewal policies of all
insurance required under this Section 15, together with written evidence of full
payment of the annual premiums therefor, at least thirty (30) days prior to the
expiration of the existing insurance period. All insurance policies and
endorsements shall be fully prepaid and nonassessable. The Lessee shall not
obtain any separate or additional insurance which is contributing in the event
of loss unless the Owner, Trust Company, LC Issuer and the Owner Collateral
Trustee (and in the case of
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insurance required by subparagraph (c) above, the Beneficiary and Kramer) are
each insured thereunder (as their interests may appear) and the policies
therefor are satisfactory to the Owner and the Owner Collateral Trustee.
16. LOSS, DAMAGE OR DESTRUCTION.
(a) BASIC LESSEE OBLIGATIONS. Lessee hereby assumes all (i) risk of
loss, damage or destruction, whether by fire or hazard or casualty, or the theft
of all or any portion of the Leased Property, however caused or occasioned (a
"Casualty"), or (ii) any Taking of all or any portion of the Leased Property,
such risks to be borne by Lessee with respect to the Leased Property from and
after the Commencement Date. Lessee agrees that no occurrence specified in the
preceding sentence shall impair, in whole or in part, any obligation of Lessee
under this Lease, including, without limitation, the obligation to pay Interim
Rental, Base Rental and Additional Rental. If a Taking or Casualty to the Leased
Property occurs, Lessee shall give Owner and the Owner Collateral Trustee prompt
written notice thereof, and describe in reasonable detail in each case the
circumstances of the Taking or Casualty and the damage to or loss of the Leased
Property.
(b) LESSEE ASSIGNS RIGHTS TO AMOUNTS DUE ON CASUALTY OR TAKING. Lessee
hereby assigns to Owner any award, compensation, insurance proceeds or other
payment to which Lessee may become entitled by reason of its interest in the
Leased Property, (i) if the Leased Property, or any portion thereof, is subject
to any Casualty , or (ii) by reason of any actual or threatened Taking of the
Leased Property or any portion thereof. So long as no Event of Default has
occurred and is continuing, Lessee shall, at its cost and expense, in the name
and on behalf of Owner, Lessee, the Owner Collateral Trustee, LC Issuer or
otherwise, appear in any such proceeding or other action, to negotiate, accept
and prosecute any claim for any award, compensation, insurance proceeds or other
payment on account of any such Casualty or Taking and to cause each such award,
compensation, insurance proceeds or other payment to be paid, subject to the
prior rights of Owner Collateral Trustee under the Owner Trust Indenture, to
Owner. Lessee shall use its commercially reasonable efforts to achieve the
maximum award or other recovery obtainable under the circumstances. Any
negotiated awards, settlement or recoveries shall be subject to Owner's prior
approval. Owner may appear in any such proceeding or other action, in a manner
consistent with the foregoing and the costs and expenses of any such appearance
shall be borne by Lessee and payable to Owner as Additional Rent. If a Default
or an Event of Default has occurred and is continuing, the Owner shall have the
right to negotiate, adjust and settle such awards, settlements and recoveries
without the approval of Lessee. Unless either the Parent is not then Investment
Grade or a Default or an Event of Default shall have occurred and be continuing,
the Lessee shall be entitled to receive all amounts paid or payable for any
Casualty or Taking of all or any portion of the Leased Property, subject to the
prior rights of the Owner Collateral Trustee and less any costs and expenses
incurred by Owner or the Owner Collateral Trustee in connection with the
negotiation, settlement or collection of such amounts (the amounts received for
any Casualty, less such costs and expenses, shall be referred to as the "Net
Casualty Award" and the amounts received for any Taking, less such costs and
expenses, shall be referred to as the "Net Taking Award"), otherwise the Owner,
subject to the prior rights of Owner Collateral Trustee under the Owner Trust
Indenture, shall be entitled to receive the Net Taking Award or the Net Casualty
Award. All such amounts shall be applied either (A) to
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the payment of the Termination Value and the other amounts due under Section
16(c) hereof, if such Casualty or Taking results in, or if the Lessee elects to
deem such Casualty or Taking as, an Event of Loss, or (B) to pay in accordance
with Section 16(d) hereof for the actual cost of repair, restoration, rebuilding
or replacement of the Improvements by Lessee (collectively, "Costs to Repair")
if such Casualty or Taking does not result in, or the Lessee or Owner does not
elect to deem such Casualty or Taking as, an Event of Loss.
(c) TAKING OR CASUALTY IS AN EVENT OF LOSS. If the Taking or Casualty
constitutes an Event of Loss, Lessee shall pay to Owner on the Event of Loss
Termination Date in respect of such Taking or Casualty the sum, without
duplication, of (i) all unpaid Interim Rental or Base Rental, as the case may
be, due for the period ending on such Event of Loss Termination Date, plus (ii)
the Termination Value as of the Rent Payment Date next following the date of
such Event of Loss (or, if no such Rent Payment Date exists, as of the last day
of the Interim Lease Term, Basic Lease Term or Extension Lease Term, as the case
may be), plus (iii) all interest, costs, fees, reimbursements and other amounts
due and payable either to Owner or the Financing Parties under the Transaction
Documents, plus (iv) Additional Rental due as of the date of payment of the
amounts specified in the foregoing clause (i), clause (ii) and clause (iii),
plus (iv) the Reinvestment Premium as of the Event of Loss Termination Date. Any
payments received at any time by Owner or by Lessee constituting Net Casualty
Award or Net Taking Award from any insurer or other party (except Lessee) as a
result of the occurrence of such Event of Loss will be applied in reduction of
Lessee's obligation to pay the foregoing amounts, if not already paid by Lessee,
or, if already fully paid by Lessee, will be applied to reimburse Lessee for its
payment of such amount. Within five (5) days of a determination that such
Casualty or Taking is deemed an Event of Loss, the Lessee shall deliver to the
Owner and the Owner Collateral Trustee a certificate of a senior officer of the
Lessee which specifies or otherwise provides (A) the Event of Loss Termination
Date in respect of such Casualty or Taking; (B) a description, in reasonable
detail, of such Event of Loss; (C) the aggregate amount due on such Event of
Loss Termination Date; and (D) a reasonably detailed calculation of an estimated
Reinvestment Premium, if any (calculated as if the date of such notice were the
Event of Loss Termination Date), due in connection with such payment. Two (2)
Business Days prior to such Event of Loss Termination Date, the senior officer
of Lessee will deliver to the Owner and the Collateral Trustee and each holder
of Notes by facsimile transmission a certificate of Lessee specifying the
details of the calculation of such Reinvestment Premium as of such Event of Loss
Termination Date.
Upon payment in full in cash, unless at such time either the Parent is
not then Investment Grade or a Default or an Event of Default shall exist in
which case upon indefeasible payment in full in cash, of such Termination Value,
Interim Rental, Base Rental, Additional Rental and the Reinvestment Premium, (I)
the obligation of Lessee to pay Base Rental hereunder shall terminate and the
Term of this Lease shall thereupon terminate, and (II) the Owner shall transfer
to Lessee all of the Owner's interest in the Leased Property in accordance with
the provisions of Section 32 hereof. As used in this Lease, the term
"Termination Value" means, at any time, an amount determined by multiplying
Thirty-Seven Million Dollars ($37,000,000) by the percentage set forth opposite
the Rent Payment Date as of such time or which next follows such time on the
schedule of Termination Values appearing in Exhibit D. An "Event of Loss" shall
be deemed to have occurred if either (x) with respect to a Casualty, the Costs
To Repair is
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equal to or greater than sixty-six and two-thirds percent (66 2/3%) of the full
replacement cost of the Improvements; or (y) with respect to a Taking, the
Taking renders the Leased Property or any substantial portion thereof
permanently unfit for its intended use under the Lease. For purposes of
determining whether an Event of Loss has occurred, it shall be assumed that the
Leased Property or the affected portion had been repaired or restored to the
fullest extent reasonably practicable. Either the Owner or the Lessee may
declare that the Taking or Casualty constitutes an Event of Loss, provided,
however, that the Lessee may deem such Taking or Casualty as an "Event of Loss,"
regardless of the amount of the Costs To Repair, with respect to a Casualty, and
regardless of the effect of the Taking on the utility of the Leased Property,
with respect to a Taking, and pay the Owner the Termination Value and the other
amounts required to be paid under this Section 16(c). Upon making such
determination, the party making such determination shall notify the other party
in writing thereof. If Owner determines that such Taking or Casualty constitutes
an Event of Loss, it shall notify the Lessee thereof and the Lessee shall have
ten (10) days from the date the Owner delivers notice of its determination to
initiate a challenge in writing to such determination pursuant to the provisions
of Section 16(f) below. If no challenge in writing is made by the Lessee of an
Owner's determination of an Event of Loss, such determination shall be binding
upon Lessee. If Owner and Lessee determine that such Taking or Casualty does not
constitute an Event of Loss (or if Owner's determination of an Event of Loss is
not upheld after arbitration pursuant to Section 16(f) hereof), Lessee shall be
required to repair, replace and restore the Leased Property as provided in
paragraph (d) below.
(d) TAKING OR CASUALTY IS NOT AN EVENT OF LOSS. If a Taking or Casualty
to the Leased Property occurs which does not result in (or is not otherwise
deemed to constitute) an Event of Loss, the Lessee under this Section 16 shall,
at its sole cost and regardless of whether any amounts constituting a Net
Casualty Award or Net Taking Award are made available to Lessee for such
purpose, proceed with diligence and promptness to carry out any demolition and
to restore, repair, replace and/or rebuild the Leased Property, as nearly as
practicable, to a condition and fair market value not less than the condition
required to be maintained and fair market value thereof immediately prior to
such Taking or Casualty. No repair or restoration work undertaken by Lessee
pursuant to this Section 16 shall violate the terms of any Permitted Lien or
other restriction, easement, condition or covenant or other matter affecting
title to the Leased Property, and shall be undertaken and completed in a good
and workmanlike manner and in compliance in all material respects with all Legal
Requirements then in effect with respect to the Leased Property. Lessee will
submit, prior to the commencement of any repair or restoration work for approval
by Owner, all plans, specifications, cost estimates and contracts for such
repair, replacement, restoration or rebuilding, provided, however, the Owner
shall not unreasonably withhold such approval provided that the utility, fair
market value and useful life of the Leased Property after such repair,
replacement, restoration or rebuilding is not less than the utility, fair market
value and useful life of the Leased Property prior to such Taking or Casualty.
Unless otherwise agreed to by Owner, any Net Casualty Award or Net
Taking Award received by Owner will be released in partial monthly disbursements
equal to ninety percent (90%) of the value of the work completed (or if the
contract is on a cost-plus basis, then monthly advances of ninety percent (90%)
of the costs of the work completed
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if less than the value of the work). The release by Owner of Net Casualty Awards
or Net Taking Awards shall be subject to the satisfaction of the following
conditions:
(i) no Default or Event of Default shall have occurred and be
continuing hereunder;
(ii) Owner is in receipt of any architect's certificates,
contractor's sworn statements and other evidence of costs, payments and
completion as the Owner may require and satisfactory evidence of
payment and release of all Liens of contractors, sub-contractors, and
materialmen and of any other Person providing work, service or
materials in connection with the repair, replacement and restoration of
the Leased Premises; and
(iii) Receipt by Owner of all approvals of any municipal or
other governmental authorities having jurisdiction over the Leased
Premises and all approvals required under any Permitted Liens.
The final payment shall be released by Owner upon completion of the
restoration and repairs provided that the conditions set forth above have been
met in full. The Lessee agrees at the Owner's request to provide the Owner with
copies of any as-built surveys and as-built plans and specifications of the
Leased Property after completion of the restoration and repair of the Leased
Property.
(e) RENT MUST BE PAID. The Lessee's obligation to pay Interim Rental,
Base Rental and Additional Rental shall not abate by reason of a Taking or a
Casualty, and this Lease shall continue in full force and effect and Lessee
shall continue to perform and fulfill all obligations, covenants and agreements
hereunder notwithstanding such Taking or Casualty.
(f) DISPUTE ABOUT EVENT OF LOSS. In the event Lessee objects to the
Owner's determination that a Taking or a Casualty constitutes an Event of Loss
and notifies the Owner in writing of its objection, the parties agree in good
faith to attempt to resolve the dispute through negotiation and agree to refer
the matter to one or more of their respective officers or employees who have the
authority to resolve the dispute. If no resolution is reached within ten (10)
days (or such longer period as the parties may mutually determine), then Lessee
and Owner shall submit to arbitration before a single arbiter in Morristown, New
Jersey, under the Commercial Arbitration Rules of the American Arbitration
Association then in effect. The resulting decision of the arbiter shall be
deemed final from which no appeal or review may be taken. All expenses and costs
of such arbitration shall be borne by the party not prevailing in the
proceeding.
(g) RIGHTS OF HOLDERS OF OWNER NOTES. If a Taking or Casualty occurs
while the Owner Notes are outstanding, then notwithstanding the provisions of
this Section 16 to the contrary, the rights of the parties hereto as to the
adjustment of claims, the retainage of the proceeds of a Taking or Casualty, the
use of such proceeds to repair or restore the Leased Property or to pay the
Owner Notes and any other matters pertaining to a Taking or Casualty shall be
determined in accordance with the provisions of Section 9.5 of the Owner Trust
Indenture. The exercise of any right by the holders of the Owner Notes to
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accelerate the Owner Notes in accordance with Section 9.5 of the Owner Trust
Indenture shall be conclusively deemed an "Event of Loss" hereunder which
requires the payment of the Termination Value and all other amounts set forth in
Section 16(c) above. If the Owner Collateral Trustee applies any Net Taking
Award or Net Casualty Award to prepay the outstanding Owner Notes, the amount of
any such proceeds will be credited against the Termination Value payable by
Lessee, and all other amounts payable as set forth in Section 16(c) above, in
connection with such Event of Loss.
17. ADDITIONS AND IMPROVEMENTS; REMOVAL.
Prior to the Basic Term Commencement Date, Lessee shall cause the
development and construction of the Improvements in accordance with the Approved
Construction Documents and subject to the terms and conditions of this Lease,
the Construction Agency Agreement and the other Transaction Documents. Subject
to the requirements of law, Lessee shall have the right (from and after the
Basic Term Commencement Date) during the Term of this Lease to make any
additions or improvements to the Leased Property to attach fixtures, structures
or signs, and to affix any personal property to the Leased Property, so long as
(a) the utility, fair market value and useful life of the Leased Property is not
thereby reduced, (b) prior to the construction of any structural improvement,
Lessee shall deliver a certificate of an AIA registered architect and a
certificate of a registered engineer to the effect that the planned structural
improvement will comply with all Legal Requirements, will not adversely affect
or interfere with the utility, operation or structural integrity of the then
existing Improvements and shall conform to the character and quality of the
existing Improvements, (c) Lessee shall finance such construction with its own
funds or through a borrowing unsecured by the Leased Property. Each such
improvement (and all fixtures and equipment included as a part thereof) shall be
deemed a part of the Leased Property and become part of Owner's property. Lessee
may remove, during or at the expiration or other termination of the Term of this
Lease, all equipment and personal property placed or installed in or upon the
Leased Property after the Basic Term Commencement Date by Lessee or under its
authority, other than any equipment or personal property included as a part of
the Leased Property title to which, prior to the exercise of Lessee's purchase
option or a third party sale, is held by the Owner, provided that Lessee shall
repair any damage to the Leased Property resulting from such removal.
18. RIGHT OF ENTRY.
Representatives of the Owner shall have the right to enter upon the
Leased Property (and to review and copy Lessee's records regarding the Leased
Property) during reasonable business hours (a) to inspect the same (including,
without limitation, the use of photographic and video equipment) or (b) for any
purpose connected with the rights or obligations of the parties under this
Lease.
19. ASSIGNMENTS AND SUBLEASING.
(a) BY LESSEE. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH BELOW,
LESSEE SHALL NOT, WITHOUT THE PRIOR WRITTEN CONSENT OF OWNER IN EACH
INSTANCE, SUBLEASE OR OTHERWISE RELINQUISH POSSESSION OF THE LEASED
PROPERTY OR ANY PART THEREOF, OR ASSIGN, TRANSFER, MORTGAGE OR
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ENCUMBER ITS RIGHTS, INTERESTS OR OBLIGATIONS HEREUNDER AND ANY ATTEMPTED
SUBLEASE, RELINQUISHMENT, ASSIGNMENT, TRANSFER OR ENCUMBERING BY LESSEE SHALL BE
NULL AND VOID. Furthermore, Lessee shall not be permitted to merge, consolidate
or sell a substantial portion of its assets (other than inventory in the
ordinary course of its business) without Owner's prior written consent in each
instance unless each of the following conditions are met in full or waived in
writing by Owner (i) the surviving, resulting or acquiring entity expressly
assumes in writing all of Lessee's past, current and future obligations and
liabilities under this Lease, the form and content of such documentation,
including an opinion of counsel, to be satisfactory to Owner in its sole and
absolute discretion, (ii) at the time of such merger, consolidation or sale, no
Event of Default shall have occurred and be continuing, (iii) all of the
representations of Lessee set forth in Section 12 hereof shall be true and
correct with respect to the surviving, resulting or acquiring entity as if made
directly by such entity as of the date of the merger, consolidation or sale
(except that such entity may be a corporation organized under the laws of a
jurisdiction other than the State of New York and may be a partnership, limited
liability company or business trust provided that such entity is duly qualified
to transact business in the State of New Jersey); and (iv) prior to the
consummation of such merger, consolidation or sale, the Owner has received a
certificate from one of the so-called "big six" firms of independent certified
public accountants (or any of their successors) selected by Lessee and approved
by the Owner to the effect that the tangible net worth (as determined in
accordance with GAAP consistently applied) of such surviving, resulting or
acquiring entity shall be no less than the tangible net worth of Lessee
immediately prior to such merger, consolidation or sale; notwithstanding the
foregoing, Lessee may sublet up to twenty-five percent (25%) of the gross
leasable space warehouse space and up to twenty-five percent (25%) of the gross
leasable office space in the Leased Premises at any time after the Basic Lease
Term Commencement Date, for all or any portion of the remaining Term to a
another Person (provided, however, that the Lessee may sublet a portion of the
Leased Property to a Subsidiary engaged in a business similar to that carried
out by the Lessee on the Basic Term Commencement Date without regard to the
foregoing space restrictions so long as such portion of the Leased Property
continues to be used in the manner described in Section 6 hereof), provided
however, (A) that Lessee remains primarily liable hereunder (as a principal and
not as a surety), (B) Lessee certifies in writing to Owner, in advance the
identity of such Person, that such sublease to such Person does not materially
adversely affect the value of the Leased Property (such certification shall not
be necessary in the case of any sublease to any Subsidiary), (C) the proposed
sublease provides that it terminates no later than the day prior to the
Termination Date, (D) the sublease expressly states that it is subject and
subordinate to this Lease, (E) the proposed sublease contains provisions
regarding use, lien lifting, maintenance, insurance, casualty and condemnation,
additions and improvements, right of entry, environmental matters, repossession
after default and further assurances all in favor of the Lessee, as sublessor
under the proposed sublease, which are, in the reasonable determination of the
Owner, no less favorable to the Lessee, as sublessor, than the corresponding
provisions of this Lease are to the Owner, (F) if the Parent is not Investment
Grade at any time while the proposed sublease is in effect, the Lessee will
execute and deliver any documents and instruments and take any actions
reasonably required by Owner to collaterally assign the Lessee's interest in and
rights under the sublease to the Owner and, if required by the Owner Collateral
Trustee, to the Owner
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Collateral Trustee, and (G) Lessee notifies the Owner in writing of the sublease
and delivers an executed copy thereof to Owner.
(b) BY OWNER. This Lease and all Interim Rental, Base Rental and
Additional Rental (except for the Excepted Rights) due and to become due
hereunder is being contemporaneously assigned by Owner to the Owner Collateral
Trustee, and Owner is contemporaneously herewith granting a mortgage and a
security interest in this Lease, the Interim Rental, Base Rental and all
Additional Rental (except for the Excepted Rights) due and to become due
hereunder to the Owner Collateral Trustee under the Assignment of Leases and
Rents. Lessee and Owner agree that the Interim Rental, Base Rental, all
Additional Rental (other than the Excepted Rights) and any other amounts payable
by Lessee to Owner hereunder (except with respect to the Excepted Rights) shall
be paid directly to the Owner Collateral Trustee (on behalf of Owner) or upon
its written order until the Owner Notes shall have been paid in full. The Owner
Collateral Trustee may re-assign and/or grant a security interest in any of such
rights, obligations, title or interest assigned to it under Assignment of Leases
and Rents. Lessee agrees to execute the Assignment of Leases and Rents and other
documents that may be requested by Owner or the Financing Parties in connection
with such financing. Lessee acknowledges receipt of an executed counterpart of
the Financing Documents. Any Person to whom any sale, assignment, transfer or
grant of security interest in this Lease is made by Owner is herein called an
"Assignee".
Without limiting the foregoing or any of the provisions of Section 7
hereof, Lessee further acknowledges and agrees that (i) the rights of the Owner
Collateral Trustee in and to the sums payable by Lessee under any provision of
this Lease shall not be subject to any abatement whatsoever and shall not be
subject to any defense, set-off, counterclaim or recoupment whatsoever, whether
by reason of failure of or defect in Owner's title, or any interruption from
whatsoever cause in the use, operation or occupancy of the Leased Property, or
any damage to, loss, destruction, reduction or impairment of the Leased Property
for any reason whatsoever, or by reason of any other indebtedness or liability,
howsoever and whenever arising, of Owner to Lessee or to any other Person or for
any cause whatsoever, it being the intent hereof that Lessee shall be
unconditionally and absolutely obligated to pay directly to the Owner Collateral
Trustee (on behalf of Owner) all of the Interim Rental, all of the Base Rental
and all Additional Rental (except the Excepted Rights which remain payable
directly to Owner) payable by Lessee hereunder; (ii) Lessee's covenants,
representations and warranties in this Lease (including, without limitation, in
Section 12 hereof) shall be deemed to be made to, and for the benefit of, the
Financing Parties and the LC Issuer as well as Owner; and (iii) the Financing
Parties shall be entitled to the benefit of all covenants and obligations to be
performed by Lessee under this Lease, except Lessee's covenants and obligations
relating to Excepted Rights. Notwithstanding the assignment to the Owner
Collateral Trustee, Lessee and Owner acknowledge that all obligations of Owner
to Lessee under this Lease shall be and remain enforceable by Lessee against,
and only against, Owner. Notwithstanding the foregoing, Owner agrees that
Lessee's rights under this Lease shall not be subordinate to the rights of any
mortgagee or other lender taking security in the Leased Property unless such
mortgagee or lender shall agree, with or for the benefit of Lessee, that it
shall not disturb Lessee's possession under the Lease and shall respect Lessee's
right to purchase the Leased Property under the terms of this Lease, so long as
no Default or Event of Default shall have occurred and be
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continuing under this Lease. If a mortgagee or lender who has taken security in
the Leased Property shall succeed to the rights of the Owner under this Lease,
whether through possession or foreclosure action or delivery of a new lease or
deed, then at the request of such party so succeeding to Owner's rights
("Successor Owner"), the Lessee shall be deemed to have attorned to and
recognized such Successor Owner as the lessor under this Lease, and shall
promptly execute and deliver any instrument that such Successor Owner may
reasonably request to evidence such attornment, provided, however, that the
Lessee shall be entitled to receive from such Successor Owner an agreement not
to disturb Lessee's possession under this Lease (so long as no Event of Default
shall have occurred and be continuing) as a condition to the execution and
delivery of such attornment agreement. Upon such attornment, this Lease shall
continue in full force and effect as if it were a direct lease between the
Lessee and the Successor Owner, and all of the terms, covenants and conditions
of this Lease shall remain applicable after such attornment.
Upon the payment in full of all indebtedness outstanding under the
Owner Notes and the termination of the Owner Collateral Trustee's security
interest in the Leased Property in accordance with the provisions of the
Mortgage, the Owner may re-assign, sell or transfer and/or grant a security
interest in, this Lease, in whole or in part and/or Leased Property to any
Person, and upon notice of such assignment, sale, transfer or grant, Lessee
shall comply with the requests and demands of such Person as if such Person was
the Owner Collateral Trustee as provided above provided that such Person shall
agree, with or for the benefit of Lessee, that it shall not disturb Lessee's
possession under the Lease and shall respect Lessee's right to purchase the
Leased Premises under the terms of this Lease, so long as no Default or Event of
Default shall have occurred and be continuing under this Lease
20. ENVIRONMENTAL MATTERS.
Lessee hereby represents and warrants to and covenants with Owner,
Trust Company, Beneficiary, Kramer, the Construction Lender, the Financing
Parties, LC Issuer, BFS, and their respective affiliates, successors, assigns,
stockholders, partners, directors, officers, trustees, employees, beneficiaries,
attorneys and accountants and any other Person claiming by through or under
Owner, its Beneficiary, the Construction Lender, the Financing Parties, LC
Issuer, BFS, Trust Company or any of their assignees (collectively, "Indemnified
Parties") as follows:
(a) Lessee covenants and agrees that (i) Lessee shall comply and cause
each permitted sublessee and assignee to comply with all Environmental Legal
Requirements, including, but not limited to, Hazardous Materials Legal
Requirements, applicable to the Leased Property or as required by any
governmental agency or third party, and (ii) Lessee shall take, and cause each
permitted sublessee and assignee to take, all remedial action necessary to avoid
any liability of Lessee, or any Indemnified Party for, and to avoid the
imposition of, or to discharge, any liens on the Leased Property, as a result
of, any failure to comply with Environmental Legal Requirements with respect to
the Leased Property.
(b) Without limiting the generality of the foregoing, Lessee agrees
that it shall not:
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(i) release any Hazardous Materials on or under the Leased
Property or fail to take commercially reasonable precautions to prevent
the release or threat of release of any Hazardous Materials on or under
the Leased Property;
(ii) generate any Hazardous Materials on or under the Leased
Property or fail to take commercially reasonable precautions to prevent
the generation of Hazardous Materials on or under, or the migration of
Hazardous Materials to, the Leased Property;
(iii) except in compliance with all Environmental Legal
Requirements, store or utilize, or permit any Hazardous Materials to be
stored or utilized on the Leased Property provided, however, that the
materials listed in Schedule II attached may be used on or about the
Lease Property and stored on the Leased Property in the quantities
listed in such Schedule provided that all Environmental Legal
Requirements are complied with in connection with such use or storage;
(iv) dispose of or permit any Hazardous Materials to be
disposed of on the Leased Property except in compliance with all
Environmental Legal Requirements; and
(v) use, or allow the Leased Property to be used, in a manner
which does not comply with all Environmental Legal Requirements.
(c) Lessee shall provide Owner with prompt written notice, but in no
event later than ten (10) Business Days after obtaining any actual knowledge or
actual notice thereof, of any of the following conditions: (i) the presence, or
any release or threat of release, of any Hazardous Materials on, under or from
the Leased Property, whether or not caused by any of the Indemnified Parties;
(ii) any Environmental Enforcement Action instituted or threatened in writing;
or (iii) any condition or occurrence on the Leased Property that constitutes a
violation of any of the Environmental Legal Requirements.
(d) Upon Lessee obtaining knowledge or notice of: (i) the violation of
any Environmental Legal Requirement related to the Leased Property, or (ii) the
presence, or any release or any threat of release, of any Hazardous Materials
on, under, or from the Leased Property, which is lawfully claimed by any
governmental agency or third party to violate any other Environmental Legal
Requirement, or any combination thereof, Lessee shall immediately take all
reasonable actions to cure or eliminate any such violation of any such
Environmental Legal Requirement and, where applicable, to arrange for the
assessment, monitoring, clean-up, containment, removal, remediation, or
restoration of the Leased Property as are required pursuant to any Hazardous
Materials Legal Requirements or by any governmental authority.
(e) Owner shall have the right (but not the obligation) to require
Lessee, at its own cost and expense, to obtain a professional environmental
assessment of the Leased Property in accordance with Owner's requirements and
sufficient in scope to determine compliance with Hazardous Materials Legal
Requirements upon the occurrence of any one or more of the following events: (i)
an Event of Default hereunder; or (ii) upon receipt of any notice of any of the
conditions specified in Section 20(c) hereof unless Lessee
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complies with the remedial actions required pursuant to Section 20(d) or (iii)
upon any return of the Leased Property in accordance with Section 34(d) hereof.
(f) Owner may exercise its rights and remedies under all of this
paragraph (f) only upon and following the existence of one or more of the
following events or conditions: (i) an Event of Default has occurred and is
continuing; (ii) an Indemnified Party, or an affiliate thereof, or any nominee
or designee of an Indemnified Party or an affiliate thereof has taken possession
of all or some portion of the Leased Property based upon an Event of Default;
(iii) an Indemnified Party, or an affiliate thereof or any nominee or designee
of an Indemnified Party or an affiliate thereof, has commenced foreclosure
proceedings or has acquired title to all or some portion of the Leased Property
by virtue of foreclosure or deed in lieu of foreclosure; or (iv) a claim has
been asserted against an Indemnified Party for which indemnification is provided
herein, but Lessee has not undertaken or is not continuing to pursue, after
having undertaken, commercially reasonable efforts to remediate, defend and
otherwise indemnify any such Indemnified Party. In any of such events, the Owner
shall have the right, but not the obligation, through such representatives or
independent contractors as it may designate, to enter upon the Leased Property
and to expend funds to:
(A) cause one or more environmental assessments of the Leased
Property to be undertaken, if Owner in its sole discretion determines
that such assessment is appropriate. Such environmental assessments
shall be reasonable in scope considering the history and use of the
Leased Property and the data available from prior reports, provided,
however, the foregoing shall not limit or restrict the reasonable
discretion of the Owner's engineers and consultants in formulating the
exact parameters of any such site assessment and such site assessment
may include, without limitation, (I) detailed visual inspections of the
Leased Property, including without limitation all storage areas,
storage tanks, drains, drywells and leaching areas; (II) the taking of
soils and surface and sub-surface water samples; (III) the performance
of soils and ground water analysis; and (IV) the performance of such
other investigations or analysis as are necessary or appropriate and
consistent with sound professional environmental engineering practice
in order for Owner to obtain a complete assessment of the compliance of
the Leased Property and the use thereof with all Environmental Legal
Requirements and to make a determination as to whether or not there is
any risk of contamination (x) to the Leased Property resulting from
Hazardous Materials originating on, under, or from any surrounding
property or (y) to any surrounding property resulting from Hazardous
Materials originating on, under, or from the Leased Property;
(B) cure any breach of the representations, warranties,
covenants and conditions made by or imposed upon Lessee under this
Lease including without limitation any violation by Lessee, or by the
Leased Property, of any of the Environmental Legal Requirements;
(C) take all actions as are necessary to (I) prevent the
migration of Hazardous Materials on, under, or from the Leased Property
to any other property; or (II) prevent the migration of any Hazardous
Materials on, under, or from any other property to the Leased Property;
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(D) comply with, settle, or otherwise satisfy any
Environmental Enforcement Action as the same relates to the Leased
Property including, but not limited to, the payment of any funds or
penalties imposed by any governmental authority and the payment of all
amounts required to remove any lien or threat of lien on or affecting
the Leased Property; and
(E) comply with, settle, or otherwise satisfy any
Environmental Legal Requirement and correct or abate in accordance with
all applicable Environmental Legal Requirements any environmental
condition on, or which threatens, the Property and which could cause
damage or injury to the Property or to any person.
(g) Any amounts reasonably paid or advanced by Owner and all reasonable
costs and expenditures incurred in connection with any action taken pursuant to
the terms of this Section 20, including but not limited to environmental
consultants' and experts' fees and expenses, attorneys' fees and expenses, court
costs and all costs of assessment, monitoring, clean-up, containment,
remediation, removal and restoration, with interest thereon at the Default Rate
shall be a demand obligation of Lessee to the Owner if not paid within ten (10)
days after notice, and, to the extent not prohibited by law, and shall be deemed
to be Additional Rental hereunder.
(h) The exercise by Owner of any one or more of the rights and remedies
set forth in this Section 20 shall not operate or be deemed to place upon Owner
any responsibility for the operation, control, care, service, management,
maintenance or repair of the Leased Property.
(i) Without limiting the generality of the other provisions of this
Section 20, any partial exercise by Owner of any one or more of the rights and
remedies set forth in this Section 20 including, without limitation, any partial
undertaking on the part of Owner to cure any failure by any of Lessee, or of the
Leased Property, or any other occupant, prior occupant or prior owner thereof,
to comply with any of the Hazardous Materials Legal Requirements shall not
obligate the Owner to complete such actions taken or require Owner to expend
further sums to cure such non-compliance.
21. ENVIRONMENTAL INDEMNITY.
Lessee hereby agrees that it shall at its sole cost and expense
indemnify, defend, exonerate, protect and save harmless each Indemnified Party
on an after-tax basis against and from any and all damages, losses, liabilities,
obligations, penalties, claims, litigation, demands, defenses, judgments, suits,
proceedings, costs, disbursements or expenses of any kind or nature whatsoever,
including, without limitation, attorneys' and experts' fees and disbursements,
which may at any time be imposed upon, incurred by, or asserted or awarded
against Owner or an Indemnified Party and arising from or out of any of the
following, or any claims alleging any of the following:
(a) Any Hazardous Materials on, in, under, or which emanated
from, all or any portion of the Leased Property, or which may hereafter
be on, in, under or emanate from, all or any portion of the Leased
Property whenever discovered;
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(b) The violation of any Hazardous Materials Legal
Requirements by Lessee, or with respect to the Leased Property,
existing on or before the date hereof or which may so exist in the
future, whenever discovered;
(c) The violation of any Environmental Legal Requirement by
Lessee, or with respect to the Property, existing on or before the date
hereof or which may so exist in the future, whenever discovered;
(d) Any material breach of warranty or representation made
under or pursuant to Section 20 hereof;
(e) Any Environmental Enforcement Action with respect to the
Leased Property, whenever asserted; and
(f) The enforcement of this Section 21 or the assertion by
Lessee of any defense to the obligations of Lessee hereunder, which is
not sustained by a final order of a court of competent jurisdiction
which is not subject to further appeal, whether any of such matters
arise before, during or after the Term of this Lease or the taking of
possession of all or any portion of the Leased Property by the Owner,
and specifically including therein, without limitation, the following
which are incurred following an Event of Default: (i) costs incurred
for any of the matters set forth in Section 20 of this Lease; and (ii)
costs and expenses incurred in ascertaining the existence or extent of
any asserted violation of any Environmental Legal Requirements relating
to the Leased Property and any remedial action taken on account thereof
including, without limitation, the costs, fees and expenses of
engineers, geologists, chemists, other scientists, attorneys,
surveyors, and other professionals, or testing and analyses performed
in connection therewith.
(g) The obligations of Lessee under this Section 21 are not
subject to any limitation as to amount. Nothing herein shall limit the
right of an Indemnified Party to obtain injunctive relief or to pursue
equitable remedies under this Section 21. The provisions of this
Section 21, and the obligations of Lessee under this Section 21, shall
apply from the Commencement Date (notwithstanding the failure of Lessee
to satisfy any condition set forth in Section 4(a) hereof), and shall
survive and continue in full force and effect, notwithstanding the
expiration or earlier termination of this Lease in whole or in part,
including the expiration or termination of the Term, and are expressly
made for the benefit of, and shall be enforceable by, each Indemnified
Party, provided, however, that notwithstanding the foregoing, the
Lessee shall not have any indemnification obligations to the
Indemnified Parties for a violation of any Hazardous Materials Legal
Requirements or Environmental Legal Requirements or for any
Environmental Enforcement Actions attributable solely to any facts or
circumstances arising after possession of the Leased Property has been
returned to Owner, the Termination Date has occurred and the Owner has
relet or sold the Leased Property.
22. INDEMNIFICATION AND HOLD HARMLESS AGREEMENT.
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To the fullest extent not prohibited by applicable law, Lessee hereby
agrees to indemnify and hold harmless each Indemnified Party, on an after-tax
basis from and against any and all losses, damages, injuries, costs or expenses
(including reasonable attorneys' fees and expenses) and from and against any and
all suits, demands, claims, actions or other proceedings whatsoever, brought by
any entity or person whatsoever (except suits brought by Lessee against an
Indemnified Party in which Lessee is the prevailing party) and arising or
allegedly arising from (a) this Lease or the Transaction Documents; (b) any
transaction contemplated hereby or thereby; (c) the acquisition, financing,
construction, installation, ownership, lease and operation of the Leased
Property (including patent or latent defects in the Land or Improvements,
whether or not discoverable by Lessee or any Indemnified Party), including,
without limitation, any suit, demand, claim or action arising under the
Financing Documents by reason of Lessee being in default or failing to otherwise
perform thereunder, hereunder or under the Construction Agency Agreement or
under any other Transaction Document; (d) the defense of any suit, demand,
claim, action or other proceeding brought against such Indemnified Party in
connection with the foregoing; (e) the enforcement of any provision of this
Lease; (f) damage, injury or death to any Person or damage to the property of
any Person, due to any defect in the Land or Improvements, or any act or
omission of any person including the defense of any suit, demand, claim, action
or other proceeding brought against such Indemnified Party in connection with
such damage or injury; (g) any claims based upon absolute or strict liability in
tort or claims based upon patent, trademark, tradename or copyright
infringement; and (h) any action taken in good faith by such Indemnified Party
in connection with this Lease or the Leased Property; except that, as to any
Indemnified Party, the foregoing indemnities shall not apply to the following:
(i) losses, damages, injuries, costs or expenses solely and
directly caused by the gross negligence or willful misconduct of such
Indemnified Party;
(ii) losses, damages, injuries, costs or expenses solely and
directly caused by the mishandling or misapplication by any Indemnified
Party of payments made by the Lessee hereunder if such payments are
made to such Indemnified Party in accordance with the Transaction
Documents;
(iii) the inaccuracy in any material respect of any
representation or warranty made by such Indemnified Party in any of the
Transaction Documents;
(iv) the creation or existence of an Owner Lien attributable
to such Indemnified Party;
(v) if such Indemnified Party is the Owner, the Owner
Collateral Trustee, or the Beneficiary, the voluntary disposition of
the Leased Property or the Lease, other than in connection with (A) a
voluntary disposition permitted after the occurrence of an Event of
Default, (B) an Owner Conveyance, (C) the voluntary assignment by the
Beneficiary of its ownership interest under the Owner Trust Agreement,
or (D) a subsequent transfer by the Owner Collateral Trustee or any
nominee, designee or affiliate thereof if such entity purchases the
Leased Property at a foreclosure sale or accepts a deed-in-lieu of
foreclosure of the Leased Property;
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(F) any other matters expressly excluded from any other
indemnity provisions contained in the Transaction Documents pursuant to
which the Lessee has agreed to indemnify any Indemnified Party; and
(G) acts or events that occur after the Indemnification
Period.
Lessee shall give each Indemnified Party prompt notice of any
occurrence, event or condition known to Lessee as a consequence of which any
Indemnified Party may be entitled to indemnification hereunder. Lessee shall
forthwith upon demand of any such Indemnified Party reimburse such Indemnified
Party for amounts expended by it in connection with any of the foregoing or pay
such amounts directly. Lessee shall be subrogated to an Indemnified Party's
rights in any matter with respect to which Lessee has actually reimbursed such
Indemnified Party for amounts expended by it or has actually paid such amounts
directly pursuant to this Section 22. In case any action, suit or proceeding is
brought against any Indemnified Party in connection with any claim indemnified
against hereunder, such Indemnified Party will, promptly after receipt of notice
of the commencement of such action, suit or proceeding, notify Lessee thereof,
enclosing a copy of all papers served upon such Indemnified Party, but failure
to give such notice or to enclose such papers shall not relieve Lessee from any
liability hereunder. Lessee may, and upon such Indemnified Party's request will,
at Lessee's expense, resist and defend such action, suit or proceeding, or cause
the same to be resisted or defended by counsel selected by Lessee and reasonably
satisfactory to such Indemnified Party and in the event of any failure by Lessee
to do so, Lessee shall pay all costs and expenses (including, without
limitation, attorney's fees and expenses) incurred by such Indemnified Party in
connection with such action, suit or proceeding. The provisions of this Section
22, and the obligations of Lessee under this Section 22, shall apply from the
Commencement Date (notwithstanding the failure of Lessee to satisfy any
condition set forth in Section 4(a) hereof), and shall survive and continue in
full force and effect, notwithstanding the expiration or earlier termination of
this Lease in whole or in part, including the expiration or termination of the
Term, and are expressly made for the benefit of, and shall be enforceable by,
each Indemnified Party. The foregoing obligation of Lessee to indemnify the
Indemnified Parties as aforesaid shall not operate as a limitation or waiver of
any rights that Lessee may have (whether directly, by assignment, by subrogation
or otherwise) against either the LC Issuer or Owner arising by reason of the
occurrence of an Event of Default described in Section 23(i) hereof.
23. EVENTS OF DEFAULT.
Any of the following events shall constitute Events of Default under
this Lease:
(a) Lessee shall fail to make any payment of Interim Rental, Base
Rental or Additional Rental (other than Additional Rental covered by clause (b)
below) within five (5) days after the same is due and payable or becomes due and
payable; or
(b) Lessee shall fail to pay the Termination Value, Purchase Price, End
of Term Adjustment or Reinvestment Premium, as applicable, when the same becomes
due and payable; or
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(c) Lessee shall fail to observe or perform any of its covenants or
agreements set forth in Sections 4(b), 15, 16(c), 19, 29, 30, 31, 32 or 34 of
this Lease or shall fail to obtain any of the Listed Permits and such failure to
obtain any of the Listed Permits materially delays the commencement,
continuation or completion of the development or construction of the
Improvements; or
(d) Lessee shall fail to perform or observe any other covenant,
condition, or agreement to be performed or observed by it under this Lease and
such failure shall continue unremedied, for thirty (30) days after such failure
shall have become known to any senior officer of the Lessee, provided, however,
that no Event of Default shall be deemed to have occurred with respect to breach
of any covenant, condition or agreement that cannot be remedied, with the
exercise of reasonable diligence on Lessee's part, within such thirty (30) day
period, if Lessee commences cure of such failure within such thirty (30) day
period and diligently pursues such cure to completion, provided further,
however, that the period given to the Lessee to remedy such failure should not
exceed a total of ninety (90) days from the occurrence of such failure, provided
further still, that if such failure relates to a failure to comply with
Environmental Legal Requirements, such ninety (90) day period may be extended to
such longer period as may be reasonably necessary to remedy such failure; or
(e) (i) Lessee or Parent shall fail to comply with its
obligations, or any Event of Default (as defined therein)
shall have occurred and be continuing, (A) under any of the
Financing Documents, the Construction Agency Agreement, any
other Transaction Document or any lease, loan agreement or
other agreement, instrument or document heretofore, now or
hereafter entered into between Lessee and Owner, or between
Lessee and any parent, subsidiary or affiliate of Owner, or
between Lessee and any Financing Party, or between Lessee and
LC Issuer, or between Parent and Owner or between Parent and
any Financing Party or between Parent and LC Issuer or (B)
under any promissory note or guarantee heretofore, now or
hereafter executed by Lessee or Parent and delivered to any
party referred to in clause (A) above evidencing or
guaranteeing any loan, lease or other obligation made by any
such party to Lessee, Parent or Owner;
(ii) Lessee, Parent or any Subsidiary shall be
default on any indebtedness or any rental payment obligation
under any lease to any Person (other than Owner, or any
parent, subsidiary or affiliate of Owner) in excess of Two
Million Dollars ($2,000,000) and such indebtedness shall be
declared to be due and payable or otherwise accelerated prior
to the maturity thereof by reason of a default in payment by
Lessee, Parent or such Subsidiary; or
(iii) (A) Lessee, Parent or any Subsidiary shall fail
to make any payment on any indebtedness or rental payment
obligation under any lease when due; or (B) any event shall
occur or any condition shall exist in respect of any
indebtedness or lease obligation of the Lessee, the Parent or
any Subsidiary, or under any agreement securing or relating to
any such indebtedness or lease obligation, that immediately or
with any one or more of the passage of time or the giving of
notice:
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(I) causes (or permits any one or more of
the holders or lessors thereof or a trustee therefore
to cause) such indebtedness or lease obligation, or a
portion thereof, to become due prior to its stated
maturity or prior to its regularly scheduled date or
dates of payment, whether by acceleration or
otherwise; or
(II) permits any one or more of the holders
of such indebtedness or a trustee therefor to require
the Lessee, the Parent or such Subsidiary to
repurchase such indebtedness from such holder and any
such holder or trustee exercises (or attempts to
exercise) such right;
provided that the aggregate amount of all obligations in
respect of all such indebtedness or lease obligations referred
to in this clause (iii) exceeds at any time Twenty-Five
Million Dollars ($25,000,000); or
(iv) a final judgment or final judgments for the payment of
money aggregating in excess of Two Million Dollars ($2,000,000) is or
are outstanding against any one or more of the Lessee, Parent or any
Subsidiary and any one of such judgments shall have been outstanding
for more than thirty (30) days from the date of its entry and shall not
have been discharged in full or stayed; or
(f) Lessee, Lessee's Parent or any Subsidiary shall become insolvent or
make an assignment for the benefit of creditors or consent to the appointment of
a trustee or receiver; or a trustee or a receiver shall be appointed for Lessee,
Parent or any Subsidiary or for a substantial part of its property without its
consent and shall not be dismissed for a period of sixty (60) days; or any
petition for the relief, reorganization or arrangement of Lessee, Parent or any
Subsidiary, or any other petition in bankruptcy or for the liquidation,
insolvency or dissolution of Lessee, Parent or any Subsidiary, shall be filed by
or against Lessee or Parent and, if filed against Lessee, Lessee's Parent or any
Subsidiary, shall be consented to or be pending and not be dismissed for a
period of sixty (60) days, or an order for relief under any bankruptcy or
insolvency law shall be entered by any court or governmental authority of
competent jurisdiction with respect to Lessee, Parent or any Subsidiary; or any
property of the Lessee, Parent or any Subsidiary shall be attached or
sequestered by court order and such order shall remain in effect more than sixty
(60) days from the date of its entry and shall not have been discharged in full
or stayed; or Lessee, Parent or any Subsidiary shall (whether in one transaction
or a series of transactions) without Owner's prior written consent, sell,
transfer or dispose of, or pledge or otherwise encumber, all or substantially
all of its assets or property, or consolidate or merge with any other entity
(except as otherwise permitted under Section 19(a) hereof), or become the
subject of, or engage in, a leveraged buy-out or any other form of corporate
reorganization;
(g) any representation, warranty, statement or certification made by
Lessee under this Lease or in any document or certificate furnished to Owner or
any Assignee in connection herewith or pursuant hereto, including, without
limitation, the Agreement and Consent to Assignment, shall prove to be untrue or
incorrect in any material respect when made, or shall be breached;
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(h) a default or an Event of Default shall have occurred under the
Lease Guaranty;
(i) (i) the Owner Collateral Trustee shall be unable to make a draw
request under any outstanding Letter of Credit because the Owner Collateral
Trustee has deemed that the conditions in such Letter of Credit for a drawing
thereunder have not been met or (ii) a Draw Conditions Failure shall have
occurred and, in the case of either (i) or (ii), the Lessee shall not have
previously delivered a Nonreturn Option Notice pursuant to Section 30(d) hereof;
or
(j) any representation, warranty, statement or certification made by
Parent under any document or certificate furnished to Owner or any Assignee in
connection herewith or pursuant hereto, including, without limitation, the
Agreement and Consent to Assignment, shall prove to be untrue or incorrect in
any material respect when made, or shall be breached.
24. REMEDIES UPON DEFAULT.
Upon the occurrence of any Event of Default and at any time thereafter
so long as the same shall be continuing, Owner may exercise one or more of the
following remedies:
(a) The Owner may take action at law or in equity to collect any
payments then due or thereafter to become due under this Lease, or to enforce
performance and observance of any term, covenant or condition of this Lease
applicable to Lessee.
(b) The Owner may, in addition to or in lieu of taking such action at
law or in equity as it may otherwise be entitled to, terminate the leasehold
estate created hereby, and subject to the Lessee's rights under Section 24(e)
below, the Owner may repossess the Leased Property without further notice,
either by summary proceeding or other suitable action either at law or in equity
or otherwise, and without being deemed guilty of any manner of trespass and
without prejudice to any remedies which might otherwise be used to demand, sue
for or collect arrears of Interim Rental, Base Rental and Additional Rental and
any other accrued obligations of Lessee under this Lease, and Lessee hereby
waives all statutory rights (including without limitation rights of redemption,
if any, to the extent such rights may be lawfully waived). In calculating the
amount of any deficiency for which Lessee shall be liable hereunder, there shall
be included, in addition to Interim Rental, Base Rental and Additional Rental,
the value of all other considerations agreed to be paid or performed by Lessee
under this Lease. In calculating the amounts to be paid by Lessee pursuant to
the foregoing sentence, there shall also be included all of the Owner's
reasonable expenses in connection with any sale or reletting of the Leased
Property, including, without limitation, all repossession costs, brokerage
commissions, fees for legal services and expenses of preparing the Leased
Property for such sale or reletting, it being agreed by Lessee that the Owner
may, but shall not be obligated to, (i) relet the Leased Property or any other
portion thereof for a term or terms which may at the Owner's option be equal to
or less than or exceed the period which would otherwise have constituted the
balance of the Interim Lease Term, the Basic Lease Term or an Extension Lease
Term then in effect and may grant such concessions and free rent as the Owner in
its reasonable judgment considers advisable or necessary to relet the same, (ii)
make such alterations,
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repairs and decorations in or to the Leased Property as the Owner in its
reasonable judgment considers advisable or necessary to sell or relet the same,
or (iii) keep the Leased Property vacant. No action of the Owner in accordance
with the foregoing or failure to sell or relet or to collect rent upon reletting
shall operate or be construed to release or reduce Lessee's liability hereunder
except that a sale of the Leased Property not subject to this Lease shall
terminate any further accruals of rent hereunder and Owner's only remedy in
respect of such rentals shall be pursuant to Section 24(c) below. In addition to
any other right, power or remedy conferred to Owner hereunder, upon the
occurrence or continuance of an Event of Default, Owner shall also be entitled
and shall have full power and authority to foreclose any of the mortgages,
grants and security interests created hereunder in accordance with applicable
law by appropriate proceedings. In furtherance of the foregoing (but without
limiting any rights of the Owner Collateral Trustee), subject to the Lessee's
rights under Section 24(e) hereof, Owner shall be deemed to have all of the
rights, powers and remedies of the Mortgagee set forth in Section 24 of the
Mortgage, the provisions of which are hereby incorporated into this Section.
(c) Whether or not Owner shall have exercised, or shall thereafter at
any time exercise, any of its rights under paragraph (a) or (b) above with
respect to the Leased Property (but subject to Lessee's rights set forth in
Section 24(e) hereof), Owner, by written notice to Lessee specifying a payment
date, may demand that Lessee pay to Owner, and Lessee shall pay to Owner, on the
payment date specified in such notice ("Liquidated Damage Payment Date"), which
may be the date of such notice, as liquidated damages for loss of a bargain and
not as a penalty (in lieu of the Interim Rental or Base Rental due for the
Leased Property for any Rental Period commencing after the Liquidated Damage
Payment Date and in lieu of the exercise by Owner of its remedies under
paragraph (b) above in the case of a reletting of the Leased Property or with
respect to a sale of the Leased Property), the sum, without duplication, of (i)
all unpaid Interim Rental or Base Rental, as the case may be, payable through
the Liquidated Damage Payment Date specified in such notice, plus (ii) all
unpaid Additional Rental due with respect to such Leased Property as of the
Liquidated Damage Payment Date, plus (iii) the Termination Value computed as of
the Rent Payment Date coincident with or next preceding the Liquidated Damage
Payment Date, together with the Reinvestment Premium as of the Liquidated Damage
Payment Date (or the date upon which the Owner Notes were accelerated, if such
date is earlier), plus (iv) all interest, cost, fees, reimbursements and all
other amounts due and payable either to Owner or the Financing Parties under the
Transaction Documents, and, on payment of such amounts, plus (v) if payment of
the foregoing amounts is not made on the Liquidated Damage Payment Date,
interest on such amounts accrued from the Liquidated Damage Payment Date to the
date of actual payment at the Default Rate, Owner shall convey the Leased
Property to Lessee as an Owner's Conveyance as provided in Section 32 below.
(d) Subject to Lessee's rights under Section 24(e) below, Owner may
exercise any other right or remedy which may be available to it under applicable
law or proceed by appropriate court action to enforce the terms hereof or to
recover damages for the breach hereof or to rescind this Lease. The remedies
herein conferred upon and reserved to the Owner are not intended to be exclusive
of any other available remedy or remedies which the Owner may have at law or in
equity, but each and every such remedy shall be cumulative and shall be in
addition to every other remedy given under this Lease or now or
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hereafter existing at law or in equity. No delay or omission to exercise any
right or power accruing upon any Event of Default shall impair any such right or
power or shall be construed to be a waiver thereof, but any such right and power
may be exercised from time to time and as often as may be deemed expedient. In
order to entitle the Owner to exercise any remedy reserved to it in this Section
24, it shall not be necessary to give any notice, other than such notice as may
be required in this Section 24.
In addition, Lessee shall be liable for all costs and expenses,
including without limiting the generality of the foregoing, reasonable
attorney's fees, incurred by Owner or any Assignee by reason of the occurrence
of any Event of Default or the exercise of Owner's remedies with respect
thereto, including all costs and expenses incurred in connection with the
surrender of the Leased Property in accordance with Section 34 hereof or in
placing the Leased Property in the condition required by said Section 34. No
express or implied waiver by Owner of any Event of Default shall in any way be,
or be construed to be, a waiver of any future or subsequent Event of Default. To
the extent permitted by applicable law, Lessee hereby waives any rights now or
hereafter conferred by statute or otherwise which may require Owner to sell,
lease or otherwise use the Leased Property in mitigation of Owner's damages as
set forth in this Section 24 or which may otherwise limit or modify any of
Owner's rights and remedies in this Section 24.
Notwithstanding any provision contained in this Lease to the contrary,
any and all remedies available to Owner upon the occurrence of an Event of
Default shall survive the termination of this Lease.
(e) The Lessee shall be entitled to elect to require the Owner to
exercise the remedies set forth in Section 24(c) hereof and to terminate any
action to repossess the Leased Property, foreclose any of the mortgages, grants,
or security interests hereunder or annul any rescission of the Lease by
delivering to the Owner written notice of its election under this Section 24(e)
at any time prior to the forty-fifth (45th) day after the date Owner (or any
Assignee) shall have taken, or (following an Event of Default) shall have given
notice to Lessee of it's intention to take, action to terminate the Lease and
repossess the Leased Property (such forty-five (45) day period is herein
referred to as the "Redemption Period"). Unless the Owner has specified another
date as the Liquidated Damage Payment Date pursuant to the notice required under
Section 24(c) hereof, the Liquidated Damage Payment Date shall be the first
Business Day after the last day of the Redemption Period. After the expiration
of the Redemption Period, Lessee's rights under this Section 24(e) shall
terminate. If the Termination Date would occur during the Redemption Period, the
Basic Lease Term or the then applicable Extension Lease Term, as the case may
be, shall be deemed to be extended to the expiration of the Redemption Period to
permit Lessee and Owner to the full rights and remedies provided hereunder
during the Term. If the Lessee elects to require Owner to proceed under Section
24(c) and fails to pay such amounts required therein on the Liquidated Damage
Payment Date, the Owner shall have the right to pursue any of its remedies set
forth in this Section 24 or otherwise.
25. OWNER'S RIGHT TO PERFORM FOR LESSEE.
If Lessee fails to make any payment of Additional Rental required to be
made by it hereunder or fails to obtain the insurance required by Section 15
hereof or to otherwise
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perform or comply with any of its material agreements contained herein, Owner
may (but shall not be required) itself, after notice to Lessee, make such
payment or perform or comply with such agreement, and the amount of such payment
and the amount of the reasonable expenses of Owner incurred in connection with
such payment or the performance of or compliance with such agreement, together
with interest on all such amounts calculated at a per annum rate equal to the
rate equal to the Default Rate applicable under the Loan shall be due and
payable by Lessee upon demand by Owner; provided, however, that no such payment,
performance or compliance by Owner shall be deemed to cure or waive any Event of
Default hereunder.
26. EXPENSES.
Lessee agrees, whether or not the transactions contemplated by this
Lease are consummated, but solely to the extent such are incurred in connection
with the transactions contemplated under the Transaction Documents (a) to pay
the fees and expenses of the Trust Company (and any successors or co-trustees)
for ordinary or extraordinary services as trustee under the Owner Trust
Agreement, including, without limitation, the reasonable fees and expenses of
its counsel, (b) all fees and expenses of the Owner, Beneficiary, Construction
Lender, the Financing Parties, LC Issuer (except that no fees shall be payable
by the Lessee or any other party to the LC Issuer for the issuance of the Letter
of Credit) and BFS including, without limitation, the reasonable fees and
expenses of their respective counsel and (c) to pay to or reimburse Owner,
Beneficiary, Construction Lender, the Financing Parties, LC Issuer and BFS for
(i) the payment of lien searches, filing and transfer fees, and taxes, fees and
expenses relating to the titling and registration of and recording of this Lease
or any mortgage, collateral, assignment of leases and rents, UCC financing
statements and any other security documents with respect to the Leased Property
incurred by or on behalf of Owner, Construction Lender, the Financing Parties
and LC Issuer, (ii) appraisal fees, engineering fees, environmental assessments,
title insurance fees, survey costs and (iii) all other fees and expenses which
the Owner is obligated to pay in connection with the negotiation and
documentation of, and consummation of the transactions contemplated by, and the
ongoing performance of the various parties under this Lease, the Construction
Loan Documents, the Financing Documents, the Construction Agency Agreement, the
Transaction Documents, and any other instruments and documents related to the
transaction described in this Lease and said other documents, including, without
limiting the generality of the foregoing, the organization and qualification of
the Owner. The obligation of Lessee to pay all such fees, expenses and other
amounts shall survive the termination of this Lease for any reason.
27. FURTHER ASSURANCES.
Lessee will promptly and duly execute and deliver to Owner and any
Assignee of Owner such other documents and assurances, including, without
limitation, such amendments to this Lease as may be reasonably required by Owner
and by any Assignee of Owner, and Uniform Commercial Code financing statements
and continuation statements, and will take such further action as Owner or any
Assignee of Owner may from time to time reasonably request in order to carry out
more effectively the intent and purposes of this Lease and to establish and
protect the rights and remedies created or
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intended to be created in favor of Owner and of any Assignee of Owner and their
respective rights, title and interests in and to the Leased Property or portions
thereof.
Owner, at Lessee's sole cost and expense, will promptly and duly
execute and deliver to Lessee and any permitted assignee of Lessee such other
documents and assurances, including, without limitation, such amendments to this
Lease as may be reasonably required by Lessee and by any permitted assignee of
Lessee, and will take such further action as Lessee or any permitted assignee of
Lessee may from time to time reasonably request in order to carry out more
effectively the intent and purposes of this Lease and to establish and protect
the rights and remedies created or intended to be created in favor of Lessee and
of any permitted assignee of Lessee and their respective rights, title and
interests in and to the Leased Property or portions thereof.
28. NOTICES.
All notices provided for or required under the terms and provisions
hereof shall be in writing, and any such notice shall be deemed given (a) when
personally delivered, (b) when deposited in the United States mails, with proper
postage prepaid, for first class certified mail, return receipt requested, or
(c) when delivered by an overnight courier service, addressed (i) if to Owner or
Lessee, at their respective addresses as set forth below or at such other
address as either of them shall, from time to time, designate in writing to the
other, and (ii) if to any Assignee, to the address of such Assignee as such
Assignee shall designate in writing to Owner and Lessee.
If to Owner:
First Fidelity Bank, National Association, trustee
c/o First Fidelity Bank
10 State House Square
Hartford, Connecticut 06103
Attn: W. Jeffrey Kramer
With a copy to:
James G. Scantling, Esq.
Bingham, Dana & Gould
100 Pearl Street
Hartford, Connecticut 06103-4507
If to Lessee:
Tiffany and Company
727 Fifth Avenue
New York, NY 10022
Attn: General Counsel
With a copy to:
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Tiffany and Company
5 Sylvan Way
Parsippany, New Jersey 07054
Attn: Assistant Treasurer
Copies of any notices sent either to Owner or Lessee shall be delivered to each
Assignee and to the LC Issuer. Notices sent to the LC Issuer shall be sent to
the address set forth below:
BOT Financial Corporation
125 Summer Street
Boston, Massachusetts 02110
Attn: Senior Vice President-Administration
29. LESSEE'S EXTENSION LEASE OPTIONS AND END OF TERM PURCHASE OPTIONS.
(a) MECHANICS OF LEASE TERM EXTENSIONS. If (i) no Event of Default
shall have occurred and be continuing, (ii) all of the conditions set forth in
Section 4(a) hereof have been satisfied in accordance with such Section 4(a),
and (iii) this Lease shall not have been earlier terminated, Lessee shall be
entitled, at its option, upon written notice to Owner (as hereinafter provided),
to enter into the Basic Lease Term. If Lessee shall have elected to enter into
the Basic Lease Term, Lessee shall, at its option, extend this Lease annually
for up to nine (9) consecutive Extension Lease Terms. The Lessee shall be
conclusively deemed to have elected to enter into the Basic Lease Term unless
Lessee shall give written notice to Owner on or prior to January 31, 1996 that
Lessee will not enter into the Basic Lease Term. The first Extension Lease Term
will commence on the day immediately following the Basic Lease Term Expiration
Date, and each succeeding Extension Lease Term will commence on the day
immediately following the last day of the immediately preceding Extension Lease
Term. All of the provisions of this Lease shall be applicable during the Basic
Lease Term and each Extension Lease Term. Except during the ninth (9th)
Extension Lease Term, this Lease shall be deemed automatically extended for the
succeeding Extension Lease Term without the necessity of any notice or the
taking of any other action unless Lessee shall give written notice to Owner that
Lessee does not elect to extend the Lease for the next succeeding Extension
Lease Term at least three hundred and sixty-five (365) days prior to the last
day of the then current Term. Unless Lessee has (A) exercised its purchase
option under Section 29(b) hereof or (B) delivered to Owner a Nonreturn Option
Notice, in the event Lessee elects not to enter into the Basic Lease Term or any
Extension Lease Term, the Leased Property shall be returned to Owner in
accordance with the provisions of Section 34 hereof, in which case the
provisions of Section 31(b) hereof shall apply (unless delivered to a bidder in
accordance with Section 30(b) hereof, in which case the provisions of Section
31(a) shall apply). If the Leased Property has not been so returned or delivered
to Owner on the last day of the then effective Interim Lease Term, Basic Lease
Term or Extension Lease Term, as the case may be, Lessee shall pay Interim
Rental, Base Rental and Additional Rental payable as provided in Section 34(f)
hereof. If Lessee elects not to enter into the Basic Lease Term or has not
renewed this Lease for an Extension Lease Term as provided above, then during
the period from February 1, 1996 to the end of the Interim Lease Term and during
the three hundred sixty-five (365)-day period preceding the date on which the
then effective Basic Lease
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Term or Extension Lease Term, as the case may be, shall terminate or expire,
Owner may, subject to all applicable governmental laws, rules and regulations,
place signs in locations on the grounds in front of the Leased Property
advertising that the same will be available for rent or purchase.
(b) LESSEE OPTION TO PURCHASE AT END OF LEASE TERM - 365 DAY NOTICE. If
(i) no Default and no Event of Default shall have occurred and be continuing
(unless at such time the Parent is Investment Grade in which case the
requirement of this clause (i) shall be of no effect), and (ii) this Lease shall
not have been earlier terminated, Lessee shall be entitled, at its option, upon
written notice to Owner, as hereinafter provided, to purchase Owner's interest
in the Leased Property in accordance with Section 32 hereof, on the then
applicable Termination Date, for an amount equal to the sum, without
duplication, of (i) all unpaid Interim Rental or Base Rental, as the case may
be, due for the period ending on such Termination Date, plus (ii) the Purchase
Price as of the Termination Date, plus (iii) all interest, costs, fees,
reimbursements and other amounts due and payable either to Owner or the
Financing Parties under the Transaction Documents, plus (iv) Additional Rental
due as of the Termination Date, plus (iv) the Reinvestment Premium as of the
Termination Date. As used in this Lease, the term "Purchase Price" means, as of
any Termination Date, an amount determined by multiplying Thirty-Seven Million
Dollars ($37,000,000) by the percentage set forth in Exhibit E for such
Termination Date. To exercise said purchase option, Lessee shall give written
notice to Owner to such effect at least three hundred sixty-five (365) days
prior to the expiration of the then current Term. If Lessee gives written notice
of its exercise of its right to purchase to Owner, such notice shall constitute
a binding obligation of Lessee to purchase the Leased Property and to pay Owner
the Purchase Price and the other amounts payable under Section 29(b) including,
without limitation, the Reinvestment Premium, if any, on the Termination Date.
Notwithstanding the provisions of Section 19 above, Lessee may freely assign its
option to purchase to any third party. Not less than thirty (30) days or more
than sixty (60) days before the Termination Date, a senior officer of Lessee
shall deliver to the Owner and the Owner Collateral Trustee a certificate
specifying:
(A) the Termination Date;
(B) that such payment is to be made under Section 29(b) of the
Lease;
(C) the Purchase Price to be paid on such date together with
the other amounts payable under this Section 29(b); and
(D) a reasonably detailed calculation of an estimated
Reinvestment Premium, if any (calculated as if the date of such notice
were the date of payment), due in connection with such payment.
Two (2) Business Days prior to the Termination Date, the Lessee will deliver to
the Owner Collateral Trustee and the Owner by facsimile transmission a
certificate of a senior officer of the Lessee specifying the details of the
calculation of such Reinvestment Premium as of the Termination Date.
30. THIRD PARTY SALE OF LEASED PROPERTY.
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(a) LESSEE OPTION TO CAUSE LEASED PROPERTY TO BE SOLD TO THIRD PARTY -
365 DAY NOTICE. If Lessee does not exercise either its option to (i) enter into
the Basic Lease Term or renew this Lease for any Extension Lease Term, or (ii)
purchase the Leased Property, and regardless of whether the Lessee shall have
delivered a Nonreturn Option Notice, then Lessee shall have the obligation
during the final three hundred sixty-five (365) days of the then current Term
(the "Remarketing Period"), to use such commercially reasonable efforts as would
be made by a self- interested property owner in the area to actively market
commercial property to obtain bona fide bids for the Leased Property from
prospective purchasers who are financially capable of purchasing the Leased
Property for cash on an as-is, where-is basis, without recourse or warranty on
the terms and conditions set forth in Section 32 hereof applicable to Owner
Conveyances. The Lessee shall be responsible for hiring brokers who shall be
reasonably acceptable to Owner and promptly upon Owner's request, shall permit
inspection of the Leased Property and any maintenance records relating to the
Leased Property by Owner, Assignee or any potential purchasers, and shall
otherwise do all things necessary to sell and deliver possession of the Leased
Property to any purchaser. All such marketing of the Leased Property shall be at
Lessee's sole expense. The Lessee shall allow the Owner and any potential
purchaser access to the Leased Property for purposes of showing the same. All
bids received by Lessee prior to the end of the Basic Lease Term, or Extension
Lease Term if applicable, shall be immediately certified to Owner in writing,
setting forth the amount of such bid and the name and address of the person or
entity submitting such bid. Notwithstanding the foregoing, Owner shall have the
right, but not the obligation, to seek bids for the Leased Property during the
Remarketing Period.
(b) DELIVERY OF LEASED PROPERTY TO THIRD PARTY BUYER. Not later than
the Termination Date, Lessee shall deliver the Leased Property to the bidder, if
any, who shall have submitted such highest bid during the Remarketing Period,
and Owner shall simultaneously therewith sell (or cause to be sold), its
ownership in such Leased Property to such bidder, provided, that Owner shall not
be obligated to sell the Leased Property if either (i) all of the conditions set
forth in Sections 29(b), 32 and 33 have not been complied with on or before such
Termination Date or (ii) the Net Proceeds of Sale of the Leased Property would
be less than the Maximum Owner Risk Amount applicable as of the Termination
Date; and, provided further, that in any event, Owner shall not sell the Leased
Property under the circumstances described in clause (ii) without the prior
written consent of the LC Issuer. No such consent shall be required if prior to
or contemporaneously with such sale the Letter of Credit shall have been
returned to the LC Issuer. The Net Proceeds of Sale shall be retained by the
Owner. This Section 30(b) is for the benefit of, and may be enforced by, LC
Issuer as a third party beneficiary.
(c) DELIVERY OF APPRAISALS AND REPORTS. Owner shall have the right in
its sole discretion, but not the obligation, to retain a third party as its
agent for the purpose of determining compliance of the Lessee with the
conditions applicable to a return of the Leased Property pursuant to Section 34,
at Lessee's cost and expense. Upon the request of Owner and at Lessee's sole
cost and expense, Lessee shall provide Owner with a written report describing in
reasonable detail Lessee's efforts during the Remarketing Period to obtain bona
bids for the purchase of the Leased Property, including a list of all Persons
approached for the purpose of soliciting bids to purchase the Leased Property.
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(d) LESSEE OPTION TO PURCHASE OR SELL TO THIRD PARTY - 180 DAY NOTICE.
If Lessee does not exercise either its option to enter into the Basic Lease Term
or to renew this Lease for any Extension Lease Term or its option to purchase
the Leased Property at the end of the Term and if no Default or Event of Default
has occurred and is continuing, then at any time on or prior to July 31, 1996,
if the Termination Date is to occur prior to the Basic Term Commencement Date,
or one-hundred eighty (180) days prior to the last day of the then current Basic
Lease Term or Extension Lease Term, as the case may be, the Lessee may deliver
to the Owner a written notice that on the applicable Termination Date either the
Leased Property will be sold to a third party pursuant to a bid which meets the
requirements of Section 30(b) above or the Lessee shall purchase the Leased
Property for the full Purchase Price together with the other amounts payable
under Section 29(b) including, without limitation, the Reinvestment Premium, if
any, on the Termination Date, if any. The written notice described in the
preceding sentence is referred to as a "Nonreturn Option Notice." If the Lessee
delivers a Nonreturn Option Notice to Owner and the Lessee desires to sell the
Leased Property to a third party, it shall be required to submit a third-party
bid which meets the requirements of Section 30(b) no later than thirty (30) days
prior to the Termination Date; otherwise, the Lessee shall be obligated to
purchase the Leased Property on the Termination Date as if it had elected to
purchase the Leased Property pursuant to Section 29(b).
31. END OF TERM ADJUSTMENT.
(a) LESSEE DEFICIENCY PAYMENT IF LEASED PROPERTY SOLD TO THIRD PARTY.
This Section 31(a) shall apply only if a sale of the Leased Property has been
consummated on or prior to the Termination Date pursuant to Section 30(b)
hereof. If the Net Proceeds of Sale of the Leased Property from a sale to a
third party are less than an amount equal to the Purchase Price plus the other
amounts payable under Section 29(b), including, without limitation, the
Reinvestment Premium, if any, on the Termination Date, Lessee shall, on the
Termination Date, pay to Owner as an End of Term Adjustment, in immediately
available funds, an amount equal to such deficiency (a "Deficiency") as an
adjustment to the Rent payable under this Lease; provided, however, that if all
of the Limited Lessee Risk Conditions have been met, the amount of the
Deficiency payable by Lessee with respect to the Leased Property shall not
exceed the Maximum Lessee Risk Amount then applicable. If the Net Proceeds of
Sale of the Leased Property exceed amount equal to the Purchase Price, as of the
Termination Date plus the other amounts payable under Section 29(b), including,
without limitation, the Reinvestment Premium, if any, on the Termination Date,
Owner shall pay to Lessee an amount equal to such excess as an adjustment to the
Rent paid or payable under this Lease; provided, however, that Owner shall have
the right to offset against such adjustment payable by Owner, any other amounts
then due and payable from Lessee to Owner hereunder or under any other
agreements between Owner and Lessee. Lessee shall also pay to Owner on the
Termination Date the Interim Rental or Base Rental, as the case may be, due and
payable for the Leased Property on the Termination Date, plus all Additional
Rental then due and owing. Owner's obligation to sell (or cause to be sold) the
Leased Property to a third party under Section 30 is contingent upon the receipt
of the amounts, if any, payable by Lessee pursuant to this Section 31(a) and
Section 31(c).
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<PAGE> 51
(b) END OF TERM PAYMENT IF LEASED PROPERTY IS NOT SOLD. If upon the
expiration of the Interim Lease Term, the Basic Lease Term or any Extension
Lease Term or upon any Termination Date, Lessee does not (i) purchase the Leased
Property pursuant to Section 29(b) hereof, (ii) arrange a third party sale which
is consummated in accordance with Section 30 hereof, (iii) elect to enter into
the Basic Lease Term or elect to extend the Term of the Lease by an Extension
Lease Term pursuant to Section 29(a) hereof or (iv) if the Lessee is not
permitted to extend the Lease for any reason whatsoever,including, without
limitation, because the Lessee has no right to extend the Lease beyond the
Maximum Term, then Lessee shall, on the Termination Date, pay to Owner as an End
of Term Adjustment as an adjustment to the rent payable under this Lease, an
amount equal to (A) the Maximum Lessee Risk Amount then applicable if all of the
Limited Lessee Risk Conditions have been met, or (B) the Purchase Price together
with the other amounts payable by Lessee under Section 29(b), including without
limitation the Reinvestment Premium, if any, as of the Termination Date, if all
of the Limited Lessee Risk Conditions have not been met, plus, in either case,
the Interim Rental or Base Rental, as the case may be, due and payable on the
Termination Date, plus all Additional Rental then due and owing. The total
selling price realized from any sale of the Leased Property after the
Termination Date shall be retained by Owner. Lessee shall remain liable for the
payment of, and upon the consummation by Owner of the sale of the Leased
Property after the Termination Date, Lessee shall pay or reimburse Owner for the
payment of, all applicable sales, excise, transfer, recording or other taxes
imposed as a result of such sale, and fees and all expenses incurred by Owner as
a result of such sale, including, without limitation, expenses incurred in
titling and registering the conveyance of Owner's title to the Leased Property,
title insurance fees and expenses and fees and expenses of counsel, but the
Lessee shall not be required to pay or reimburse Owner for any tax based upon or
measured solely by Owner's or Beneficiary's gross, net or taxable income
realized upon such sale or any taxes payable in the nature of capital gains,
unless any such tax is in lieu of or a substitute for any sales, excise,
transfer or recording taxes imposed as a result of a sale of the Leased
Property.
(c) LESSEE RIGHTS AND OBLIGATIONS ON FAILURE TO PAY LETTER OF CREDIT.
If the Owner Collateral Trustee submits a draw request to the LC Issuer for
payment of the Letter of Credit and there is a Draw Conditions Failure, such
shall constitute an Event of Default hereunder, but the occurrence of an Event
of Default for such reason shall not operate as a limitation or waiver of any
rights that Owner, Beneficiary or Lessee may have against LC Issuer for wrongful
dishonor, and in such event, (i) Owner agrees to take all actions (and agrees to
cause the Beneficiary and any Assignee to take all actions) which are reasonably
required to preserve any claims against the LC Issuer and (ii) upon payment in
full of all amounts due from Lessee at the expiration of this Lease, the Owner
shall assign (and agrees to cause the Beneficiary and any Assignee to assign)
all of its rights against LC Issuer to the Lessee. If an Event of Default
described in Section 23(i) hereof shall have occurred by reason of the Owner's
default under the Reimbursement and Remarketing Agreement, the Lessee shall be
subrogated to the LC Issuer's rights against the Owner and Leased Property, all
as provided in Section 13 of the Reimbursement and Remarketing Agreement.
(d) SUBSEQUENT PAYMENT BY LESSEE IF LC IS NOT PAID. If (i), as of the
Termination Date, the Lessee shall have met all of the Limited Lessee Risk
Conditions and the Lessee
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<PAGE> 52
shall not have received notice of the occurrence of an Event of Default
described in Section 23(i) hereof, and (ii) an Event of Default described in
Section 23(i) hereof subsequently occurs on or after the Termination Date, then
the Lessee shall pay in immediately available funds and on demand from Owner (or
its Assignee) an amount equal to the difference, if any, between (A) the amount
which would have been payable by the Lessee on the Termination Date under
Section 31(a) or 31(b) hereof as if the Limited Lessee Risk Conditions were not
met as of such date and (B) the amount actually paid by Lessee on the
Termination Date pursuant to Section 31(a) or 31(b) hereof, plus interest at the
Default Rate on such difference for the period from the Termination Date to the
date of payment.
(e) GENERAL MAKE WHOLE PAYMENT. In the event a Termination Date occurs
prior to the last day of the Maximum Term hereof, Lessee shall pay to Owner on
the Termination Date, in addition to any other obligations hereunder, the
Reinvestment Premium, if any, as of such Termination Date.
32. PROCEDURE FOR OWNER CONVEYANCE.
In the event of an Owner Conveyance, the terms and conditions of this
Section 32 shall apply. On the closing date for such transfer:
(a) The Owner shall have received all amounts due and payable
to it under the applicable provisions of this Lease, and without
limitation of the foregoing, Lessee shall have paid all Interim Rental,
Basic Rental and Additional Rental and all other sums due and payable
by Lessee under this Lease, through the date of consummation of the
transfer, in each case in funds of the type specified and otherwise in
accordance with Section 33 hereof.
(b) Each Owner's Conveyance shall be made by a good and
sufficient bargain and sale deed, or such other instruments as may be
appropriate in the circumstances, which shall transfer all of the
Owner's interest in the Leased Property to Lessee or third party, as
the case may be. OWNER'S TRANSFER OF ITS OWNERSHIP IN THE LEASED
PROPERTY SHALL BE ON AN AS-IS, WHERE-IS BASIS, WITHOUT ANY
REPRESENTATION OR WARRANTY, EITHER EXPRESSED OR IMPLIED, AS TO THE
DESIGN, CONDITION, QUALITY, CAPACITY, MERCHANTABILITY, HABITABILITY,
DURABILITY, SUITABILITY OR FITNESS OF THE LEASED PROPERTY FOR ANY
PARTICULAR PURPOSE, OR ANY OTHER MATTER CONCERNING THE LEASED PROPERTY
OR ANY PORTION THEREOF. LESSEE AND, IF APPLICABLE, ANY THIRD PARTY
SHALL WAIVE ANY CLAIM (INCLUDING ANY CLAIM BASED ON STRICT OR ABSOLUTE
LIABILITY IN TORT OR INFRINGEMENT) IT MIGHT HAVE AGAINST OWNER FOR ANY
LOSS, DAMAGE (INCLUDING INCIDENTAL OR CONSEQUENTIAL DAMAGE) OR EXPENSE
CAUSED BY THE LEASED PROPERTY OR BY LESSEE'S LOSS OF USE THEREOF FOR
ANY REASON WHATSOEVER. Owner shall convey all of its then right, title
and interest in and to the Leased Property to Lessee or third party, as
the case may be, free and clear of any Owner Liens (other than
Permitted Liens), and any liens securing debt incurred by Owner,
whether recourse or otherwise, including but not limited to the
Construction Loan and the Owner Notes and any replacements for or
additions to the foregoing, but NO REPRESENTATION OR WARRANTY SHALL BE
MADE BY
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<PAGE> 53
OWNER AS TO THE EXISTENCE OF ANY OTHER LIENS OR ENCUMBRANCES ON THE
LEASED PROPERTY AS OF THE DATE OF SALE.
(c) The Lessee shall have paid all charges and expenses
incident to the transfer of the Leased Property in an Owner's
Conveyance, including, without limitation, all transfer taxes,
recording fees, title insurance premiums and federal, state and local
taxes arising as a result of such transfer. Lessee shall have paid all
fees and expenses of Owner's counsel, Construction Lender's counsel and
the Financing Parties counsel(s) incurred by reason of the transfer.
33. TIME OF THE ESSENCE; MANNER OF PAYMENT.
The provisions of this Lease requiring the payment by Lessee to the
Owner or to any third party, whether such payments are for Interim Rental, Base
Rental, Additional Rental, Termination Value, Purchase Price, End of Term
Adjustment, Maximum Lessee Risk Amount, Late Charges or otherwise are of the
essence of this Lease, and time is of the essence for any payment and
performance of such obligations of Lessee set forth herein. So long as any Owner
Notes or Beneficiary Notes shall be outstanding, all payments due the Owner
hereunder shall be made in immediately available funds paid by wire transfer to
the Owner Collateral Trustee.
34. RETURN OF LEASED PROPERTY.
(a) Upon the expiration or earlier termination of the Term (unless
Lessee has purchased the Leased Property pursuant to Section 29 hereof, or has
delivered a Nonreturn Option Notice), Lessee will vacate and surrender and
deliver possession of the Leased Property to Owner in broom clean condition and
in the condition required pursuant to Section 13(a) hereof. Lessee shall remove
from the Leased Property on or prior to such expiration or earlier termination
of this Lease, all personal property, furniture and fixtures (other than
equipment and fixtures which form a part of the building systems) situated
thereon which is not the property of Owner, and shall repair any damage caused
by such removal. Property not so removed shall become the property of Owner, and
Owner may cause such property to be removed from the Leased Property and
disposed of, and Lessee shall pay the reasonable cost of any such removal and
disposition and of repairing any damage caused by such removal.
(b) Except for surrender upon the expiration or earlier termination of
the Term hereof, no surrender to Owner of this Lease or of the Leased Property
shall be valid or effective unless agreed to and accepted in writing by Owner
and any Assignee of Owner.
(c) Without limiting the generality of the foregoing, upon the
surrender and return of the Leased Property to Owner pursuant to this Section
34, the Leased Property shall (i) be capable of being immediately utilized by a
third-party purchaser or third-party lessee without further inspection,
construction, repair, replacement, alterations or improvements, licenses,
permits, or approvals, except for any of the foregoing required solely by virtue
of the change in ownership (other than to Owner or Assignee), use or occupancy
of the Leased Property, (ii) be in accordance and compliance with all Legal
Requirements and Environmental Legal Requirements including, without limitation,
any of
49
<PAGE> 54
the foregoing required by virtue of a change in ownership, use or occupancy of
the Leased Property other than to Lessee, (iii) be free and clear of all Liens,
other than any Permitted Liens and Owner Liens and any liens securing debt
incurred by Owner, whether recourse or otherwise, including but not limited to
the Construction Loan, the Beneficiary Notes and the Owner Notes and any
replacements for or additions to the foregoing.
(d) On or prior to the date of such surrender and return of the Leased
Property, Owner shall have received from Lessee, at Lessee's expense, evidence
satisfactory to Owner and each Assignee, of compliance with the provisions of
this Section 34, including without limitation, an environmental assessment for
the Leased Property addressed in form and substance satisfactory to Owner and
each Assignee or, in lieu of addressing to such parties directly, accompanied by
a letter permitting Owner and each Assignee to rely thereon, performed by an
independent, licensed professional engineer satisfactory to Owner and each
Assignee, and which assessment (i) shall be sufficient in scope to determine
compliance with the applicable Environmental Legal Requirements, (ii) shall
reveal no actual or potential environmental liabilities which cannot be
remediated by Lessee as provided in the following clause (iii), and (iii) if
such environmental assessment reveals the need for additional review, Lessee
shall have provided such additional information or environmental assessments as
are required by Owner and each Assignee and, subject to Section 20 hereof, any
remediation recommended therein to be performed shall have been performed, and
evidence of compliance with Section 34(c)(ii).
(e) Upon such return of the Leased Property to Owner, Lessee shall
deliver to Owner a then current title insurance policy or a binding commitment
to issue a title insurance policy written by a title insurance company
reasonably acceptable to Owner, insuring good and marketable title in the Leased
Property in an amount equal to the Termination Value determined as of the
Termination Date, unencumbered except for Owner Liens or Permitted Liens. Upon
the request of Owner, Lessee shall continue to maintain its insurance policies
for the Leased Property required under Section 15 hereof if able to do so on a
commercially reasonable basis, provided that Owner pays or reimburses Lessee for
its pro rata costs thereof.
(f) Until the Leased Property has been returned to Owner in the
condition required under Section 34(a) through (d) hereof, Lessee shall continue
to pay Owner, on the same dates on which Interim Rental or Base Rental, as
applicable, was payable during the Interim Lease Term, the Basic Lease Term or
any Extension Lease Term thereof, (i) if prior to the Basic Term Commencement
Date, the Interim Rental or (ii) if after the Basic Term Commencement Date, 125%
of the Base Rental that was payable on the last Base Rent Payment Date of the
Basic Lease Term thereof, or if the Term has been renewed pursuant to Section
29(a) hereof, 125% of the same Base Rental that was payable on each Base Rent
Payment Date during the last Extension Lease Term, plus, in each case, all
Additional Rental for which Lessee is liable applicable to such Rental Periods.
(g) The provisions of this Section 34 are of the essence of this Lease,
and any breach thereof shall be deemed an Event of Default hereunder, and upon
application to any court of equity having jurisdiction in the premises, Owner
shall be entitled to a decree against Lessee requiring specific performance of
the covenants of Lessee set forth in this Section 34.
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<PAGE> 55
35. FINANCIAL INFORMATION.
Without limiting the obligations of Lessee or Parent set forth in the
Agreement and Consent to Assignment, Lessee agrees to furnish Owner (a) as soon
as available, and in any event within 105 days after the last day of each fiscal
year of Lessee, a copy of the balance sheet of Parent on a consolidated basis as
of the end of such fiscal year, and related consolidated statements of income
and retained earnings of Parent for such fiscal year, certified by an
independent certified public accounting firm of recognized standing, each on a
comparative basis with corresponding statements for the prior fiscal year, and a
copy of Parent's form 10-K, if any, filed with the Securities and Exchange
Commission for such fiscal year; (b) within 50 days after the last day of each
fiscal quarter of Parent (except the last such fiscal quarter), a copy of the
balance sheet as of the end of such quarter, and statement of income and
retained earnings covering the fiscal year to date of Parent on a consolidated
basis, each on a comparative basis with the corresponding period of the prior
year, all in reasonable detail and certified by the treasurer or principal
financial officer of Parent, together with a copy of Parent's form 10-Q, if any,
filed with the Securities and Exchange Commission for such quarterly period; (c)
contemporaneously with its transmittal to each stockholder of Parent and to the
Securities and Exchange Commission, all such other financial statements and
reports as Parent shall send to its stockholders and to the Securities and
Exchange Commission; (d) as soon as available to Parent, the notice of any
material adjustment resulting from any audit of the books and/or records of
Parent by any taxing authority having jurisdiction over Parent; and (e) such
additional financial information as Owner may reasonably request concerning
Parent.
36. RECORDING.
Lessee will execute, acknowledge, deliver and cause to be recorded or
filed in the manner and place required by any present or future law, a
memorandum hereof (the "Memorandum of Lease"), and all other instruments,
including, without limitation, financing statements, continuation statements,
releases and instruments of similar character, which shall be reasonably
requested by Owner or any Assignee as being necessary or appropriate in order to
protect Owner's or Assignee's respective interests in the Leased Property or to
publish notice of or to create, maintain and protect the lien and security
interest intended to be created by the mortgage securing the Owner Notes and the
other obligations of Owner to the Financing Parties upon, and the interest of
Owner Collateral Trustee in, the Leased Property. If Lessee shall fail to comply
with this Section 36, Owner shall be and is hereby irrevocably appointed the
agent and attorney in fact of Lessee, to comply therewith, but this sentence
shall not prevent any default in the observance of this Section 36 by Lessee
from constituting an Event of Default in accordance with the provisions of this
Lease. Lessee may record a memorandum hereof whether or not requested by Owner.
37. NO RELIANCE.
Lessee and Owner hereby mutually acknowledge that in negotiating the
terms of this Lease and all other related agreements and documents, each has
sought, obtained and relied exclusively upon such accounting, actuarial, tax and
legal advice from its own or other independent sources as it has deemed
necessary, and further acknowledges that neither Lessee, Owner, the Financing
Parties, LC Issuer, BFS or any Assignee nor any of
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<PAGE> 56
their respective affiliates or personnel has represented or warranted the legal,
tax, economic, accounting, or other consequences of the terms and provisions
hereof and of the other related agreements and documents.
38. MISCELLANEOUS.
Any provision of this Lease which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating or diminishing Owner's
rights under the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted
by applicable law, Lessee hereby waives any provision of law which renders any
provision of this Lease prohibited or unenforceable in any respect. In no event
shall any amounts payable hereunder, whether payable as Interim Rental, Base
Rental, Additional Rental or otherwise, exceed any limits imposed by applicable
law. To the extent any amounts received by Owner exceeds the maximum amount
permitted, such payment shall be credited to future Interim Rental or Base
Rental payable hereunder or at Owner's option, be refunded to Lessee. No term or
provision of this Lease may be amended, altered, waived, discharged or
terminated orally, but may be amended, altered, waived, discharged or terminated
only by an instrument in writing signed by a duly authorized officer of the
party against which the enforcement of the amendment, alteration, waiver,
discharge or termination is sought. A waiver on any one occasion shall not be
construed as a waiver on a future occasion. All of the covenants, conditions and
obligations contained in this Lease shall be binding upon and shall inure to the
benefit of the respective successors and assigns of Owner and (subject to the
restrictions of Section 19 hereof) Lessee. This Lease, the Construction Agency
Agreement and each related instrument, document, agreement and certificate,
collectively constitute the complete and exclusive statement of the terms of the
agreement between Owner and Lessee with respect to the leasing and construction
of the Leased Property, and cancel and supersede any and all prior oral or
written understandings with respect thereto.
39. VENUE; GOVERNING LAW.
Lessee agrees that at Owner's sole election any suit, action or
proceeding brought by Owner against Lessee in connection with or arising out of
this Lease may be brought in any federal or state court in the State of New
Jersey, and Lessee waives personal service of all process upon it and consents
that service of process may be made by mail or messenger directed to it at its
address set forth above and that service so made shall be deemed to be completed
upon the earlier of actual receipt or three (3) days after the same shall have
been posted to Lessee's said address. Nothing herein contained shall affect
Owner's right to serve legal process in any other manner permitted by law or to
bring any suit, action or proceeding against Lessee or its property in the
courts of any other jurisdiction. This Lease shall in all respects be governed
by, and constructed in accordance with, the laws of the State of New Jersey,
including all matter of construction, validity and performance.
40. ESTOPPEL CERTIFICATE.
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<PAGE> 57
Lessee agrees from time to time, upon not less than ten (10) days'
prior written notice from Owner, any Financing Party or LC Issuer, to execute,
acknowledge and deliver to Owner, any Financing Party or LC Issuer or any other
Person designated by Owner, any Financing Party or LC Issuer , a statement in
form and substance reasonably satisfactory to the Person requesting same
certifying that this Lease is unmodified and in full force and effect (or if
there have been modifications, that this Lease is in full force and effect as
modified and stating the modifications), the dates to which Interim Rental or
Base Rental, as the case may be, and Additional Rental have been paid, and
stating whether or not, to the best knowledge of the signer of the certificate,
Owner is in default in performance of any covenant, agreement or condition in
this Lease and, if so, specifying each such default of which the signer may have
knowledge, it being intended that any such statement may be relied upon by any
prospective purchasers of the Leased Property, any assignee of Owner, any
Financing Party or LC Issuer or any prospective mortgage lender.
41. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
All representations, warranties, agreements, covenants and obligations
of Lessee herein are material, shall be deemed to have been relied upon by
Owner, and, unless by their express terms expire as of an earlier date, shall
survive and continue in full force and effect notwithstanding the expiration or
earlier termination of this Lease in whole or in part, including the expiration
or termination of the Term with respect to the Leased Property.
42. NONRECOURSE.
(a) Any provision of this Lease to the contrary notwithstanding, the
liability of the Owner hereunder, if any, shall be satisfied solely from the
assets held in trust by the Owner, including the Leased Property. This Lease is
a trust obligation of the Owner, and no recourse under or upon any
representation, warranty, obligation, covenant or agreement contained herein or
for any claim based hereon or in respect hereto shall be had against any past,
present or future trustee, co-trustee, beneficiary, settlor, officer, employee
or agent, as such, of the Owner or any of their respective assets or properties.
(b) It is expressly understood and agreed by the parties hereto that
(i) this Lease is executed and delivered by First Fidelity Bank, National
Association, not individually or personally but solely as trustee under the
Owner Trust Agreement in the exercise of powers and authority conferred and
vested in it, (ii) each of the representations, undertakings and agreements
herein made on the part of the Owner is made and intended not as personal
representations, undertakings and agreements by First Fidelity Bank, National
Association, but is made and intended for the purpose for binding only the Owner
as the trustee under the Owner Trust Agreement and (iii) under no circumstances
shall First Fidelity Bank, National Association, be personally liable for the
payment of any indebtedness or expenses of the Owner or be liable for the breach
or failure of any obligation, representation, warranty or covenant made or
undertaken by the Owner under this Lease.
[SIGNATURES ON NEXT PAGE]
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IN WITNESS WHEREOF, the parties hereto have caused this Lease to be
duly executed under seal by their duly authorized representatives effective as
of the date first written above.
FIRST FIDELITY BANK, NATIONAL ASSOCIATION,
NOT IN ITS INDIVIDUAL CAPACITY BUT SOLELY AS
TRUSTEE UNDER TRUST AGREEMENT 1995-1
DATED AS OF JULY 1, 1995, AS AMENDED
(Owner)
/s/ W. Jeffrey Kramer
- -----------------------------
By: W. Jeffrey Kramer
- -----------------------------
Title: Vice President
- -----------------------------
TIFFANY AND COMPANY
(Lessee)
/s/ William R. Chaney
- -----------------------------
By: William R. Chaney
- -----------------------------
Title: Chairman of Board of Directors,
President and Chief Financial Officer
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<PAGE> 59
EXHIBIT A
LAND DESCRIPTION
All that tract or parcel of land and premises, situate, lying and being in the
Township of Parsippany-Troy Hills in the County of Morris and State of New
Jersey, more particularly described as follows:
Beginning at a point in the southerly sideline of Sylvan Way (a variable width
right-of-way) distant 1048.67 feet easterly along said southerly sideline and
the several courses thereof from the intersection of the easterly sideline of
Dryden Way (a variable width right-of-way), both sidelines produced, and running
thence and continuing along Sylvan Way:
(1) Easterly along the arc of a 460.02 foot radius curve to the left
through a central angle of 21 degrees 39 minutes 29 seconds, a distance
of 173.89 feet to a point of tangency; thence
(2) North 70 degrees 57 minutes 22 seconds East, a distance of 87.99 feet
to a point of a curvature; thence
(3) Along the arc of a 837.65 foot radius curve to the right, through a
central angle of 43 degrees 52 minutes 18 seconds, a distance of 641.39
feet to a point; thence
(4) Leaving Sylvan Way, South 12 degrees 46 minutes 08 seconds West, a
distance of 81.27 feet to a point of curvature; thence
(5) Along the arc of a 1063.12 foot radius curve to the left, through a
central angle of 05 degrees 30 minutes 10 seconds, a distance of 102.10
feet to a point of tangency; thence
(6) South 07 degrees 15 minutes 58 seconds West, a distance of 436.46 feet
to a point; thence
(7) South 09 degrees 06 minutes 31 seconds West, a distance of 256.33 feet
to a point; thence
(8) South 21 degrees 55 minutes 03 seconds West, a distance of 146.65 feet
to a point; thence
(9) South 06 degrees 42 minutes 13 seconds East, a distance of 341.14 feet
to a point; thence
(10) South 68 degrees 18 minutes 29 seconds West, a distance of 817.84 feet
to a point; thence
EXHIBIT A-1
<PAGE> 60
(11) South 88 degrees 44 minutes 58 seconds West, a distance of 505.97 feet
to a point; thence
(12) North 41 degrees 28 minutes 07 seconds West, a distance of 238.23 feet
to a point; thence
(13) North 21 degrees 43 minutes 08 seconds West, a distance of 459.68 feet
to a point; thence
(14) North 54 degrees 09 minutes 13 seconds East, a distance of 638.21 feet
to a point; thence
(15) North 67 degrees 49 minutes 27 seconds East, a distance of 828.31 feet
to a point; thence
(16) North 59 degrees 10 minutes 16 seconds West, a distance of 344.16 feet
to a point; thence
(17) North 38 degrees 00 minutes 52 seconds West, a distance of 207.97 feet
to the point and place of Beginning.
Containing 40.713 acres of land
The above description is in accordance with a survey prepared by Schoor DePalma,
Engineers and Design Professionals, dated October 25, 1995 and last revised on
December 8, 1995.
EXHIBIT A-2
<PAGE> 61
EXHIBIT A1
IMPROVEMENTS DESCRIPTION
Those improvements to be constructed in accordance with the Plans &
Specifications.
EXHIBIT A1-1
<PAGE> 62
EXHIBIT B1
RENTAL PAYMENT SCHEDULE
INTERIM RENTAL PAYMENT SCHEDULE
<TABLE>
<CAPTION>
Interim Rental Payment Date Interim Rental
- --------------------------------------------------------------------------------
<S> <C>
1/31/96 490,553.82
- --------------------------------------------------------------------------------
7/31/96 1,479,853.82
- --------------------------------------------------------------------------------
1/31/97 1,479,853.82
- --------------------------------------------------------------------------------
</TABLE>
EXHIBIT B1-1
<PAGE> 63
EXHIBIT B2
RENTAL PAYMENT SCHEDULE
BASE RENTAL PAYMENT SCHEDULE
<TABLE>
<CAPTION>
================================================================================
Base Rent Payment Date Base Rental
- --------------------------------------------------------------------------------
<S> <C>
7/31/97 1,675,383.91
- --------------------------------------------------------------------------------
1/31/98 1,675,383.91
- --------------------------------------------------------------------------------
7/31/98 1,675,383.91
- --------------------------------------------------------------------------------
1/31/99 1,675,383.91
- --------------------------------------------------------------------------------
7/31/99 1,675,383.91
- --------------------------------------------------------------------------------
1/31/00 1,675,383.91
- --------------------------------------------------------------------------------
7/31/00 1,675,383.91
- --------------------------------------------------------------------------------
1/31/01 1,688,720.55
- --------------------------------------------------------------------------------
7/31/01 1,688,720.55
- --------------------------------------------------------------------------------
1/31/02 1,688,720.55
- --------------------------------------------------------------------------------
7/31/02 1,688,720.55
- --------------------------------------------------------------------------------
1/31/03 1,688,720.55
- --------------------------------------------------------------------------------
7/31/03 1,688,720.55
- --------------------------------------------------------------------------------
1/31/04 1,688,720.55
- --------------------------------------------------------------------------------
7/31/04 1,688,720.55
- --------------------------------------------------------------------------------
1/31/05 1,688,720.55
- --------------------------------------------------------------------------------
7/31/05 1,688,720.55
- --------------------------------------------------------------------------------
1/31/06 1,688,720.55
- --------------------------------------------------------------------------------
7/31/06 1,688,720.55
- --------------------------------------------------------------------------------
1/31/07 1,688,720.55
- --------------------------------------------------------------------------------
7/31/07 1,688,720.55
- --------------------------------------------------------------------------------
1/31/08 1,688,720.55
- --------------------------------------------------------------------------------
7/31/08 1,688,720.55
- --------------------------------------------------------------------------------
1/31/09 1,688,720.55
================================================================================
</TABLE>
EXHIBIT B2-1
<PAGE> 64
EXHIBIT C
MAXIMUM LESSEE RISK AMOUNT/MAXIMUM OWNER RISK AMOUNT
(AS A PERCENTAGE OF $37,000,000)
[PRIOR TO BASIC LEASE TERM COMMENCEMENT DATE]
<TABLE>
<CAPTION>
================================================================================
Maximum Lessee Risk Amount Maximum Owner Risk Amount
================================================================================
<S> <C>
88.662066% 12.779208%
================================================================================
</TABLE>
EXHIBIT C-1
<PAGE> 65
EXHIBIT D
TERMINATION VALUE
(AS A PERCENTAGE OF $37,000,000)
<TABLE>
<CAPTION>
===================================================================
Rent Payment Date Termination Value
===================================================================
<S> <C>
1/31/96 101.734112%
- -------------------------------------------------------------------
7/31/96 101.590183%
- -------------------------------------------------------------------
1/31/97 101.441274%
- -------------------------------------------------------------------
7/31/97 100.758753%
- -------------------------------------------------------------------
1/31/98 100.052103%
- -------------------------------------------------------------------
7/31/98 99.320467%
- -------------------------------------------------------------------
1/31/99 98.562963%
- -------------------------------------------------------------------
7/31/99 97.778673%
- -------------------------------------------------------------------
1/31/00 96.966649%
- -------------------------------------------------------------------
7/31/00 96.125909%
- -------------------------------------------------------------------
1/31/01 95.219390%
- -------------------------------------------------------------------
7/31/01 94.278379%
- -------------------------------------------------------------------
1/31/02 93.301561%
- -------------------------------------------------------------------
7/31/02 92.287576%
- -------------------------------------------------------------------
1/31/03 91.235009%
- -------------------------------------------------------------------
7/31/03 90.142391%
- -------------------------------------------------------------------
1/31/04 89.008200%
- -------------------------------------------------------------------
7/31/04 87.830852%
- -------------------------------------------------------------------
1/31/05 86.608706%
- -------------------------------------------------------------------
7/31/05 85.340058%
- -------------------------------------------------------------------
1/31/06 84.023138%
- -------------------------------------------------------------------
7/31/06 82.656109%
- -------------------------------------------------------------------
1/31/07 81.237064%
- -------------------------------------------------------------------
7/31/07 79.764025%
- -------------------------------------------------------------------
1/31/08 78.234936%
- -------------------------------------------------------------------
7/31/08 76.647666%
- -------------------------------------------------------------------
1/31/09 75.000000%
===================================================================
</TABLE>
EXHIBIT D-1
<PAGE> 66
EXHIBIT E
PURCHASE PRICE
(AS A PERCENTAGE OF $37,000,000)
<TABLE>
<CAPTION>
================================================================================
Termination Date Purchase Price
- --------------------------------------------------------------------------------
<S> <C>
1/31/97 101.441274%
- --------------------------------------------------------------------------------
1/31/00 96.966649%
- --------------------------------------------------------------------------------
1/31/01 95.219390%
- --------------------------------------------------------------------------------
1/31/02 93.301561%
- --------------------------------------------------------------------------------
1/31/03 91.235009%
- --------------------------------------------------------------------------------
1/31/04 89.008200%
- --------------------------------------------------------------------------------
1/31/05 86.608706%
- --------------------------------------------------------------------------------
1/31/06 84.023138%
- --------------------------------------------------------------------------------
1/31/07 81.237064%
- --------------------------------------------------------------------------------
1/31/08 78.234936%
- --------------------------------------------------------------------------------
1/31/09 75.000000%
================================================================================
</TABLE>
EXHIBIT E-1
<PAGE> 67
EXHIBIT F
MAXIMUM LESSEE RISK AMOUNT AND MAXIMUM OWNER RISK AMOUNT
(AS A PERCENTAGE OF $37,000,000)
[AFTER BASIC LEASE TERM COMMENCEMENT DATE]
<TABLE>
<CAPTION>
================================================================================
If the Determination Maximum Maximum
Date occurs in the Lessee Owner Risk
period Risk Amount Amount
- --------------------------------------------------------------------------------
<S> <C> <C>
at any time prior to or 82.979470% 13.987179%
on 1/31/00
- --------------------------------------------------------------------------------
one year period ended 83.601829% 11.617561%
1/31/01
- --------------------------------------------------------------------------------
one year period ended 81.997189% 11.304372%
1/31/02
- --------------------------------------------------------------------------------
one year period ended 80.267989% 10.967020%
1/31/03
- --------------------------------------------------------------------------------
one year period ended 78.400194% 10.608006%
1/31/04
- --------------------------------------------------------------------------------
one year period ended 76.382696% 10.226011%
1/31/05
- --------------------------------------------------------------------------------
one year period ended 74.203496% 9.819642%
1/31/06
- --------------------------------------------------------------------------------
one year period ended 71.849635% 9.387429%
1/31/07
- --------------------------------------------------------------------------------
one year period ended 69.307113% 8.927823%
1/31/08
- --------------------------------------------------------------------------------
one year period ended 66.560809% 8.439191%
1/31/09
================================================================================
</TABLE>
EXHIBIT F-1
<PAGE> 68
AMENDED AND RESTATED
CONSTRUCTION AGENCY AGREEMENT
This AMENDED AND RESTATED CONSTRUCTION AGENCY AGREEMENT (this "Agreement"),
dated as of December 1, 1995, effective as of the Closing Date, is made by and
between Tiffany and Company, a New York corporation ("Agent") and First Fidelity
Bank, National Association, a national banking association, not in its
individual capacity but solely as trustee pursuant to a Trust Agreement 1995-1
dated as of July 1, 1995, as amended (the "Owner").
ARTICLE I
DEFINED TERMS
Unless the context otherwise requires and except as specifically provided
herein, each of the capitalized terms used in this Agreement shall have the
meanings set forth in the Definitions Appendix attached to this Agreement, as
the same may be amended, modified or supplemented from time to time.
ARTICLE II
PRELIMINARY STATEMENT
The Owner is the fee owner of the Land and desires to appoint Agent as its
agent with the sole and exclusive right and obligation to undertake construction
and development of the Improvements on the Land. Agent desires to design and
construct the Improvements on the Land, as agent for the Owner. Except as
otherwise provided in this Agreement, Development Costs necessary for the
acquisition of the Land and the design and construction of the Improvements will
be paid for from a combination of funds from Agent and the Owner. In order to
obtain funds to pay for a portion of the Development Costs as and to the extent
shown on the Project Budget (a copy of which is attached hereto as Exhibit A),
the Owner will (a) enter into (i) those separate Note Purchase Agreements
(collectively, as the same may from time to time be amended, the "Owner Note
Purchase Agreement"), each dated as of December 1, 1995, between the Owner and
each of the Persons on Annex 1 thereto (the "Purchasers") pursuant to which the
Owner will sell, and the Purchasers will purchase the Owner Notes, (ii) that
certain Collateral Trust Indenture (as may be amended from time to time, the
"Owner Trust Indenture"), dated as of December 1, 1995, between the Owner and
Fleet National Bank of Connecticut (in its capacity as collateral trustee herein
referred to as the "Owner Collateral Trustee") and (iii) each of the other Owner
Financing Documents and (b) provide the Owner's Equity in an amount not to
exceed One Million Nine Hundred Twenty-Five Thousand Dollars ($1,925,000).
The Beneficiary will enter into (a) those separate Note Purchase
Agreements (collectively, as the same may from time to time be amended, the
"Beneficiary Note Purchase Agreement"), each dated as of December 1, 1995,
between the Beneficiary and each of the Purchasers pursuant to which the
Beneficiary will sell, and the Purchasers will purchase, the Beneficiary Notes
(the Beneficiary Notes together with the Owner Notes collectively referred to
1
<PAGE> 69
herein as the "Notes"), (b) that certain Collateral Trust Indenture (as may be
amended from time to time, the "Beneficiary Trust Indenture"), dated as of
December 1, 1995, between the Beneficiary and Fleet National Bank of Connecticut
(in its capacity as collateral trustee herein referred to as "the "Beneficiary
Collateral Trustee") and (c) each of the other Beneficiary Financing Documents.
The proceeds of the Beneficiary Notes will repay indebtedness of the Beneficiary
which was incurred to permit Beneficiary to contribute its equity investment in
the Owner. In order to further secure repayment of the Owner Notes, the Owner
will mortgage and assign to the Owner Collateral Trustee its interests in this
Agreement and the Lease. To the extent additional funds are needed for
Development Costs in excess of those shown on the Project Budget (or are not
available under the terms hereof or under the terms of Section 3.4 of the Owner
Trust Indenture as a result of the failure to satisfy the conditions for
advances thereunder or because there are no funds remaining in the Construction
Account referred to in the Owner Trust Indenture), Agent shall solely be
responsible for the provision of all such additional funds. The purpose of this
Agreement is to amend and restate in full the Construction Agency Agreement
dated August 1, 1995, between Agent and the Owner and by execution and delivery
hereof said Agreement is hereby so amended and restated.
ARTICLE III
AGENCY
3.1 Appointment. Solely and for the limited purposes hereinafter set
forth, the Owner hereby designates Agent as its agent, and Agent hereby accepts
such appointment, to design and construct the Improvements, strictly in
accordance with the terms and conditions of this Agreement, the Financing
Documents and the other Transaction Documents, to advance funds for the same as
provided herein, both prior to and after the Closing Date, and otherwise to
perform or cause to be performed the work necessary or appropriate to complete
the Improvements. Agent shall have no authority to act for or on behalf of the
Owner except with respect to the construction and installation of the
Improvements and except with respect to making disbursements from the
Construction Account as provided for in Section 3.3 of the Owner Trust Indenture
and herein. Agent shall cause any agreement, contract, purchase order or other
writing entered into by Agent purporting to be binding upon the Owner to provide
that (i) the Owner's liability thereunder is nonrecourse, except as to the
Leased Property and (ii) Agent, individually, shall have primary liability
thereunder. The authority and, except as specifically provided herein, the
obligation of Agent hereunder shall terminate on the earliest to occur of (i)
final completion of the Improvements (including all Punch List Items) in
accordance with the terms and conditions of this Agreement and the Owner
Financing Documents or (ii) the termination of Agent's authority pursuant to
Section 12.2 hereof following occurrence of an Event of Default. The termination
of Agent's authority hereunder shall not discharge Agent or limit in any way
Agent's liability hereunder with respect to obligations arising out of this
Agreement and Agent's performance hereunder on or prior to the date of such
termination of Agent's authority, including, without limitation, with respect to
Agent's indemnification of the Indemnified Parties pursuant to Section 10.20.
3.2 Performance of and Payment for Costs of the Improvements. On August
1, 1995, the Owner acquired the Land pursuant to the P&S and used the Owner's
Acquisition Equity and the proceeds of a draw on the Construction Loan to pay
the purchase price thereof. Agent shall undertake to continue to construct the
Improvements in accordance with the provisions of this Agreement including,
without limitation, the provisions of Article X and,
2
<PAGE> 70
subject to the provisions hereof shall pay all amounts required to construct the
Improvements in accordance with the Plans and Specifications. Pursuant to
Article IV, Agent shall pay for Development Costs (other than for the portion of
the purchase price of the Land paid for from the Owner's Acquisition Equity)
using (a) the proceeds of the Owner Notes (including, without limitation, the
portion of such proceeds which were used on the Closing Date to pay the
outstanding balance of the Construction Loan due the Construction Lender), and
(b) Agent's own funds to the extent required to complete the Improvements in
accordance with the Plans and Specifications and the other Transaction
Documents. The Owner shall not be liable to Agent for failure or delay in any
aspect of the performance of the work necessary to construct the Improvements in
accordance with the Plans and Specifications. Each request by Agent to the Owner
or to the Owner Collateral Trustee for a disbursement of funds from the
Construction Account shall be deemed to be (i) a conclusive acknowledgement and
admission by Agent, individually, that such aspect of the Work, and all prior
aspects of the Work are fully and completely acceptable to Agent for all
purposes; and (ii) a representation and warranty by Agent that the Work covered
thereby and by all other prior requisitions has been done and completed in full
accordance with the Approved Construction Documents and the applicable
requirements of the Transaction Documents, provided, however, any such deemed
acknowledgement, admission, representation and warranty shall be made for the
sole and exclusive benefit of the Owner, the Owner Collateral Trustee, the
holders of the Owner Notes and the LC Issuer and no other third party shall have
any rights to rely upon such acknowledgement, admission, representation and
warranty.
3.3 Reports. No later than the 10th day of each January, April, July
and October, commencing with January 10, 1996, during the period prior to the
later of (i) the date upon which a Certificate of Occupancy is issued with
respect to the Improvements, or (ii) the Final Completion Date, Agent shall
provide a written report to the Owner, the Owner Collateral Trustee, the holders
of the Owner Notes and LC Issuer setting forth in detail (a) all expenditures
made or incurred on account of Development Costs for the Improvements during the
calendar quarter most recently ended at such time, (b) the total Development
Costs as of the last day of such calendar quarter, and (c) a construction status
report. Additionally, Agent shall provide to the Owner, the Owner Collateral
Trustee, the holders of the Owner Notes and LC Issuer such additional reports
and information as the Owner, the Owner Collateral Trustee, the holders of the
Owner Notes or LC Issuer may reasonably request from time to time relating to
the transactions contemplated hereby. Agent shall also certify to the Owner, the
Owner Collateral Trustee, the holders of the Owner Notes and LC Issuer the
aggregate total of all Development Costs incurred through the Final Completion
Date.
3.4 Recovery on Contractor Warranties. Subject to the rights of the
Owner Collateral Trustee, so long as no Event of Default has occurred and is
continuing, Agent shall, at its cost and expense, in the name and on behalf of
the Owner, negotiate, accept and prosecute any claim for damages, compensation
or other recoveries due from any contractors or subcontractors based on a breach
of contract or breach of warranty (whether express or implied) and shall apply
any proceeds received on account of such collection efforts to the construction,
repair or renovation of the Improvements. If an Event of Default has occurred
and is continuing, the Owner is hereby expressly and irrevocably authorized, but
not required, to exercise every right, option, power or authority inuring to
Agent it has against any contractor or subcontractor. Unless either the Lessee's
Parent is not then Investment Grade or an Event of Default has occurred and is
continuing, Agent shall be entitled to receive directly
3
<PAGE> 71
all such amounts paid or payable with respect to such claims, subject to the
rights of the Owner Collateral Trustee and less any costs and expenses incurred
by the Owner or the Owner Collateral Trustee in connection with exercise of
their powers to enforce Agent's rights against contractors and subcontractors,
and Agent shall apply such amounts to the construction, repair and renovation of
the Improvements. If the conditions set forth in the preceding sentence relating
to Agent's receipt of amounts paid or payable from contractors or subcontractors
have not been satisfied or waived by the Owner in writing, the Owner shall be
entitled to receive such amounts and the Owner may apply such proceeds to the
construction, repair of the Improvements or apply such amounts to pay Agent's
obligations hereunder or under the Lease.
3.5 Fee. Upon Full Completion of the Improvements and provided that (a)
the Basic Lease Term Commencement Date has occurred, (b) no Default or Event of
Default exists at such time and (c) the conditions for a final advance in
Section 7.3 have been satisfied, Agent shall be entitled to receive, as
compensation for its services rendered hereunder, the balance of the funds held
in the Construction Account after all Development Costs have been paid in full.
Agent and the Owner agree that any such amount due to Agent shall be deposited
by the Owner Collateral Trustee in the Note Payment Account to be credited
against future Base Rental obligations of Agent (in its capacity as "Lessee"
under the Lease).
ARTICLE IV
OWNER'S ADVANCES AND REIMBURSEMENTS
4.1 Owner's Obligations. Subject to the terms and conditions of this
Agreement and the Owner Financing Documents, including satisfaction of the
applicable conditions set forth in Article VII hereof, the Owner agrees to make
available to Agent for payment of Development Costs incurred in connection with
the Improvements the proceeds of the Owner Notes (including, without limitation,
the portion of such proceeds which were used on the Closing Date to pay the
outstanding balance of the Construction Loan due the Construction Lender) in a
manner consistent with the terms of this Agreement. The Owner shall make such
payments solely from funds held by the Owner Collateral Trustee in the
Construction Account. To the extent the funds held in the Construction Account
are insufficient or are delayed or otherwise not available to pay the
Development Costs, Agent agrees to pay any and all additional Development Costs
from its own funds as necessary to complete the Improvements in accordance with
the Plans and Specifications in accordance with the Project Schedule (a copy
which is attached hereto as Exhibit B provided, however, that if Agent pays
additional Development Costs from its own funds, it shall be entitled to receive
reimbursement from a disbursement made from the Construction Account if and to
the extent the terms and conditions to the making of a disbursement for such
purpose (as defined in Section 3.3 of the Owner Trust Indenture) have been met
under the Owner Trust Indenture. Nothing contained in this Agreement shall in
any way obligate the Owner to pay any debt or meet any financial obligation
under this Agreement or otherwise with respect to the Development Costs, except
from monies actually received by the Owner from the sources specified in Section
3.2.
4.2 Advances of the Owner's Funds. Subject to the terms and conditions
of the Owner Trust Indenture and of this Agreement and so long as no Default has
occurred and is continuing and no Event of Default has occurred and is
continuing, the Owner shall permit disbursement from the Construction Account to
be made in accordance with the provisions of
4
<PAGE> 72
this Agreement on account of Development Costs (each such disbursement referred
to herein as an "Advance" or as "Advances"). Advances shall be made upon Agent's
written request in the form of Exhibit B to the Owner Trust Indenture (each a
"Disbursement Request") for an Advance given from time to time (but not more
often than once per month) to the Owner Collateral Trustee in accordance with
the provisions of the Owner Trust Indenture, subject to the satisfaction of all
conditions set forth in Article VII hereof. Each request for an Advance on
account of Development Costs shall be in the form required under the Owner Trust
Indenture. Agent shall submit all requests for any Advance and related materials
directly to the Owner Collateral Trustee, with a simultaneous copy to the Owner,
and Agent's requests for Advances hereunder shall serve as the written requests
for advances contemplated by the Owner Trust Indenture. As long as no Default
has occurred and is continuing and no Event of Default has occurred and is
continuing, the Owner shall have no right or authority to submit any request for
an Advance unless such Advance is necessary, in the Owner's sole judgment, to
provide funds to preserve and protect the Leased Property or is required to
provide funds in response to an emergency affecting the Leased Property.
Any other provision hereof to the contrary notwithstanding, no amounts
shall be disbursed pursuant to this Agreement or the Owner Trust Indenture for
costs which Agent, in its capacity as Lessee, is obligated to pay directly under
the Lease other than payments of Interim Rental which may be paid with funds
disbursed from the Construction Account as permitted by Section 5.1(a)(i) of the
Lease, Section 3.5 hereof, and Section 3.4(c) of the Owner Trust Indenture.
ARTICLE V
LEASE AGREEMENT
The Owner has leased the Land to Agent pursuant to the Lease. The Lease
is a net lease, and Agent shall be responsible in its individual capacity as
Lessee under the Lease as and to the extent set forth therein, for all expenses
associated with the use and occupancy of the Leased Property.
ARTICLE VI
CLOSING
Subject to compliance with the provisions of this Agreement, the Closing of the
Transactions contemplated by the Financing Documents shall take place on the
Closing Date at the offices of Hebb & Gitlin, One State Street, Hartford,
Connecticut 06103. On the Closing Date, Agent shall pay BFC and BFS all of their
respective fees and expenses which Agent has agreed to pay at such Closing. The
Closing contemplated above is expressly conditioned upon the concurrent or prior
closing of all of the Transactions which by the terms of the Transaction
Documents are to close concurrently with or prior to the Closing.
ARTICLE VII
CONDITIONS OF OWNER'S OBLIGATIONS
7.1 Initial Advance. Agent shall not be entitled to receive Advances
from the Construction Account unless all of the following conditions have been
met.
5
<PAGE> 73
(a) Purchase of Notes. All conditions precedent to the purchase
of the Owner Notes and the Beneficiary Notes have been satisfied
pursuant to the Owner Note Purchase Agreement and the Beneficiary Note
Purchase Agreement, respectively.
(b) Representations and Warranties. The representations and
warranties contained in Section 8 hereof shall be true, accurate and
complete on the Closing Date.
(c) No Defaults. No Default of Agent shall have occurred and be
continuing and no Event of Default shall have occurred.
(d) No Adverse Change. No material adverse change in Agent's
financial condition shall have occurred since April 30, 1995, or since
the last Advance, that could in the Owner's sole judgment, impair the
ability of Agent to fulfill its payment and performance obligations
under this Agreement, the Lease, the Financing Documents and any other
Transaction Documents to which Agent is a party.
(e) Title Insurance. Prior to the requested disbursement date
for the initial Advance from the Construction Account, the Owner and
the Owner Collateral Trustee shall have received a specimen ALTA
mortgage title insurance policy from the Title Company in the aggregate
principal amount of the Owner Notes with a pending disbursement
endorsement, zoning endorsement and such other endorsements as the
Owner and the Owner Collateral Trustee reasonably request; provided
that a final policy shall be issued within five (5) days following the
Closing Date. Appropriate provisions satisfactory to the Owner and the
Owner Collateral Trustee for reinsurance with direct access agreements
shall also be obtained with title insurance companies satisfactory to
the Owner and the Owner Collateral Trustee. Agent also shall have
delivered to the Title Company such papers, instructions, affidavits
and other documents as may be reasonably necessary in connection with
the issuance of such title insurance and any endorsements thereto from
time to time.
(f) Taxes. All taxes, fees and other charges in connection with
the execution, delivery, recording, filing and registration of this
Agreement, the Lease, the Financing Documents, the LC Documents and all
the other documents and agreements contemplated hereby and thereby
shall have been paid. The Owner and the Owner Collateral Trustee shall
have received from Agent evidence (shown on the survey and the title
insurance commitment) that the Land is either separately assessed or
separately assessable for real estate tax purposes and legally
subdivided under local law. If the Land is not separately assessed,
Agent agrees to pay real estate taxes and assessments when due with
respect to the entire tax parcel.
(g) Survey. The Owner and the Owner Collateral Trustee shall
have received a copy of a survey of the Land, satisfactory in form and
substance to the Owner and the Owner Collateral Trustee and certified
to the Owner and the Owner Collateral Trustee no earlier than six (6)
months prior to the Closing Date, by an independent survey licensed in
the State of New Jersey.
(h) Opinions of Counsel. The Owner and the Owner Collateral
Trustee shall have received from Bingham, Dana & Gould, special counsel
to the Owner, from local
6
<PAGE> 74
counsel selected by the Owner, from Crummy, Del Deo, Dolan, Griffinger
& Vechione, counsel to Agent, or in each case, other counsel reasonably
satisfactory to the Owner, opinions substantially in the form approved
by the Owner and the Owner Collateral Trustee prior to the Closing
Date. Each such opinion shall be dated the Closing Date and addressed
to the Owner, Beneficiary, the Financing Parties (and their respective
special counsel) and LC Issuer.
(i) Legal Restrictions. The Owner shall not be prohibited or
restricted by law from engaging in the transactions contemplated hereby
or in the Transaction Documents on the Closing Date. The transactions
contemplated hereby or under the Lease on the terms and conditions
herein or therein shall not violate any applicable law or governmental
regulation and shall not subject the Owner, the Beneficiary, Kramer, LC
Issuer or any one or more of the Financing Parties to any tax, penalty,
liability or other onerous condition under or pursuant to any
applicable law or governmental regulation.
(j) Environmental Report. No later than ten (10) days prior to
the Closing Date, the Owner and the Financing Parties shall have
received a copy of the environmental assessment of the Land, addressed
to the Owner, the Financing Parties, the Beneficiary and LC Issuer or
accompanied by a letter permitting such parties to rely thereon
performed by an engineer satisfactory to the Owner. The scope of such
environmental assessment shall be satisfactory to the Owner and the
Financing Parties and shall meet all the terms and conditions required
under the Owner Financing Documents and Section 20(e) of the Lease. If
such environmental assessment reveals the need for additional review or
remediation, Agent shall provide such additional environmental
assessments as are required by the Owner and any remediation
recommended therein to be performed shall have been performed.
(k) Evidence of Insurance. The Owner shall have received a
certificate relating to the insurance required herein and under the
Lease, together with all original or certified copies of policies of
insurance evidencing such compliance or if such original or certified
copies of policies of insurance are not issued as of the Closing Date,
then such original or certified copies of policies of insurance shall
be delivered to the Owner promptly after receipt thereof by Lessee.
(l) Proceedings and Documents. All opinions, certificates and
other instruments required hereunder, the Lease, the Financing
Documents or any related document or agreement, and all proceedings in
connection with the transactions contemplated hereby or thereby with
respect to the Closing Date shall be satisfactory in form and substance
to the Owner. The Owner shall have received copies of all instruments
and other evidence as the Owner may reasonably request, in form and
substance satisfactory to the Owner, with respect to such transactions
and the taking of all corporate proceedings in connection therewith.
(m) Approved Construction Contracts. The construction of the
Improvements shall be undertaken in accordance with the following
documents:
(i) Guaranteed Maximum Price Construction Contract
with Turner Construction Company as general contractor, dated
July 31, 1995;
7
<PAGE> 75
(ii) Agreement for Architectural and Engineering
Services with Perkins & Will Architects, P.C., dated December
15, 1993 ("Architect's Contract");
(iii) Agreements relating to other design and
engineering services which are more particularly listed in
Exhibit C hereto;
(iv) The plans, specifications and working drawings
prepared by the Architect which are more particularly listed in
Exhibit C hereto; and
(v) The other contracts and documents described in
Exhibit C hereto.
The foregoing documents, as they may be hereafter amended or
supplemented in accordance with the Transaction Documents from time to
time, are referred to herein as the "Approved Construction Documents".
The Approved Construction Contracts, and Agent's interest in such
Construction Contracts shall be in full force and effect and each party
thereto shall be in full compliance with its respective obligations
thereunder.
(n) Disbursement Request. Agent shall have delivered to the
Owner and the Owner Collateral Trustee a Disbursement Request not less
than one (1) Business Day prior to the requested disbursement date. In
connection with each Disbursement Request submitted hereunder or under
Section 7.2, Agent shall represent to the Owner and the Owner
Collateral Trustee that it has received from the General Contractor and
each other contractor, supplier, materialman or other Person that has
supplied labor, materials or services for procurement, design or
construction of the Improvements or that otherwise might be entitled to
claim a contractual or statutory lien against the Leased Property or
any part thereof, partial waivers of liens for any work completed for
which such Person has received payment.
(o) Project Budget and Construction Schedule. The Owner and the
Owner Collateral Trustee shall have received a copy of the Project
Budget and Construction Schedule.
(p) Architect Approval. The Architect shall have executed the
Architect Certificate Accompanying Advance Request, the form of which
is attached as Exhibit D hereto (the "Architect's Certificate"),
certifying as to the status of the Project.
7.2 Subsequent Advances. Agent's right to receive subsequent Advances
from the Construction Account shall also be subject to the satisfaction of the
following conditions:
(a) Transaction Documents and Construction Documents. All
Transaction Documents and Construction Contracts shall be in full force
and effect and no Default or Event of Default shall exist with respect
thereto and the Disbursement Request will certain such matters. All
conditions required to have been satisfied under section 7.1 of this
Agreement prior to the first Advance hereunder shall, whether or not
fulfillment of such conditions shall have previously been waived, be
satisfied on and as of the date of such subsequent Advance; and the
Owner and the Owner Collateral Trustee shall have received such
certificates, legal opinions and other evidence of such continued
satisfaction as such Persons may reasonably deem necessary or
appropriate.
8
<PAGE> 76
(b) Disbursement Request. At least ten (10) Business Days prior
to the requested date of disbursement, the Owner and the Owner
Collateral Trustee shall have received a Disbursement Request executed
by Agent, accompanied by an Architect's Certificate with respect to
such Advance or Advances and all representations and certifications
contained therein shall be true and correct and, as of the date two (2)
Business Days prior to the date of disbursement requested therein the
Owner Collateral Trustee shall not have received any objection from the
Owner with respect thereto.
(c) Lien Waivers. Agent shall have received contractor's and
subcontractor's sworn statements and waivers of liens, subject to
Agent's right to contest mechanics' lien claims as provided in Section
8(b) of the Lease, all in compliance with the mechanics' lien laws of
the State of New Jersey and the Disbursement Request will certify to
such matters.
(d) Material Adverse Change. There shall have been no material
adverse change in the financial condition of Agent or Agent's Parent.
7.3 Final Advance. Prior to or simultaneously with the final Advance,
in addition to the conditions set forth in Section 7.1 and Section 7.2 hereof,
the Agent shall have complied with all of the requirements of Section 10.25.
ARTICLE VIII
REPRESENTATIONS, WARRANTIES AND CERTAIN COVENANTS OF AGENT
Agent warrants and represents to the Owner for the express purpose of
inducing the Owner to enter this Agreement that as of the Closing Date and upon
the date of each Advance and thereafter until the Final Completion Date, except
as to those representations and warranties which by their nature are not
recurring, as follows:
8.1 Organization and Power. Agent (a) is a corporation duly organized,
validly existing and in good standing under the laws of the State of New York
and is duly qualified as a foreign corporation and in good standing in the State
of New Jersey and in all other jurisdictions in which failure to be so qualified
would have a material adverse effect on Agent's ability to perform its customary
business operations and Agent agrees to maintain its corporate existence and all
such qualifications; and (b) executed the Owner Financing Documents, this
Agreement, the Lease and all other Transaction Documents to be entered into by
Agent pursuant to adequate corporate power, authority and legal right to carry
on its business as now conducted and to execute, deliver and perform this
Agreement, the Lease, the Owner Financing Documents and all other Transaction
Documents to which it is a party.
8.2 Full Disclosure. No written statement delivered to the Owner by
Agent in connection with the negotiation of the transactions contemplated hereby
or contained in this Agreement, the Owner Financing Documents and all other
Transaction Documents to which it is a party contains any untrue statement of a
material fact or omits a material fact necessary to make the statements
contained therein or herein not misleading in any material respect.
8.3 Litigation. There is no action, suit or proceeding pending, or to
the best of Agent's knowledge threatened, against or affecting Agent at law or
in equity before any court, or
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by or before any federal, state, municipal or other governmental department,
commission, board, bureau, agency, or instrumentality or arbitrator which if
adversely determined (i) individually or in the aggregate could materially and
adversely affect the performance by Agent of its obligations under this
Agreement, the Lease and all other agreements and documents contemplated
thereunder to which it is a party or the business and operations of Agent, taken
as a whole or (ii) could affect in any materially adverse respect the
consummation or validity of the this Agreement, the Owner Financing Documents
and all other Transaction Documents to which it is a party, or the transactions
contemplated thereby.
8.4 Financial Information. All of the consolidated financial statements
of Lessee's Parent delivered to the Owner, (a) fairly present in all material
respects the financial condition of Lessee's Parent on a consolidated basis on
the dates for which, and the results of its operations for the periods for
which, the same have been furnished, and (b) have been prepared in accordance
with generally accepted accounting principles consistently followed throughout
the periods covered thereby except as otherwise noted thereon. There has been no
material adverse change in the condition of Agent, financial or otherwise, since
April 30, 1995.
8.5 No Defaults. No Default has occurred and is continuing and no Event
of Default has occurred under this Agreement, the Owner Financing Documents and
all other agreements and documents contemplated thereunder to which it is a
party. Agent is not in default in the payment of the principal or interest on
any indebtedness for borrowed money or for its deferred purchase of property, in
either event in an amount in excess of $2 million, or in default beyond any
applicable notice and grace period under any instrument or agreement under and
subject to which any such indebtedness has been issued or under any lease, in
any case involving the likelihood of any actions or proceedings against it which
will materially and adversely affect Agent's ability to perform under this
Agreement, the Lease and all other Transaction Documents to which it is a party.
8.6 No Violation. Neither the execution, delivery or performance by
Agent of this Agreement, the Lease and all other Transaction Documents to which
it is a party to be delivered by Agent nor compliance by Agent herewith or
therewith (a) conflicts or will conflict with or results or will result in a
breach of or constitutes or will constitute a default under (i) any applicable
law in effect as of the date of delivery of this Agreement or (ii) any
applicable order, writ, injunction or decree of any court or other governmental
authority, or (b) results or will result in the creation or imposition of any
lien, charge or encumbrance upon its property pursuant to such agreement or
instrument other than those created pursuant to this Agreement, the Lease and
the other Transaction Documents to which it is a party. Neither the execution,
delivery or performance by Agent of this Agreement, the Financing Documents and
all other Transaction Documents to which it is a party nor compliance by Agent
herewith or therewith conflicts or will conflict with or results or will result
in a breach of or constitutes or will constitute a default under (i) the
certificate of incorporation or bylaws of Agent or (ii) any agreement or
instrument to which Agent is a party or by which it is bound.
8.7 Agreements Are Legal and Authorized. This Agreement, the Lease, the
Financing Documents and all other Transaction Documents to which it is a party
have been duly authorized by Agent by all necessary corporate action (including
any necessary action by its shareholders) and duly executed and delivered by it,
and, assuming the due authorization,
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execution and delivery thereof by the other parties thereto, are legal, valid
and binding obligations of Agent enforceable against it in accordance with their
respective terms.
8.8 Insurance. All insurance required by the Lease and the Owner
Collateral Indenture is in effect and all premiums now due and payable in
respect of such insurance have been paid for a period of no less than 12 months
from the Closing Date.
8.9 Consents. No consent, license, approval, certificate, permit or
authorization of, or filing, registration or declaration with, or exemption or
other action by, any governmental or public body, authority, bureau or agency
(including courts) under the laws of the United States of America, the State of
New York or the State of New Jersey is required in connection with (i) the
execution and delivery or performance by Agent of this Agreement, the Financing
Documents and all other Transaction Documents to which it is a party, (ii) the
performance of the Work in accordance with this Agreement, and (iii) the
construction, use and occupancy of the Improvements which has not been obtained
with all rights of appeal having elapsed except for such as, by their nature,
cannot be obtained until a future date and which will be obtained in the
ordinary course on a timely basis.
8.10 Compliance; Taxes. Agent will use and occupy the Leased Property
for the purposes contemplated by the Lease. There has been no change since
January 12, 1995 to the soils condition or any other condition of the Land which
would materially and adversely affect the intended construction and operation of
the Improvements in accordance with the Plans and Specifications, nor are any
condemnation or eminent domain proceedings pending, or to Agent's knowledge,
threatened with respect thereto. Agent is not in default in the payment of any
taxes levied or assessed against the Land or otherwise related to the
transactions contemplated hereunder or under the Financing Documents and all
other Transaction Documents. Agent has filed and will file all federal, state
and local tax returns when and as the same were due, and has paid and will pay
the taxes shown as payable thereon, subject to such taxes that Agent may, in
good faith, be protesting.
8.11 Use of Owner Advances. Agent shall use all Advances provided to it
pursuant to this Agreement solely for the Development Costs, as agent of the
Owner, in accordance with the terms and conditions of this Agreement or to
reimburse Agent for any Development Costs previously paid for by Agent from its
own funds, provided that such reimbursement is approved by the Owner.
8.12 Use. The Permitted Liens do not interfere with Agent's intended
use of the Land.
8.13 ERISA. No accumulated funding deficiency (as defined in section
302 of ERISA and section 412 of the Code), whether or not waived, exists with
respect to any Plan (other than a Multiemployer Plan). No liability under Title
IV of ERISA has been or is expected by Agent or any ERISA Affiliate to be
incurred with respect to any Plan (other than a Multiemployer Plan) by Agent or
any ERISA Affiliate which is or would be materially adverse to the business,
condition (financial or otherwise) or operations of Agent. Neither Agent nor any
ERISA Affiliate has incurred or presently expects to incur any withdrawal
liability under Title IV of ERISA with respect to any Multiemployer Plan which
is or would be materially adverse to the business, condition (financial or
otherwise) or operations of Agent. Agent is not entering
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into this Agreement, the Lease and all other Transaction Documents to which it
is a party or transactions contemplated hereby or thereby, directly or
indirectly, in connection with any arrangement in any way involving any asset of
any employee benefit plan or related trust with respect to which it is a
party-in-interest, all within the meaning of ERISA and the Code.
8.14 Location of Office and Equipment. Agent's corporate headquarters
is located at 727 Fifth Avenue, New York, New York 10022 and Agent's office and
principal place of business in the State of New Jersey is located at 5 Sylvan
Way, Parsippany, New Jersey, 07054. Any portion of the Improvements constituting
fixtures, furniture, equipment or personal property will be kept in the State of
New Jersey. Agent will notify the Owner promptly of any change in any of the
information set forth in this Section 8.14.
8.15 Brokers. Other than Cushman & Wakefield of New Jersey, Inc., Agent
has not retained any broker, finder or financial advisor in connection with the
transactions contemplated hereunder or under the Lease or the Owner Financing
Documents. The only commission payable to Cushman & Wakefield of New Jersey,
Inc. is set forth on the Project Budget and has been paid.
8.16 No Archaeological Encumbrances. The Land does not include any
cemetery, Indian burial ground or village, or any other matter of archaeological
significance that would require the notification or consent of any state, local
or federal agency or any third party (including, without limitation, any agency
of the State of New Jersey) in connection with any excavation or construction
thereon.
8.17 Representations of Agent, as Lessee. All of the representations
and warranties of Agent, as Lessee under the Lease, are true and correct.
ARTICLE IX
FINANCING
9.1 Financing. The Owner will enter into the Owner Financing Documents
in order to obtain financing for the construction of the Improvements. Agent
acknowledges that the Owner will assign its rights hereunder to the Owner
Collateral Trustee pursuant to the Owner Financing Documents and agrees that it
shall perform hereunder for the benefit of the Owner Collateral Trustee in
accordance with the Owner Financing Documents. Agent shall also, in connection
with the Closing and in connection with the performance of the Work and Advances
to, or for the benefit of, the Owner pursuant to the Owner Financing Documents,
deliver such documents, certificates and opinions as the Owner Collateral
Trustee shall request.
ARTICLE X
PERFORMANCE OF THE WORK
As agent of the Owner, using Advances from the Construction Account and
other funds as set forth in Section 3.2 hereof, Agent shall construct and
install the Improvements on the Land in accordance with the following:
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10.1 Scope of Work. Agent shall construct and install the Improvements
and otherwise perform the Work substantially in accordance with the Approved
Construction Documents, as the same may be modified from time to time upon
written approval of the Owner and the Owner Collateral Trustee. With respect to
such construction, Agent shall furnish the materials and perform the work
described in the Plans and Specifications.
10.2 Agency Status. As described in Section 3.2 hereof, Agent shall use
Advances available from the Construction Account and, subject to the terms and
conditions of this Agreement, its own funds, to perform or cause to be performed
the Work as agent for the Owner. Prior to or concurrently with the incurrence of
any obligation to any contractor or vendor, Agent shall give written notice to
each such contractor and vendor that all payments made by Agent to each such
contractor and vendor with respect to the Work are or will be made on behalf of
the Owner.
10.3 Performance of Work. Agent shall be solely responsible for all
means, methods and techniques in the performance of the Work and shall perform
the Work or cause the Work to be performed in accordance with the provisions of
this Article X. Agent shall promptly remedy damage or loss to any property
referred to herein howsoever caused and shall use its commercially reasonable
best efforts to cause any contractor, any subcontractor, any vendor, or anyone
directly or indirectly employed by any of them, or by anyone for whose acts any
of them is liable, to remedy any damage or loss to any property referred to
herein caused by any of them. Agent shall be exclusively responsible for the
performance of all of the Owner's construction obligations under the Approved
Construction Documents.
10.4 Permits. Agent shall obtain and pay for any and all permits and
bonds required to be obtained before commencement of the Work (except for the
Listed Permits, which must be obtained and paid for before the absence of any
such Listed Permits would materially delay the commencement, continuance or
completion of the development or construction of the Improvements) and for all
other permits, governmental fees, sales taxes and use taxes, licenses and
inspections necessary for the proper execution and completion of the Work as and
when the same are required to be obtained.
10.5 Indemnification for Acts of Workers. Pursuant to Section 10.20
hereof, Agent shall be responsible to the Indemnified Parties for, defend, and
shall hold the Indemnified Parties harmless from and against, the acts and
omissions of its employees, contractors and subcontractors, their respective
agents and employees and any other persons performing any of the Work.
10.6 Compliance with Laws. Agent shall perform the work or cause the
work to be performed in accordance in all material respects with all Legal
Requirements which have been enacted as of the date of this Agreement and which
are or will become applicable to the Work including, without limitation, all
building laws, health codes, safety rules, handicapped access, zoning and
subdivision laws and regulations, and applicable state and federal Environmental
Legal Requirements and shall give all notices applicable thereto, and when
completed, all buildings, structures, site improvements and the like that are
part of the Leased Property shall be wholly within applicable building
restriction lines and will not violate applicable use or other restrictions,
whether established in prior conveyances, zoning laws, governmental regulations
or otherwise.
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10.7 Waste Removal. During and upon the completion of the Work, Agent
shall remove or cause to be removed all of its waste materials and rubbish from
and about the Land. All such removal shall at all times be conducted and carried
out in full compliance with applicable Environmental Legal Requirements.
10.8 [Intentionally Omitted].
10.9 Labor. Agent and its contractors may employ open shop or union
labor for performance of the Work. If Agent or any contractor uses union labor,
Agent shall comply, or cause such contractor to comply with all union contract
requirements, including, without limitation, shop stewards, if required.
10.10 Books and Records. Agent shall at all times during the
performance of the Work keep and maintain accurate books, records and accounts
showing all materials ordered and received and all disbursements and accounts
payable in connection with performance of the Work.
10.11 Hazardous Materials.
(a) If, in the course of the Work, Agent discovers Hazardous
Materials or underground storage tanks that are not included in the
Work pursuant to the Final Plans and Specifications, and which are not
maintained in accordance with all applicable Environmental Legal
Requirements, Agent shall stop and cause the General Contractor to stop
the Work and shall notify the Owner and the Owner Collateral Trustee
promptly. Agent shall not remove such Hazardous Materials without the
Owner's written approval. All Hazardous Materials that may be
discovered shall be maintained, removed, transported and disposed of by
qualified contractors in accordance with all applicable state and
federal Environmental Legal Requirements and in accordance with the
applicable provisions of the Lease.
(b) Agent shall not permit any violation of any Environmental Legal
Requirements to exist with respect to the Leased Property. Agent shall
not use all or any portion of the Leased Property for the storage,
treatment, use or disposal of any substance for which a license or
permit is required by state, federal or local Environmental Legal
Requirements and for which no such license or permit has been obtained.
Without limitation express or implied, unless caused by the gross
negligence or willful misconduct of the Owner or of any employee or
agent of the Owner (other than Agent), Agent shall pay all sums and
take all such actions as may be required to avoid or discharge the
imposition of any lien on the Leased Property under any Environmental
Legal Requirement, and Agent shall indemnify and save harmless the
Owner from any and all loss, claims, liabilities and expenses
(including attorney's and expert fees) incurred or suffered by the
Owner by virtue of the provisions of any Environmental Legal
Requirement now or hereinafter in effect or by virtue of the failure of
Agent to comply with any Environmental Legal Requirement in connection
with the presence of any Hazardous Materials on the Leased Property in
violation of such Environmental Legal Requirements.
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10.12 Underground Utilities. The existence of underground utilities
shall be so identified in the field by Agent or its contractor before starting
work or as they are discovered during the performance of the Work. Pursuant to
Section 10.20, Agent shall hold the Indemnified Parties harmless from and
against damage to any utilities and damage resulting therefrom.
10.13 Verification of Boundaries. All dimensions of the Improvements
and boundary lines shown in the survey of the Land and set forth in the deed to
the Owner are to be field checked and verified and any material error or
inconsistencies are to be communicated to the Owner before commencing the Work.
Agent shall be responsible for and shall hold the Owner harmless from and
against any costs or damages arising from its failure to do so.
10.14 Inspection Rights. Agent shall allow the Owner, the Owner
Collateral Trustee and LC Issuer and their various representatives to enter the
Leased Property upon prior written notice and during normal business hours,
which notice shall not be required in the event of an emergency, for the purpose
of inspecting the progress of the Work and examining all books, accounts, plans,
drawings and records with respect thereto.
10.15 Completion Date. (a) Agent shall cause the Improvements and all
portions of the Work associated therewith to be Substantially Complete by
January 31, 1997, provided, however, if an act or event of Force Majeure occurs
which prevents Lessee from completing the Improvements by January 31, 1997,
Lessee shall be entitled to an extension beyond January 31, 1997 in which to
complete the Improvements, such extension not to extend beyond the earlier to
occur of July 31, 1997 or the number of days which the act or event of Force
Majeure delayed completion of the Improvements (" Substantial Completion Date").
(b) All Punch List Items shall be completed and a final certificate of
occupancy (if required by applicable law) obtained with respect to the
Improvements (the completion of such Punch List Items and the issuance of
a final certificate of occupancy, if required, is referred to as "Final
Completion"), within 45 days after the Substantial Completion Date ("Final
Completion Date"), provided, however, that if such Punch List Items cannot
reasonably be completed within said 45-day period, the Owner, in its
discretion, may grant an extension of such period to permit the completion
of such Punch List Items. No change in the work shall be deemed to extend
the Substantial Completion Date or the Final Completion Date, nor shall
the implementation of any change order constitute evidence of any party's
consent to such extension, unless the Owner and Agent have expressly
agreed that the Substantial Completion Date or Final Completion Date is so
extended.
10.16 Change Orders. Agent may not order changes in the Work which are
Significant without the prior approval of the Owner and the Owner Collateral
Trustee. The Owner, the Owner Collateral Trustee and Agent shall be provided
with a written description of all changes to the Work not less frequently than
monthly. The term "Significant" shall mean: any such change or changes which
individually increases the contract sum by more than Two Hundred Thousand
Dollars ($200,000) in any instance or One Million Dollars ($1,000,000) in the
aggregate.
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10.17 Owner's Representative. The Owner's consents, approvals or
instructions may be given only by an authorized representative ("Authorized
Representative") of the Owner designated in writing to Agent by the Owner
pursuant to the terms hereof. So long as the Owner Notes are outstanding, the
Authorized Representative shall be the Owner Collateral Trustee.
10.18 [Intentionally Omitted].
10.19 Independent Contractor Status. Agent recognizes that despite its
designation as the Owner's agent hereunder, it is engaged as an independent
contractor hereunder and acknowledges that the Owner shall not have any
responsibility to provide any benefits normally associated with employee status.
Agent, in accordance with its status as an independent contractor, covenants and
agrees that it will conduct itself in a manner consistent with such status, that
it will neither hold itself out as, nor claim to be an officer, director,
partner, beneficial owner or employee of the Owner by reason hereof, and that it
shall not by reason hereof make any claim, demand or application to or for any
right or privilege applicable to an officer, director, partner, beneficial owner
or employee of the Owner.
10.20 Indemnification. As between the Owner and Agent and between any
other Indemnified Party and Agent, Agent, individually, hereby assumes all
liability for its services, the acquisition and ownership of the Land by the
Owner, the design, construction and operation of the Leased Property and any
other Work to be performed hereunder including payment of all fees for permits,
studies and variances, whether performed by Agent, by any vendor or any other
entity performing the Work directly or indirectly for or under Agent or any
vendor and shall defend (with counsel reasonably approved by the Owner) and hold
harmless the Indemnified Parties from any and all out-of-pocket losses, damages,
costs, expenses, liabilities, fines, penalties, suits and causes of action but,
including, without limitation, all reasonable attorneys' fees, court costs and
any other costs of litigation (the foregoing are referred to as "Losses")
related to (i) this Agreement and any other Transaction Documents, (ii) any of
the Transactions, (iii) patent or latent defects in the Leased Property or any
portion thereof, (iv) the Approved Construction Documents and any other
agreements with contractors, subcontractors, architects or other providers of
materials or services, (v) any activity undertaken on the Leased Property by any
Person (vi) any of Agent's other actions or omissions, whether for itself or as
agent on behalf of the Owner hereunder, or (vii) ownership of the Leased
Property by the Owner, except that, with respect to any Indemnified Party, the
foregoing indemnities shall not apply to the following:
(i) losses, damages, injuries, costs or expenses solely and
directly caused by the gross negligence or willful misconduct
of such Indemnified Party;
(ii) the inaccuracy in any material respect of any representation
and warranty made by such Indemnified Party in any of the
Transaction Documents;
(iii) the creation or existence of an Owner Lien attributable to such
Indemnified Party;
(iv) if such Indemnified Party is the Owner, a Financing Party or
the Beneficiary, the voluntary disposition of the Leased
Property or the Lease, other than in
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connection with (A) a disposition permitted after the
occurrence of an Event of Default, (B) an Owner Conveyance, (C)
the voluntary assignment by the Beneficiary of its ownership
interest under the Owner Trust Indenture, or (D) a subsequent
transfer by the Owner Collateral Trustee or any nominee,
designee or affiliate thereof if such entity purchases or
acquires the Leased Property by foreclosure, deed in lieu of
foreclosure or otherwise; and
(v) acts or events that occur after the Indemnification Period.
Under no circumstances shall the Owner or any Indemnified Party be liable for
any actions taken or not taken by the Owner with Agent's written consent. Any
negligence on the part of Agent, its directors, officers, agents or employees
shall not be attributed to any Indemnified Party. In any and all claims against
any Indemnified Party by any employee of Agent, any contractor, any
subcontractor, any vendor, anyone directly or indirectly employed by any of them
or anyone for whose acts any of them may be liable, the indemnification
obligation under this Section shall not be limited in any way by any limitation
on the amount or type of damages, compensation or benefits payable by or for
Agent or any subcontractor under workers' compensation acts, disability benefit
acts or other employee benefit acts. The indemnification obligation under this
Section shall be in addition to and not in abrogation of that contained in
Section 10.11(b) hereof covering certain environmental matters or the
indemnification obligations set forth in the Lease.
Agent shall promptly remedy damage or loss to the Leased Property caused
in whole or in part by Agent, any contractor, subcontractor or any Person
directly or indirectly employed by any of them, or by any Person for whose acts
any of them is liable and/or which Agent is responsible hereunder.
10.21 Removal of Liens. If any notices of contract, statements of claim
with respect to unpaid costs for the performance of the Work or mechanics' or
materialmen's liens (collectively, "Mechanics' Liens") are filed against the
Leased Property, or any portion thereof, by any vendor or agent of Agent or any
employee, contractor or subcontractor with respect to the Work, Agent agrees to
cause such Mechanic's Lien to be removed or bonded against at its sole cost and
expense as and to the extent provided in the Owner Financing Documents and
Agent's failure to do so shall constitute an Event of Default under this
Agreement.
10.22 Correction of Work. Agent warrants to the Owner that all materials
shall be new and of good quality and all Work shall be of good and workmanlike
quality, free from faults and defects and in conformance with the requirements
of the Plans and Specifications and as set forth in this Agreement. Agent shall,
at its sole cost and expense, promptly correct all of the Work not in
conformance with the Plans and Specifications and this Agreement and requested
by the Owner whether observed before or after the Basic Term Commencement Date,
provided the Owner serves written notice of the existence of such nonconformance
within three hundred sixty-five (365) days year after the Basic Term
Commencement Date. This obligation shall survive termination of this Agreement
for the three hundred sixty-five (365) day period described above. Agent shall
remove, in a manner which at all times complies with all applicable
Environmental Legal Requirements, from the Leased Property all portions of the
Work which are defective or nonconforming and which have not been corrected
under this Section unless removal is waived by the Owner in writing. Nothing
contained in this Section
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shall be construed to establish a period of limitation with respect to any other
obligation of Agent under this Agreement.
10.23 Notice of Delay. Agent shall give the Owner Collateral Trustee
prompt written notice of interruption of the performance of the Work due to
Force Majeure or otherwise that may interfere with its ability to complete the
Improvements in accordance with the Project Schedule.
10.24 Insurance; Condemnation and Casualty. Agent shall obtain or cause
its contractors to obtain policies of liability insurance, builders' risk
insurance and all-risk insurance with respect to the Work and workers'
compensation insurance (the foregoing collectively, the "Insurance") to be
issued in respect of the Work in amounts required by the Owner Financing
Documents and the Lease or as prescribed by the Owner from time to time. Agent
shall cause to be maintained throughout the prosecution of the Work, through its
contractors or otherwise, insurance affording substantially the same benefits to
the Owner and the Owner Collateral Trustee as those required under the Owner
Financing Documents.
If at any time the Leased Property, or any portion thereof, is subject to
a Casualty or Taking, the provisions of Section 3.2 and Section 9 of the Owner
Trust Indenture and, to the extent not inconsistent with such Sections, Section
16 of the Lease shall apply.
10.25 Conditions of Completion. On or before the Substantial Completion
Date, as a condition precedent to consideration of the Improvements as being
Substantially Complete and as a condition to the commencement of the Basic Term
Commencement Date, Agent shall deliver or cause to be delivered to the Owner
Collateral Trustee and the Owner all of the following items and on or before the
Final Completion Date, as a condition precedent to consideration of the
Improvements being Substantially Complete and as a condition of satisfaction of
Agent's obligations under Section 10.15(b) of this Agreement, Agent shall
deliver or cause to be delivered to the Owner Collateral Trustee all of the
following items, all of which must be satisfactory in form and substance to the
Owner in its sole discretion:
(a) Final lien waivers with respect to the Leased Property from any
contractor or subcontractor performing construction or installation
services establishing that all work and labor performed and materials
furnished through the Substantial Completion Date or the Final Completion
Date, as the case may be, have been paid for in full, or a bond or other
assurance of payment with respect thereto.
(b) An endorsement to the Owner Collateral Trustee's and the Owner's title
insurance policies delivered pursuant to the Financing Documents and the
Lease confirming the respective amounts of coverage thereunder and that
such amount is insured with no exceptions other than those reflected on
such title policy as originally delivered to the Owner Collateral Trustee
and the Owner or other immaterial exceptions acceptable to the Owner
Collateral Trustee and the Owner in its reasonable discretion.
(c) An as-built survey plan of the Leased Property, certified to the Owner
and the Owner Collateral Trustee, no earlier than 30 days prior to the
Final Completion Date by an independent surveyor licensed in New Jersey,
and, if available, "as-built" plans and specifications for the
Improvements and other Improvements upon the Land.
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(d) The final Plans and Specifications, certified by the Architect.
(e) All approvals in connection with the Work required of municipal or
other governmental authorities having jurisdiction over the Leased
Property.
(f) A certificate of all Development Costs and Project Costs as of the
Completion Date or the Final Completion Date, as the case may be,
certified by the treasurer or chief financial officer of Agent, and
confirmed and approved by the Architect.
(g) A certificate of the officer of Agent who has been given the primary
responsibility for the management of the construction and financing of the
Improvements that the Improvements have been constructed substantially in
accordance with the Final Plans and Specifications with only those Change
Orders consented to in writing by the Owner Collateral Trustee and the
Owner, to the extent required.
(h) An updated post-construction environmental assessment of the Leased
Property confirming that the Leased Property, after the construction of
the Improvements, is in compliance with all Environmental Legal
Requirements. Such report shall be prepared by the independent
environmental engineer who prepared the report delivered at the Closing
Date and shall be prepared at Agent's sole expense. If such environmental
assessment, as updated, recommends or reveals the need for additional
review or remediation of the Leased Property, Agent, at its sole expense,
will provide such additional environmental assessments or remediation as
are required by either or both of the Owner or the Owner Collateral
Trustee. The results of the environmental assessment shall be satisfactory
to the Owner and the Owner Collateral Trustee.
10.26 Appraisal. The Owner may obtain an appraisal of the Leased Property
which includes the related Improvements as built, which appraisal in the Owner's
sole discretion may be a "bring-down" of the appraisal delivered to the Owner
Collateral Trustee prior to the Closing Date performed by the original appraiser
or a new full scope appraisal conducted by a separate independent appraiser. The
Owner may require such appraisal as a condition precedent to considering the
Improvements Substantially Complete. Such appraisal shall permit the Owner and
the Owner Collateral Trustee to rely thereon and shall be reasonably acceptable
in form and substance to the Owner Collateral Trustee. Such appraisal shall
indicate an estimated fair market value and useful life of the Leased Property
(i) on the Basic Term Commencement Date, and (ii) annually at the end of each of
the years 3 through 12 of the Term of the Lease, as extended by any Extension
Lease Terms, in each case which value and useful life are reasonably acceptable
to the Owner Collateral Trustee. The cost of the "bring-down" appraisal or new
appraisal shall be borne by Agent and shall be paid by Agent on demand from the
Owner Collateral Trustee.
ARTICLE XI
FAILURE TO COMPLETE
If the Improvements are not Substantially Complete on or before the
Substantial Completion Date or Fully Completed on or before the Final Completion
Date for any reason whatsoever, then the same shall constitute an Event of
Default hereunder.
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ARTICLE XII
DEFAULTS AND REMEDIES
12.1 Events of Default. Each of the following shall constitute an
Event of Default by Agent under this Agreement:
(a) If Agent defaults in making payment of any amounts payable hereunder
when the same shall become due and payable; or
(b) If, as of the time when the same shall have been made, any
representation or warranty of Agent set forth herein or in any consent,
notice, certificate, demand, request or other instrument delivered by or
on behalf of Agent in connection with or pursuant to this Agreement or the
transactions contemplated hereby shall prove to have been incorrect or
misleading in any material respect when made; or
(c) If the Improvements are not Substantially Complete on or prior to the
Substantial Completion Date or Finally Completed on or prior to the Final
Completion Date; or
(d) If Agent shall fail to cause any individual Mechanic's Lien to be
removed or bonded in accordance with Section 10.21 within 60 days after
the filing thereof unless the same is being contested by Agent pursuant to
the Lease, or Agent shall fail to maintain the insurance required by
Section 10.24; or
(e) If Agent defaults in the performance in any other covenant, agreement,
or obligation on the part of Agent to be performed under this Agreement
and such default continues for a period of thirty (30) days after notice
thereof from the Owner; or
(f) An Event of Default, as defined in the Lease, shall have occurred and
be continuing beyond the applicable grace periods set forth therein, if
any; or
(g) An Event of Default, as defined in any of the Financing Documents or
any other Transaction Document shall have occurred and be continuing
beyond the applicable grace periods set forth therein, if any; or
(h) Agent shall cease construction of the Improvements for a period of
forty-five (45) consecutive days (except as may be caused by Force
Majeure) or as may otherwise be permitted in the Owner Financing
Documents.
12.2 Remedies. After the occurrence of any Event of Default hereunder,
subject to the Owner's assignment of this Agreement to the Owner Collateral
Trustee, the Owner shall have all rights and remedies available at law and in
equity and without limiting the generality of the foregoing, may elect to
exercise any or all of the following remedies which shall be cumulative and not
exclusive:
(a) Terminate Agent's authority and all of Agent's rights and privileges
under this Agreement;
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(b) Exercise all rights and remedies under any or all of this Agreement,
the Lease, the Financing Documents and all other agreements and documents
contemplated thereunder to which Agent is a party;
(c) Demand immediate payment of all sums due hereunder together with
interest thereon at the Default Rate until paid;
(d) Recover from Agent all out-of-pocket and other damages and expenses
that the Owner may have sustained by reason of the Event of Default,
including, without limitation, reasonable attorneys' fees and expenses,
which damages and expenses shall be paid by Agent as they are incurred by
the Owner, together with interest thereon at the Default Rate until paid;
and
(e) At the option of the Owner exercised at any time (which option shall
be exercisable by the Owner Collateral Trustee pursuant to the Owner
Financing Documents), the Owner forthwith shall be entitled to recover
from Agent, in addition to any other proper claims, the aggregate amount
of all costs and expenses to construct and complete the Project, and all
other fees and expenses then due from Agent under the Transaction
Documents.
12.3 Costs of Enforcement. If an action shall be brought by the Owner for
the enforcement of any provision of this Agreement, Agent shall pay to the Owner
all costs and other expenses that may become payable as a result thereof,
including, without limitation, reasonable attorneys' fees and expenses. If the
Owner or any of the other Indemnified Parties or any agent of any of them shall,
without fault on its part, be made a party defendant to any litigation commenced
against Agent, the Owner or any of the other Indemnified Parties arising out of
any of the transactions contemplated by this Agreement, the Financing Documents
or the Transaction Documents, Agent shall pay all costs and reasonable
attorneys' fees and expenses incurred or paid by the Owner, such Indemnified
Parties or their agents in connection with such litigation.
12.4 Cumulative Remedies. No right or remedy herein conferred upon or
reserved to the Owner is intended to be exclusive of any other right or remedy
and every right and remedy shall be cumulative and in addition to any other
legal or equitable right or remedy given hereunder, or at any time existing. The
failure of the Owner to insist upon the strict performance of any provision or
to exercise any option, right, power or remedy contained in this Agreement shall
not be construed as a waiver or a relinquishment thereof for the future.
ARTICLE XIII
MISCELLANEOUS
13.1 Governing Law. This Agreement shall be deemed an instrument executed
under seal and shall be construed and enforced in accordance with, and governed
by, the laws of the State of New Jersey. In connection with this Agreement and
the transactions contemplated by the Lease, the Owner Financing Documents and
all other agreements and documents contemplated thereunder, Agent hereby agrees
to nonexclusive personal jurisdiction and venue in the state courts of the State
of New Jersey, and the United States District Court for the District of New
Jersey. TO THE FULLEST EXTENT PERMITTED BY
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APPLICABLE LAW, AGENT HEREBY WAIVES ALL RIGHTS TO A TRIAL BY JURY WITH
RESPECT TO ANY DISPUTE ARISING BETWEEN THE OWNER AND AGENT RELATING TO
THE SUBJECT MATTER HEREOF.
13.2 Notices; Modification; Waiver. All notifications, notices, demands,
requests and other communications herein provided for or made pursuant hereto
shall be in writing and shall be sent by reputable overnight delivery service
and the giving of such communication shall be deemed complete on the immediately
succeeding Business Day after the same is deposited with such delivery service:
(a) if to the Owner, addressed to such party at c/o First Fidelity Bank, 10
State House Square, Hartford, Connecticut 06103, Attn: W. Jeffrey Kramer,
Corporate Trust, (b) if to Agent, addressed to such party at 727 Fifth Avenue,
New York, New York, 10022 or at such other address as the Owner or Agent shall
have specified to the others in writing, and, except as otherwise set forth
above, such notifications, notices, demands, requests or other communications
shall be deemed given on the date of receipt.
This Agreement may not be modified or discharged except by an instrument
in writing executed by the Owner and Agent and consented to by the Owner
Collateral Trustee. No requirement hereof may be waived at any time except by an
instrument in writing signed by the party against whom such waiver is sought,
nor shall any waiver be deemed a waiver of any subsequent breach or default by
either party.
13.3 Illegal Provision. If any provision herein contained shall be held to
be invalid, illegal or unenforceable in any respect, such invalidity, illegality
or unenforceability shall not affect any other provision hereof, and this
Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein.
13.4 Binding Effect. The covenants, conditions and agreements herein
contained shall bind, and the benefits and advantages shall inure to, the
respective heirs, executors, administrators, successors and assigns of the
parties hereto. With respect to provisions in this Agreement that by their terms
are expressly for the benefit of the Financing Parties or any other of the
Indemnified Parties, such Persons shall be third party beneficiaries of this
Agreement. Whenever used, the singular shall include the plural, the plural
include the singular and the use of any gender shall include all genders.
13.5 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original but all of which
shall constitute one and the same instrument.
13.6 Headings. The Table of Contents preceding this Agreement and the
headings to the various Sections of this Agreement have been inserted for the
convenience of reference only and shall not limit or otherwise affect any of the
terms hereof.
13.7 Reproduction of Documents. This Agreement and all documents relating
thereto (except any notes or other evidence of indebtedness), including, without
limitation, (a) consents, waivers and modifications which may hereafter be
executed, (b) documents delivered at any closing, and (c) financial statements
and other information previously or hereafter furnished to either party, may be
reproduced by any reliable photographic,
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photostatic, microfilm, micro-card, miniature photographic or other similar
process, and such party may destroy any original document so reproduced. Agent
and the Owner each stipulate that any such reproduction shall be admissible in
evidence as the original itself in any judicial or administrative proceeding
(whether or not the original is in existence and whether or not such
reproduction was made by such party in the regular course of business) and that
any enlargement, facsimile or further reproduction of such reproduction shall
otherwise be admissible in evidence.
13.8 Time of Essence. Time is of the essence of this Agreement.
13.9 Limitation on Liability. Notwithstanding anything contained herein to
the contrary, this Agreement is a trust obligation of the Owner and no recourse
under or upon any obligation, covenant, or agreement contained herein, or for
any claim based hereon or in respect hereto, shall be had against any past,
present or future trustee, officer, employee, agent, or beneficiary, as such, of
the Owner, whether by virtue of any constitution, statute, or rule of law, by
the enforcement of any assignment or penalty, or otherwise. All such liability
and claims against such persons are expressly waived by Agent as a condition of,
and in consideration for, the execution and delivery hereof. All of the
representations, warranties and covenants of Agent hereunder are intended to be
personal representations, warranties and covenants of Tiffany and Company.
13.10 Maximum Interest Payable. To the extent that any sum due hereunder
is construed as interest under applicable law, this Agreement shall not require
the payment or permit the collection of interest in excess of the maximum
permitted by law. If any excess of interest in such respect is provided for
herein or shall be adjudicated to be so provided for, neither the Owner nor its
successors or assigns shall be obligated to pay such interest in excess of the
maximum amount not prohibited by law, and the right to demand the payment of any
such excess shall be and hereby is waived; and this provision shall control any
other provision of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK;
SIGNATURES ON NEXT PAGE]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed under seal by their duly authorized representatives effective as
of the date first written above.
AGENT: TIFFANY AND COMPANY
By /s/ James N. Fernandez
---------------------------
Name: James N. Fernandez
Title: Senior Vice President
Chief Financial Officer
OWNER: FIRST FIDELITY BANK,
NATIONAL ASSOCIATION,
NOT IN ITS INDIVIDUAL CAPACITY BUT
SOLELY AS TRUSTEE UNDER TRUST
AGREEMENT 1995-1 DATED AS OF
JULY 1, 1995, AS AMENDED
By /s/ W. Jeffrey Kramer
---------------------------
Name: W. Jeffrey Kramer
Title: Vice President
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---------------------------------------------------
AGREEMENT AND CONSENT TO ASSIGNMENT
---------------------------------------------------
DATED AS OF DECEMBER 1, 1995
AMONG
TIFFANY & CO., TIFFANY AND COMPANY
AND
FLEET NATIONAL BANK OF CONNECTICUT,
AS COLLATERAL TRUSTEE UNDER THE INDENTURE
<PAGE> 93
TABLE OF CONTENTS
<TABLE>
<S> <C>
PRELIMINARY STATEMENT........................................................... 1
1. WARRANTIES AND REPRESENTATIONS......................................... 3
1.1 Nature of Business........................................... 3
1.2 Financial Statements; Debt; Material Adverse Change.......... 3
1.3 Subsidiaries and Affiliates.................................. 4
1.4 Title to Properties.......................................... 4
1.5 Taxes........................................................ 5
1.6 Pending Litigation........................................... 5
1.7 Full Disclosure.............................................. 5
1.8 Corporate Organization and Authority......................... 6
1.9 Charter Instruments, Other Agreements........................ 6
1.10 Restrictions on the Parent, the Lessee and Subsidiaries...... 6
1.11 Compliance with Law.......................................... 7
1.12 Pension Plans................................................ 7
1.13 Environmental Compliance..................................... 8
1.14 Authorization; Obligations are Enforceable................... 9
1.15 Governmental Consent......................................... 9
1.16 No Defaults; Transactions Prior to Closing Date.............. 10
1.17 Private Offering............................................. 10
1.18 Margin Securities; Foreign or Enemy Status................... 11
1.19 Solvency..................................................... 11
1.20 Construction Documents and Other Agreements.................. 12
1.21 Quality of Work.............................................. 12
1.22 Work to Comply............................................... 12
1.23 Required Licenses and Permits................................ 12
1.24 Curb Cuts and Utility Connections............................ 12
1.25 Project Budget Amounts....................................... 13
1.26 Representations with Respect to the Lease.................... 13
2. GENERAL COVENANTS OF THE LESSEE AND PARENT............................. 13
2.1 Maintenance of Properties and Corporate Existence, etc....... 14
2.2 Payment of Taxes and Claims.................................. 15
2.3 Nature of Business........................................... 15
2.4 Interest Coverage Ratio...................................... 15
2.5 Leverage Ratios.............................................. 16
2.6 Sale of Assets, etc.......................................... 16
2.7 Disposal of Ownership of a Restricted Subsidiary............. 17
2.8 Merger, Consolidation, etc................................... 17
2.9 Transactions with Affiliates................................. 18
2.10 Private Offering............................................. 18
2.11 Pension Plans................................................ 18
2.12 Restricted Subsidiary Debt................................... 19
2.13 Liens........................................................ 20
</TABLE>
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<TABLE>
<S> <C>
2.14 Restricted Payments.............................................. 23
2.15 Restrictions on Dividends of Subsidiaries, etc................... 24
3. ADDITIONAL COVENANTS AND AGREEMENTS RELATING TO THE LEASE
AND CONSTRUCTION AGENCY AGREEMENT.......................................... 24
3.1 The Lease and Construction Agency Agreement...................... 24
3.2 Certain Payments................................................. 24
3.3 Benefits of Lease and Construction Agency Agreement.............. 25
3.4 No Abatement or Set-Off.......................................... 25
3.5 Certain Rights of Owner Collateral Trustee....................... 25
3.6 No Liability of Owner Collateral Trustee......................... 25
3.7 Termination of Lease and Construction Agency Agreement Under
Certain Circumstances............................................ 26
3.8 Representations, Warranties and Covenants Under Lease and
Construction Agency Agreement.................................... 26
3.9 Amendments, etc. to Lease and Construction Agency Agreement...... 26
3.10 Additional Obligations and Covenants of the Lessee............... 27
3.11 Nondisturbance................................................... 27
3.12 Attornment....................................................... 27
3.13 Release and Limitation........................................... 28
3.14 Owner Collateral Trustee......................................... 28
3.15 Indemnity........................................................ 28
3.16 Subject to the Indenture......................................... 29
4. ADDITIONAL COVENANTS AND AGREEMENTS RELATING TO THE LEASE
GUARANTY................................................................... 29
4.1 The Lease Guaranty............................................... 29
4.2 Certain Payments................................................. 30
4.3 Benefits of Lease Guaranty....................................... 30
4.4 No Abatement or Set-Off.......................................... 30
4.5 Certain Rights of Owner Collateral Trustee....................... 30
4.6 No Liability of Owner Collateral Trustee......................... 31
4.7 Termination of Lease Under Certain Circumstances; Payment of
Guaranteed Obligations........................................... 31
4.8 Representations, Warranties and Covenants Under Lease Guaranty... 31
4.9 Amendments, etc. to Lease Guaranty............................... 31
4.10 Additional Obligations of the Parent............................. 31
5. INFORMATION AS TO PARENT................................................... 32
5.1 Financial and Business Information............................... 32
5.2 Officer's Certificates........................................... 35
5.3 Accountants' Certificates........................................ 35
5.4 Inspection....................................................... 36
5.5 Confidential Information......................................... 36
6. INTERPRETATION OF THIS AGREEMENT........................................... 37
6.1 Terms Defined.................................................... 37
6.2 Accounting Principles............................................ 51
</TABLE>
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<TABLE>
<S> <C>
6.3 Directly or Indirectly....................................... 52
6.4 Section Headings and Table of Contents and Construction...... 52
6.5 Governing Law................................................ 52
7. MISCELLANEOUS.......................................................... 52
7.1 Communications............................................... 52
7.2 Amendment and Waiver......................................... 53
7.3 Reproduction of Documents.................................... 54
7.4 Survival..................................................... 54
7.5 Successors and Assigns....................................... 54
7.6 Entire Agreement; Severability............................... 55
7.7 Duplicate Originals, Execution in Counterpart................ 55
</TABLE>
Annex 1 -- Information as to Parent and Lessee
Annex 2 -- Liens
Exhibit A -- Copy of Lease Agreement
Definition Appendix
iii
<PAGE> 96
AGREEMENT AND CONSENT TO ASSIGNMENT
This AGREEMENT AND CONSENT TO ASSIGNMENT, dated as of December 1, 1995,
among TIFFANY & CO., a Delaware corporation (the "PARENT"), TIFFANY AND COMPANY,
a New York corporation (the "LESSEE"), and FLEET NATIONAL BANK OF CONNECTICUT, a
national banking association (in its individual capacity, the "BANK"), as
collateral trustee (a) under a Collateral Trust Indenture (as may be amended and
supplemented from time to time, the "OWNER TRUST INDENTURE"), dated as of
December 1, 1995, between First Fidelity Bank, National Association, not in its
individual capacity, but solely as trustee pursuant to an agreement captioned a
"Trust Agreement 1995-1," dated as of July 1, 1995, as amended ("OWNER"), and
Bank (together with its successors and assigns under the Owner Trust Indenture,
the "OWNER COLLATERAL TRUSTEE") and (b) under a Collateral Trust Indenture (as
may be amended and supplemented from time to time, the "BENEFICIARY TRUST
INDENTURE"), dated as of December 1, 1995, between First Fidelity Bank National
Association, not in its individual capacity, but solely as trustee pursuant to
an agreement captioned a "Trust Agreement 1995-2," dated as of July 1, 1995, as
amended ("BENEFICIARY TRUSTEE"), and Bank (together with its successors and
assigns under the Beneficiary Trust Indenture, the "BENEFICIARY COLLATERAL
TRUSTEE;" together with the Owner Collateral Trustee referred to herein as, the
"COLLATERAL TRUSTEE").
PRELIMINARY STATEMENT
A. WHEREAS, Owner has entered into separate Note Purchase Agreements
(as may be amended from time to time, the "OWNER NOTE PURCHASE AGREEMENTS"),
each dated as of December 1, 1995, with each of the Persons listed on Annex 1
thereto (collectively, the "PURCHASERS") pursuant to which the Purchasers will
purchase from the Owner its (a) Series A Senior Secured Notes due January 31,
2009 (the "SERIES A OWNER NOTES") in the aggregate principal amount of
Thirty-Three Million Five Hundred Thirty-Three Thousand Eight Hundred Fifty-Four
and 51/100 Dollars ($33,533,854.51) and (b) Series B Senior Secured Notes due
July 31, 2000 in the aggregate principal amount of One Million Six Hundred
Sixteen Thousand One Hundred Forty-Five and 49/100 Dollars ($1,616,145.49) (the
"SERIES B OWNER NOTES;" together with the Series A Owner Notes and as amended,
restated or otherwise modified from time to time, and including each promissory
note delivered from time to time in accordance herewith, individually an "OWNER
NOTE" and collectively the "OWNER NOTES"), issued under, and pursuant to the
provisions of, the Owner Trust Indenture; and
B. WHEREAS, the Owner will use the proceeds of the sale of the Owner
Notes to construct the Improvements on the Land owned by the Owner, which Land
and Improvements are more particularly described in the Lease (such Land and
Improvements herein referred to as the "LEASED PROPERTY") and to repay its
existing indebtedness to Stellar Capital Corporation; and
C. WHEREAS, Beneficiary Trustee has entered into separate Note Purchase
Agreements (as may be amended from time to time, the "BENEFICIARY NOTE PURCHASE
AGREEMENTS"), each dated as of December 1, 1995, with the Purchasers pursuant to
which the Purchasers will purchase from the Beneficiary Trustee its (a) Series A
Senior Secured
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Notes due January 31, 2009 (the "SERIES A BENEFICIARY NOTES") in the aggregate
principal amount of Two Million Four Hundred Sixty-Six Thousand One Hundred
Forty-Five and 49/100 Dollars ($2,466,145.49) and (b) Series B Senior Secured
Notes due July 31, 2000 in the aggregate principal amount of One Hundred
Eighteen Thousand Eight Hundred Fifty-Four and 51/100 Dollars ($118,854.51) (the
"SERIES B BENEFICIARY NOTES;" together with the Series A Beneficiary Notes and
as amended, restated or otherwise modified from time to time, and including each
promissory note delivered from time to time in accordance herewith, individually
a "BENEFICIARY NOTE" and collectively the "BENEFICIARY NOTES," the Beneficiary
Notes together with the Owner Notes collectively referred to herein as, the
"NOTES"), issued under, and pursuant to the provisions of, the Beneficiary Trust
Indenture; and
D. WHEREAS, the Beneficiary Trustee will use the proceeds of the sale
of the Beneficiary Notes to repay its existing indebtedness to Stellar Capital
Corporation and to pay certain fees relating to the Transactions; and
E. WHEREAS, as the Beneficiary Trustee is the sole beneficiary of the
Owner Trust Estate; and
F. WHEREAS, the Owner and the Lessee have entered into that certain
Lease Agreement, dated as of August 1, 1995, which Lease Agreement has been
amended and restated by that certain Amended and Restated Lease Agreement, dated
as of December 1, 1995, effective as of August 1, 1995, between Owner and Lessee
(as amended and as may be further amended and supplemented from time to time,
the "LEASE"), which provides for the leasing by the Owner to the Lessee of the
Leased Property; and
G. WHEREAS, the Parent has guaranteed all of the obligations of Lessee
under the Lease and the Construction Agency Agreement pursuant to that certain
Guaranty, dated as of the date hereof, in favor of the Owner (as may be amended
and supplemented from time to time, the "LEASE GUARANTY"); and
H. WHEREAS, it is a condition to the purchase by the Purchasers of the
Owner Notes that (a) the Owner's interest in the Leased Property, the Lease, the
Construction Agency Agreement and the Lease Guaranty, among other things, be
mortgaged, pledged and assigned to the Owner Collateral Trustee as security for
the Owner's obligations evidenced by the Owner Notes pursuant to the provisions
of the Owner Trust Indenture, (b) the Lessee and Parent acknowledge and consent
in all respects to such mortgage, pledge and assignment, (c) the Lessee and the
Parent make certain representations and warranties to the Owner Collateral
Trustee and the holders of the Owner Notes and (d) the Lessee and Parent enter
into certain covenants and undertakings in favor of the Owner Collateral Trustee
and the holders of the Owner Notes; and
I. WHEREAS, it is a condition to the purchase by the Purchasers of the
Beneficiary Notes that (a) the Beneficiary Trustee's beneficial interest in the
Owner Trust Estate, be mortgaged, pledged and assigned to (i) the Beneficiary
Collateral Trustee as security for the Beneficiary Trustee's obligations
evidenced by the Beneficiary Notes pursuant to the provisions of the Beneficiary
Trust Indenture and (ii) the Owner Collateral Trustee as security for the
Beneficiary Trustee's obligations evidenced by the Beneficiary
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Guaranty, (b) the Lessee and Parent make certain representations and warranties
to the Beneficiary Collateral Trustee and the holders of the Beneficiary Notes
and (c) the Lessee and Parent enter into certain covenants and undertakings in
favor of the Beneficiary Collateral Trustee and the holders of the Beneficiary
Notes;
NOW THEREFORE, in order to induce the Purchasers to purchase the Owner
Notes of the Owner and the Beneficiary Notes of the Beneficiary Trustee and to
induce the Collateral Trustee to enter into the respective Indentures and
related agreements, and in consideration therefor and in consideration of the
mutual covenants and agreements hereinafter contained, the Lessee and Parent
agree as follows:
1. WARRANTIES AND REPRESENTATIONS
To induce each of the Purchasers to purchase the Notes at the Closing,
and to induce the Collateral Trustee to enter into this Agreement and the
Indentures and the other Financing Documents to which it is a party, the Lessee
and the Parent warrant and represent to the Collateral Trustee and the
Purchasers, as of the Closing Date, as follows:
1.1 NATURE OF BUSINESS.
The Placement Materials (a copy of which previously has been delivered
to each of the Purchasers), correctly describes the general nature of the
business and principal Properties of the Parent, the Lessee and the other
Subsidiaries.
1.2 FINANCIAL STATEMENTS; DEBT; MATERIAL ADVERSE CHANGE.
(a) FINANCIAL STATEMENTS. The Parent and the Lessee have
provided each of the Purchasers with the financial statements described
in Part 1.2(a) of Annex 1. Such financial statements present fairly in
all material respects the consolidated financial position of the Parent
and its consolidated subsidiaries as of the respective dates specified
in such Part and the consolidated results of their operations and cash
flows for the respective periods so specified in conformity with GAAP
applied on a consistent basis throughout the periods involved.
(b) DEBT. Part 1.2(b) of Annex 1 lists all Debt of the
Parent, the Lessee and the other Subsidiaries as of the Closing Date
other than Debt of the type described in Section 2.12(c) and
2.12(e)(i), and provides the following information with respect to each
item of such Debt:
(i) the type thereof;
(ii) the holder thereof;
(iii) the outstanding amount thereof and the
maximum amount which may be incurred under the agreement
which created or evidences such Debt;
(iv) the current portion thereof, if any;
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(v) the final maturity thereof; and
(vi) the collateral securing such Debt, if any.
No event or condition exists with respect to any Debt of the Parent,
the Lessee or any other Subsidiary that would permit (or with notice or
lapse of time would permit) a Person to cause such Debt to become due
and payable before its stated maturity or its regularly scheduled dates
of payment.
(c) MATERIAL ADVERSE CHANGE. Since January 31, 1995, there
has been no change in the business, prospects, operations, affairs,
financial condition or Properties of the Parent, the Lessee and the
other Subsidiaries except changes in the ordinary course of business or
changes that, in the aggregate for all such changes, could not
reasonably be expected to have a Material Adverse Effect.
1.3 SUBSIDIARIES AND AFFILIATES.
Part 1.3 of Annex 1 sets forth:
(a) the name of each Subsidiary, its jurisdiction of
incorporation, the percentage of its Voting Stock owned by the Parent,
the Lessee and each other Subsidiary; and
(b) a description of the Affiliates (other than individuals)
and the nature of their affiliation.
Each of the Parent, the Lessee and the other Subsidiaries has valid title to all
of the shares it purports to own of the stock of each Subsidiary, free and clear
in each case of any Lien. All such shares have been duly issued and are fully
paid and nonassessable.
1.4 TITLE TO PROPERTIES.
(a) Each of the Parent, the Lessee and the other Subsidiaries
has good and marketable title to all of the real Property, and good
title to all of the other Property, reflected in the most recent
balance sheet referred to in Part 1.2(a) of Annex 1 hereto (except as
sold or otherwise disposed of in the ordinary course of business),
except for such failures to have such good and marketable title as are
immaterial to such financial statements and that, in the aggregate for
all such failures, could not reasonably be expected to have a Material
Adverse Effect. All such Property is free from Liens not permitted
hereby.
(b) Except as set forth on Part 1.4 of Annex 1, each of the
Parent, the Lessee and the other Subsidiaries owns, possesses or has
the right to use all of the patents, trademarks, service marks, trade
names, copyrights and licenses, and rights with respect thereto,
necessary for the present and currently planned future conduct of its
business, without any known conflict with the rights of others, except
for such failures to own, possess, or have the right to use, that, in
the aggregate for all such failures, could not reasonably be expected
to have a Material Adverse Effect.
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1.5 TAXES.
(a) INCOME AND OTHER TAXES. Each of the Parent, the Lessee
and the other Subsidiaries:
(i) has filed in a timely manner all income tax
returns and other tax returns that are required to be filed
with, and has given all notices and supplied all other
information required to be supplied to, all relevant tax
authorities; and
(ii) has paid (A) all taxes as shown on such returns
or as otherwise determined by reference to such notices or to
such other information and (B) all assessments of taxes
received by it, in each case to the extent that such taxes
have become, or are currently, due and payable;
except for such items that (I) are being actively contested in good
faith and by appropriate proceedings and (II) in the aggregate, could
not reasonably be expected to have a Material Adverse Effect.
(b) OPEN TAX YEARS. All liabilities of each of the Parent,
the Lessee and the other Subsidiaries referred to in the preceding
clause (a) with respect to United States federal income taxes have been
finally determined except for the fiscal years 1992 through 1995, the
only years not closed by the completion of an audit or the expiration
of the statute of limitations.
1.6 PENDING LITIGATION.
(a) There are no proceedings, actions or investigations
pending or, to the knowledge of the Lessee or the Parent, threatened
against or affecting the Parent, the Lessee or any other Subsidiary in
any court or before any Governmental Authority or arbitration board or
tribunal that, in the aggregate for all such proceedings, actions and
investigations, could reasonably be expected to have a Material Adverse
Effect.
(b) Neither the Parent, the Lessee nor any other Subsidiary
is in default with respect to any judgment, order, writ, injunction or
decree of any court, Governmental Authority, arbitration board or
tribunal that, in the aggregate for all such defaults, could reasonably
be expected to have a Material Adverse Effect.
1.7 FULL DISCLOSURE.
The financial statements referred to in Part 1.2(a) of Annex 1 do not,
nor does any Financing Document, the Placement Materials or any written
statement furnished by or on behalf of the Parent, the Lessee or any other
Subsidiary to any Purchaser in connection with the negotiation or the closing of
the sale of the Notes, contain any untrue statement of a material fact or omit a
material fact necessary to make the statements contained therein not misleading.
There is no fact that the Parent nor the Lessee has not disclosed to any
Purchaser in writing that has had or, so far as the Parent or the Lessee can now
reasonably foresee, could reasonably be expected to have a Material Adverse
Effect.
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1.8 CORPORATE ORGANIZATION AND AUTHORITY.
(a) The Parent is a corporation, duly organized, validly
existing and in good standing under the laws of the State of Delaware
and the Lessee is a corporation, duly organized, validly existing and
in good standing under the laws of the State of New York.
(b) Each other Subsidiary is duly organized, validly
existing and in good standing under the laws of the jurisdiction in
which it is organized.
(c) Each of the Parent, the Lessee and the other
Subsidiaries:
(i) has all corporate power and authority necessary
to own and operate its Properties and to carry on its
business as now conducted and as presently proposed to be
conducted;
(ii) has all licenses, certificates, permits,
franchises and other governmental authorizations necessary to
own and operate its Properties and to carry on its business
as now conducted and as presently proposed to be conducted,
except where the failure to have such licenses, certificates,
permits, franchises and other governmental authorizations, in
the aggregate for all such failures, could not reasonably be
expected to have a Material Adverse Effect; and
(iii) is duly qualified or has been duly licensed,
and is authorized to do business and is in good standing, as
a foreign corporation, in each jurisdiction where the failure
to be so qualified or licensed and authorized and in good
standing, in the aggregate for all such failures, could
reasonably be expected to have a Material Adverse Effect.
1.9 CHARTER INSTRUMENTS, OTHER AGREEMENTS.
Neither the Parent, the Lessee nor any other Subsidiary is in violation
in any respect of any term of any charter instrument, bylaw or other
constitutive agreement, document or instrument. Neither the Parent, the Lessee
nor any other Subsidiary is in violation in any respect of any term in any
agreement or other instrument to which it is a party or by which it or any of
its Property may be bound except for such violations that, in the aggregate for
all such violations, could not reasonably be expected to have a Material Adverse
Effect.
1.10 RESTRICTIONS ON THE PARENT, THE LESSEE AND SUBSIDIARIES.
Neither the Parent, the Lessee nor any other Subsidiary:
(a) is a party to any contract or agreement, or subject to
any charter, bylaw or other corporate restriction that, in the
aggregate for all such contracts, agreements and corporate or
partnership restrictions, could reasonably be expected to have a
Material Adverse Effect;
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(b) is a party to any contract or agreement that restricts
the entry by the Parent or the Lessee into the Lease Guaranty, the
Lease or this Agreement or the performance of the Parent or the Lessee,
as the case may be, thereunder or hereunder except with respect to
future performance which may be prohibited or limited at such time by
compliance with covenants which relate to future financial conditions
of the Lessee or the Parent contained in one or more agreements to
which the Parent or the Lessee may be a party at such time; or
(c) has agreed or consented to cause or permit in the
future (upon the happening of a contingency or otherwise) any of its
Property, whether now owned or hereafter acquired, to be subject to a
Lien not permitted hereby.
Part 1.10 of Annex 1 sets forth each contract or agreement (other than this
Agreement) which restricts the right or ability of the Parent, the Lessee or any
other Subsidiary to incur Debt or enter into any lease.
1.11 COMPLIANCE WITH LAW.
Neither the Parent, the Lessee nor any other Subsidiary is in violation
of any law, ordinance, governmental rule or regulation to which it is subject,
except for such violations that, in the aggregate for all such violations, could
not reasonably be expected to have a Material Adverse Effect.
1.12 PENSION PLANS.
(a) PROHIBITED TRANSACTIONS. Neither the execution of this
Agreement and the other Financing Documents, the execution and delivery
of the Lease Guaranty by the Parent and the Lessee, the entry by the
Lessee into the Lease nor the purchase of the Notes by the Purchasers
will constitute a "prohibited transaction" (as defined in section 406
of ERISA or section 4975 of the IRC). The representation by the Parent
and the Lessee in the preceding sentence is made in reliance upon and
subject to the accuracy of the representations in certain letters dated
October, 1995 as to the source of funds used by certain of the
Purchasers to purchase the Notes.
(b) PENSION PLANS.
(i) COMPLIANCE WITH ERISA. The Parent, the Lessee and
the ERISA Affiliates are in compliance with ERISA, except for
such failures to comply that, in the aggregate for all such
failures, could not reasonably be expected to have a Material
Adverse Effect.
(ii) FUNDING STATUS. No "accumulated funding deficiency"
(as defined in section 302 of ERISA and section 412 of the
IRC), whether or not waived, exists with respect to any
Pension Plan.
(iii) PBGC. No liability to the PBGC has been or is
expected to be incurred by the Parent, the Lessee or any
ERISA Affiliate with respect to any Pension Plan that,
individually or in the aggregate, could reasonably be
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expected to have a Material Adverse Effect. No circumstance
exists that constitutes grounds under section 4042 of ERISA
entitling the PBGC to institute proceedings to terminate, or
appoint a trustee to administer, any Pension Plan or trust
created thereunder, nor has the PBGC instituted any such
proceeding.
(iv) MULTIEMPLOYER PLANS. Neither the Parent, the
Lessee nor any ERISA Affiliate has any Multiemployer Plan.
(c) FOREIGN PENSION PLANS. The present value of all
benefits vested under each Foreign Pension Plan, determined as of the
most recent valuation date in respect thereof, does not exceed the
value of the assets of such Foreign Pension Plan and all required
payments in respect of funding such Foreign Pension Plan have been
made, except for such failures to fund such Foreign Pension Plans that,
in the aggregate for all such failures, could not reasonably be
expected to have a Material Adverse Effect.
1.13 ENVIRONMENTAL COMPLIANCE.
(a) COMPLIANCE. Neither the Parent, the Lessee nor any other
Subsidiary is in violation of any Environmental Legal Requirement in
effect in any jurisdiction where it currently is doing business or owns
Property, except for such violations that, in the aggregate for all
such violations, could not reasonably be expected to have a Material
Adverse Effect.
(b) LIABILITY. Neither the Parent, the Lessee nor any other
Subsidiary is subject to any liability under any Environmental Legal
Requirement that, in the aggregate for all such liabilities, could
reasonably be expected to have a Material Adverse Effect.
(c) NOTICES. Neither the Parent, the Lessee nor any other
Subsidiary has received any:
(i) notice from any Governmental Authority by which
any of its currently or previously owned or leased Properties
has been identified in any manner by any Governmental
Authority as a hazardous substance disposal or removal site
or other clean-up site or candidate for removal or closure
pursuant to any Environmental Legal Requirement;
(ii) notice of any Lien arising under or in
connection with any Environmental Legal Requirement that has
attached to any revenues of, or to, any of its currently or
previously owned or leased Properties; or
(iii) any communication from any Governmental
Authority concerning any action or omission by the Lessee or
such Subsidiary in connection with its currently or
previously owned or leased Properties resulting in the
release of any hazardous substance or resulting in any
violation of any Environmental Legal Requirement;
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in each case where the effect of which, in the aggregate for all such
notices and communications, could reasonably be expected to have, or be
related to, a Material Adverse Effect.
1.14 AUTHORIZATION; OBLIGATIONS ARE ENFORCEABLE.
(a) AUTHORIZATION. Each of the execution and delivery (i) by
the Lessee of this Agreement, the Lease and each other Financing
Document to which it is a party, and (ii) by the Parent of this
Agreement, the Lease Guaranty and the other Financing Documents to
which it is a party, and compliance by the Lessee and the Parent with
all of the provisions of this Agreement, the Lease Guaranty, the Lease
and each other Financing Documents to which such Person is a Party:
(A) is within the corporate powers of the Lessee and
the Parent; and
(B) is legal and does not conflict with, result in
any breach of any of the provisions of, constitute a default
under, or result in the creation of any Lien upon any
Property of the Parent, the Lessee or any other Subsidiary
under the provisions of,
(i) any agreement, indenture, partnership
agreement, charter instrument, bylaw or other
constitutive document or instrument to which it is a
party or by which it or any of its Property may be
bound, or
(ii) any order, judgment, decree, or ruling
of any court, arbitrator or Governmental Authority
applicable to the Lessee or any Subsidiary.
(b) OBLIGATIONS ARE ENFORCEABLE. Each of this Agreement, the
Lease Guaranty, the Lease and each other Financing Document to which
the Lessee and the Parent purports to be a party has been duly
authorized by all necessary corporate action on the part of the Lessee
and the Parent, has been executed and delivered by one or more duly
authorized officers of the Lessee and the Parent, as the case may be,
and constitutes a legal, valid and binding obligation of the Lessee and
the Parent, enforceable against the Lessee and the Parent in accordance
with its terms, except that the enforceability hereof and thereof may
be:
(i) limited by applicable bankruptcy, administration,
reorganization, arrangement, insolvency, moratorium or other
similar laws affecting the enforceability of creditors'
rights generally; and
(ii) subject to the availability of equitable
remedies.
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1.15 GOVERNMENTAL CONSENT.
(a) Neither the nature of the Parent, the Lessee or any other
Subsidiary, or of any of their respective businesses or Properties, nor
any relationship between the Parent, the Lessee or any other Subsidiary
and any other Person, nor any circumstance in connection with the
execution and delivery of this Agreement, the Lease Guaranty, the Lease
or any other Financing Document, or the performance of the obligations
hereunder and thereunder, is such as to require a consent, approval or
authorization of, or filing, registration or qualification with, any
Governmental Authority on the part of the Parent and the Lessee as a
condition to the execution and delivery of this Agreement, the Lease
Guaranty, the Lease or any other Financing Document or the performance
of the obligations hereunder or thereunder.
(b) The execution and delivery by the Parent and the Lessee
of this Agreement, the Lease Guaranty, the Lease and each other
Financing Document to which such Person is a Party, the incurrence of
the obligations evidenced hereby and thereby, and the performance
hereunder and thereunder,
(i) is not subject to regulation under the Investment
Company Act of 1940 of the United States of America, as
amended, the Public Utility Holding Company Act of 1935 of
the United States of America, as amended, the Interstate
Commerce Act of the United States of America, as amended, or
the Federal Power Act of the United States of America, as
amended, and
(ii) does not violate any provision of any statute or
other rule or regulation of any Governmental Authority
applicable to the Parent, the Lessee or any other Subsidiary.
1.16 NO DEFAULTS; TRANSACTIONS PRIOR TO CLOSING DATE.
(a) No event has occurred and no condition exists that, upon
the execution and delivery of this Agreement, the Lease Guaranty, the
Lease and the other Financing Documents would constitute a Default or
an Event of Default.
(b) Neither the Parent nor the Lessee has entered into any
transaction since the date of the most recent balance sheet referred to
in Part 1.2(a) of Annex 1 that would have been prohibited by Section
2.4 through Section 2.6, inclusive, Section 2.12 or Section 2.13 of
this Agreement had such Sections applied since such date.
1.17 PRIVATE OFFERING.
(a) The Parent, the Lessee, the other Subsidiaries, the
Beneficiary Trustee, the Owner and the Placement Agent (the only Person
authorized or employed by the Parent, the Lessee, the Beneficiary
Trustee or the Owner as agent, broker, dealer or otherwise in
connection with (i) the entry by the Parent, the Lessee, the
Beneficiary Trustee and the Owner into the transactions evidenced by
this Agreement, the Lease Guaranty, the Lease and the other Financing
Documents or (ii) the offering or sale of
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the Notes or any similar Security of the Owner or the Beneficiary
Trustee, as the case may be, other than employees of the Parent and/or
the Lessee), taken together, have not offered any of the Notes or any
similar Security of the Owner or the Beneficiary Trustee for sale to,
or solicited offers to buy any thereof from, or otherwise approached or
negotiated with respect thereto with, more than sixty-seven (67)
institutional investors (including the Purchasers), each of whom was
offered all or a portion of the Notes at private sale for investment.
(b) Neither the Parent, the Lessee, any other Subsidiary,
the Beneficiary Trustee or the Owner, nor any agent acting on behalf of
any of them, has taken any action that would
(i) subject the issuance or sale of the Notes to the
registration provisions of section 5 of the Securities Act or
to the registration, qualification or other similar
provisions of any securities or "blue sky" law of any
applicable jurisdiction, or
(ii) breach any of the provisions of any securities
laws of the United States of America or any other
jurisdiction.
1.18 MARGIN SECURITIES; FOREIGN OR ENEMY STATUS.
(a) MARGIN SECURITIES. None of the transactions contemplated
in this Agreement, the Lease Guaranty, the Lease or any other Financing
Document (including, without limitation, the use of the proceeds from
the sale of the Notes) violates, will violate or will result in a
violation of section 7 of the Exchange Act or any regulations issued
pursuant thereto, including, without limitation, Regulations G, T, U
and X of the Board of Governors of the Federal Reserve System, 12
C.F.R., Chapter II. The obligations of the Parent and Lessee under this
Agreement, the Lease Guaranty, the Lease and each other Financing
Document are not and will not be directly or indirectly secured (within
the meaning of such Regulation G) by any Margin Security.
(b) ABSENCE OF FOREIGN OR ENEMY STATUS. Neither the Parent
nor the Lessee is an "enemy" or an "ally of the enemy" within the
meaning of section 2 of the Trading with the Enemy Act (50 U.S.C. App.
Section 1 et seq.), as amended. Neither the Parent nor the Lessee is in
violation of, and the transactions evidenced by this Agreement, the
Lease Guaranty, the Lease and each other Financing Document do not
violate, the Trading with the Enemy Act, as amended, or any executive
orders, proclamations or regulations issued pursuant thereto, including,
without limitation, regulations administered by the Office of Foreign
Asset Control of the Department of the Treasury (31 C.F.R., Subtitle B,
Chapter V).
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1.19 SOLVENCY.
The fair value of the business and assets of each of the Parent and the
Lessee exceeds the amount that will be required to pay its respective
liabilities (including, without limitation, contingent, subordinated, unmatured
and unliquidated liabilities on existing debts, as such liabilities may become
absolute and matured), in each case after giving effect to the transactions
contemplated by this Agreement, the Lease Guaranty, the Lease and each other
Financing Document. Neither the Parent nor the Lessee, after giving effect to
the transactions contemplated by this Agreement, the Lease Guaranty, the Lease
and each other Financing Document, will be engaged in any business or
transaction, or about to engage in any business or transaction, for which such
it has unreasonably small assets or capital (within the meaning of the Uniform
Fraudulent Transfer Act, the Uniform Fraudulent Conveyance Act and Section 548
of the Federal Bankruptcy Code), and neither the Parent nor the Lessee has any
intent to
(a) hinder, delay or defraud any entity to which it is, or
will become, on or after the Closing Date, indebted, or
(b) incur debts that would be beyond any its ability to pay
as they mature.
1.20 CONSTRUCTION DOCUMENTS AND OTHER AGREEMENTS.
True and correct counterparts of each of the Approved Construction
Documents have been delivered to the Purchasers and the Collateral Trustee, and
there have been no alterations, modifications, amendments or changes of any
nature whatsoever to anyone or more of the Approved Construction Documents since
the respective dates of delivery thereof to the Purchasers and the Owner
Collateral Trustee. Neither the Lessee nor Parent has entered into any other
material contract, agreement or lease related to the Property or the Lease other
than the Lease, the Construction Agency Agreement and the Approved Construction
Documents.
1.21 QUALITY OF WORK.
All materials used in the construction and completion of the
Improvements are and shall be of the quality called for under the Plans and
Specifications and the other Approved Construction Documents as heretofore or
hereafter approved by the Purchasers and the Owner Collateral Trustee and the
Architect, all workmanship and construction has been and shall be good and
workmanlike in all respects.
1.22 WORK TO COMPLY.
The construction and completion of the Improvements to date have been
made and done, and all future construction and completion of the Improvements
shall be made and done, in strict adherence to the approved Plans and
Specifications, the other Approved Construction Documents, the applicable
Licenses and Permits, and any and all other Legal Requirements and any and all
covenants, conditions, restrictions or other matters affecting the same.
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1.23 REQUIRED LICENSES AND PERMITS.
All Licenses and Permits which are reasonably required in order to
complete the Project, but only to the extent now available given the status of
the development or required to allow the construction of the Improvements as
contemplated by the Approved Construction Documents, have been duly and properly
obtained. All such Licenses and Permits which are not presently available given
the status of the development shall be duly and properly obtained as soon as
possible and in a timely manner so as not to delay completion of such
Improvements and the use and occupation thereof. All such Licenses and Permits
once obtained shall remain in full force and effect and shall be complied with
in all respects.
1.24 CURB CUTS AND UTILITY CONNECTIONS.
All required curb cuts, utility connections and permits therefor either
(a) have been duly obtained and are in full force and effect or (b) will be duly
obtained and will be in full force and effect to allow the construction of the
Improvements as contemplated by the Approved Construction Documents. All utility
services as required by the Plans and Specifications for water, gas, electric,
telephone, sewer and storm drainage and sanitary waste disposal are and shall be
available as a matter of right and to an extent adequate to serve the
Improvements.
1.25 PROJECT BUDGET AMOUNTS.
The Project Budget sets forth and presents a full and complete
representation of all costs, expenses and fees which Lessee expects to pay to
complete the Improvements on or before the respective completion dates and to
fund any operating deficits of the Project through the Basic Term Commencement
Date.
1.26 REPRESENTATIONS WITH RESPECT TO THE LEASE.
(a) The Lease is presently in full force and effect and,
except as contemplated herein and in the other Owner Financing
Documents, has not been assigned, amended or modified in any way, nor
has the Leased Property been sublet in whole or in part.
(b) A true, correct and complete copy of the Lease is
attached hereto as Exhibit A.
(c) Neither the Lessee nor the Owner is in Default (as
defined in the Lease) under the Lease nor does any Event of Default (as
defined in the Lease) exist.
(d) Except as set forth on Part 1.26 of Annex 1, all
conditions under the Lease to be satisfied by Owner as of the date of
execution hereof (including, without limitation, all work, if any, to
be performed by Owner in the Leased Property) have been satisfied, and
all contributions, if any, required to be paid by Owner under the Lease
to date for the Improvements have been paid.
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(e) Except as set forth on Part 1.26 of Annex 1, the Lessee
is in possession of the Leased Property and is fully obligated to pay
and is paying the rent and other charges due under the Lease and is
fully obligated to perform and is performing all of its obligations
under the Lease.
(f) Except for Advances under the Construction Agency
Agreement, the Lease does not provide for payments (including, without
limitation, rent credit) by Owner to Lessee which are presently due and
payable, or which are due and payable in the future.
(g) As of the date of execution hereof, to the best of
Lessee's knowledge, there are no existing defenses or off-sets which
Lessee has against the enforcement of the Lease by Owner.
2. GENERAL COVENANTS OF THE LESSEE AND PARENT.
The Parent and the Lessee covenant and agree that, on and after the
Closing Date and for so long as any of Notes shall be outstanding:
2.1 MAINTENANCE OF PROPERTIES AND CORPORATE EXISTENCE, ETC.
The Parent and the Lessee will, and will cause each other Subsidiary
to:
(a) PROPERTY -- maintain its Property in good condition,
ordinary wear and tear and obsolescence excepted, and make all
necessary renewals, replacements, additions, betterments and
improvements thereto;
(b) INSURANCE -- maintain in full force and effect, with
financially sound and reputable insurers, insurance with respect to its
Property and business against such casualties and contingencies, of
such types and in such amounts as is customary in the case of
reasonable and prudent corporations of established reputations engaged
in the same or a similar business and similarly situated, provided that
any such Person may maintain one or more programs of self-insurance if
but only if (i) each such program is maintained in an amount, and in a
manner consistent, with the practices of reasonable and prudent
corporations of established reputations engaged in the same or a
similar business and similarly situated and (ii) each such program is
operated in accordance with sound financial practices with respect to
which adequate insurance reserves are maintained in respect thereof in
accordance with (A) GAAP and/or relevant national accounting standards
and practices, as the case may be, and (B) generally accepted prudent
insurance principles and practices; notwithstanding this Section 2.1(b)
the Lessee shall maintain insurance as required by the Lease and the
Owner Trust Indenture;
(c) FINANCIAL RECORDS -- keep accurate and complete books
of records and accounts in which accurate and complete entries shall be
made of all of its business transactions in accordance with sound
accounting principles consistently applied that
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permit the preparation of accurate and complete financial statements in
accordance with GAAP;
(d) EXISTENCE AND RIGHTS -- do or cause to be done all
things necessary
(i) to preserve and keep in full force and effect its
corporate existence and corporate rights and franchises,
except as otherwise provided in Section 2.7 and Section 2.8,
and
(ii) to preserve and keep in full force and effect
its patents, patent rights, trademarks, trademark rights,
service marks, service mark rights, trade names, trade name
rights, copyrights, licenses and permits, and other rights in
respect thereof, that are necessary for the ownership,
maintenance and operation of its businesses, in each case
free from all restrictions, except where the failure, either
individually or in the aggregate, so to preserve and keep (or
to preserve and keep free from all restrictions) could not
reasonably be expected to have a Material Adverse Effect; and
(e) COMPLIANCE WITH LAW, ETC. -- not be in violation of any
law, statute, ordinance, governmental rule, regulation or order to
which it is subject and not fail to obtain any license, certificate,
permit, franchise or other governmental authorization necessary to the
ownership of its Properties or to the conduct of its business if such
violations or failures to obtain, in the aggregate, could reasonably be
expected to have a Material Adverse Effect.
2.2 PAYMENT OF TAXES AND CLAIMS.
The Parent and the Lessee will, and will cause each other Subsidiary
(and each Affiliate with which it files a consolidated income tax return) to,
pay before they become delinquent
(a) all taxes, assessments and governmental charges or levies
imposed upon it or its Property, and
(b) all claims or demands of materialmen, mechanics,
carriers, warehousemen, vendors, repairmen, landlords, lessors and
other like Persons that, if unpaid, might result in the creation of a
Lien upon its Property,
provided, that items of the foregoing description need not be paid so long as
(i) such items are being actively contested in good
faith and by appropriate proceedings and adequate book
reserves have been established and maintained and exist with
respect thereto in accordance with GAAP, and
(ii) such items, in the aggregate, could not
reasonably be expected to have a Material Adverse Effect.
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2.3 NATURE OF BUSINESS.
The Parent and the Lessee will not, and will not permit any of the
other Subsidiaries to, engage in any business if, as a result, the general
nature of the business in which the Parent, the Lessee and the other Restricted
Subsidiaries, taken as a whole, would then be engaged would be substantially
changed from the general nature of the business in which the Parent, the Lessee
and the other Restricted Subsidiaries, taken as a whole, are engaged on the
Closing Date as described in the Placement Materials.
2.4 INTEREST COVERAGE RATIO.
The Parent shall at all times maintain a ratio of
(a) Consolidated EBIT
to
(b) Consolidated Interest Expense,
in each case determined at such time for the four (4) consecutive fiscal
quarters then most recently ended, equal to or greater than 2.50 to 1.00.
2.5 LEVERAGE RATIOS.
(a) CONSOLIDATED LEVERAGE RATIO. The Parent shall not permit
at any time the ratio of Consolidated Debt to Consolidated Total
Capitalization, in each case as determined at such time, to be greater
than .55 to 1.00.
(b) LESSEE LEVERAGE RATIO. The Parent and the Lessee shall
not permit at any time the ratio of Lessee Debt to Lessee Total
Capitalization, in each case as determined at such time, to be greater
than .60 to 1.00.
2.6 SALE OF ASSETS, ETC.
SALE OF ASSETS, ETC. The Parent and the Lessee will not, and will not
permit any of the other Restricted Subsidiaries to, make any Transfer, provided
that the foregoing restriction does not apply to a Transfer if:
(a) the property that is the subject of such Transfer
constitutes either (i) inventory held for sale or (ii) equipment,
fixtures, supplies or materials no longer required in the operation of
the business of the Parent, the Lessee or such other Restricted
Subsidiary or that is obsolete, and, in the case of any Transfer
described in clause (i) or clause (ii), such Transfer is in the
ordinary course of business (an "ORDINARY COURSE TRANSFER");
(b) either
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(i) such Transfer is from a Restricted Subsidiary to
the Parent, the Lessee or any other Restricted Subsidiary, or
(ii) such Transfer is from the Lessee to the Parent
or another Restricted Subsidiary
(each such Transfer, an "INTERGROUP TRANSFER"); or
(c) such Transfer is not an Ordinary Course Transfer or an
Intergroup Transfer (such transfers collectively referred to as
"EXCLUDED TRANSFERS"), and all of the following conditions shall have
been satisfied with respect thereto (the date of the consummation of
such Transfer of property being referred to herein as the "PROPERTY
DISPOSITION DATE"):
(i) such Transfer does not involve a Substantial
Portion;
(ii) in the good faith opinion of the Parent and, in
the case such Property is owned by the Lessee, the Lessee,
the Transfer is in exchange for consideration with a Fair
Market Value at least equal to that of the property
exchanged, and is in the best interests of the Parent and the
Lessee; and
(iii) immediately after giving effect to such
transaction no Default or Event of Default would exist.
2.7 DISPOSAL OF OWNERSHIP OF A RESTRICTED SUBSIDIARY.
The Parent and the Lessee will not, and will not permit any of the
other Restricted Subsidiaries to, sell or otherwise dispose of any shares of
Subsidiary Stock nor will the Lessee permit any such Restricted Subsidiary to
issue, sell or otherwise dispose of any shares of its own Subsidiary Stock
provided that the foregoing restrictions do not apply to:
(a) the issue of directors' qualifying shares by any such
Restricted Subsidiary;
(b) any such Transfer of Subsidiary Stock constituting an
Intergroup Transfer; and
(c) the Transfer of all of the Subsidiary Stock of a
Restricted Subsidiary owned by the Parent, the Lessee and its other
Restricted Subsidiaries if:
(i) such Transfer satisfies the requirements of
Section 2.6(c)(i) hereof;
(ii) in connection with such Transfer the entire
Investment (whether represented by stock, Debt, claims or
otherwise) of the Parent, the Lessee and its other Restricted
Subsidiaries in such Restricted Subsidiary is sold,
transferred or otherwise disposed of to a Person other than
(A) the Lessee,
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(B) another Restricted Subsidiary not being simultaneously
disposed of, or (C) an Affiliate; and
(iii) the Restricted Subsidiary being disposed of has
no continuing Investment in any other Restricted Subsidiary
of the Parent and the Lessee not being simultaneously
disposed of or in the Lessee.
For purposes of determining the book value of Property constituting Subsidiary
Stock being Transferred as provided in clause (c) above, such book value shall
be deemed to be the aggregate book value of the assets of the Restricted
Subsidiary which shall have issued such Subsidiary Stock.
2.8 MERGER, CONSOLIDATION, ETC.
Except as permitted under Section 2.6, the Parent and the Lessee will
not, and will not permit any of the other Restricted Subsidiaries to,
consolidate with or merge with any other corporation or convey, transfer or
lease substantially all of its assets in a single transaction or series of
transactions to any Person (except that a Restricted Subsidiary other than the
Lessee may consolidate with or merge into, or convey, transfer or lease
substantially all of its assets in a single transaction or series of
transactions to, another Restricted Subsidiary or the Parent), provided that the
foregoing restriction does not apply to the consolidation or merger of the
Parent or the Lessee with, or the conveyance, transfer or lease of substantially
all of the assets of the Parent or the Lessee in a single transaction or series
of transactions to, any Person so long as:
(a) the successor formed by such consolidation or the
survivor of such merger or the Person that acquires by conveyance,
transfer or lease substantially all of the assets of the Parent or the
Lessee as an entirety, as the case may be (the "SUCCESSOR
CORPORATION"), shall be a solvent corporation organized and existing
under the laws of the United States of America, any State thereof or
the District of Columbia;
(b) the Successor Corporation shall have executed and
delivered to each holder of Notes and the Owner Collateral Trustee, and
with respect to the assumption of the Lease and the Lease Guaranty, to
the Owner, its assumption of the due and punctual performance and
observance of each covenant and condition of this Agreement, the Lease
Guaranty and the Lease, as the case may be; and
(c) immediately after giving effect to such transaction:
(i) no Default or Event of Default would exist;
and
(ii) the Successor Corporation would have a Tangible
Net Worth equal to or in excess of the Tangible Net Worth of
the Parent or the Lessee, as the case may be, immediately
prior to the consummation of such transaction.
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No such conveyance, transfer or lease of substantially all of the assets of the
Parent or the Lessee shall have the effect of releasing the Parent, the Lessee
or any Successor Corporation from its respective liability under this Agreement,
the Lease or the Lease Guaranty.
2.9 TRANSACTIONS WITH AFFILIATES.
Neither the Parent nor the Lessee will, nor will they permit any other
Restricted Subsidiary to, enter into any transaction, including, without
limitation, the purchase, sale or exchange of Property or the rendering of any
service, with any Affiliate, provided, however, the Parent, the Lessee and the
other Restricted Subsidiaries may enter into a transaction with an Affiliate if
such transaction is entered into (a) in the ordinary course of business (unless
such transaction is with Mitsukoshi Limited in which case such transaction need
not be in the ordinary course of business), (b) pursuant to the reasonable
requirements of the Parent's, Lessee's or such other Restricted Subsidiary's
business and (c) upon fair and reasonable terms no less favorable to the Parent,
the Lessee or such other Restricted Subsidiary than it would obtain in a
comparable arm's-length transaction with a Person not an Affiliate.
2.10 PRIVATE OFFERING.
Neither the Parent not the Lessee will, nor will they permit any other
Subsidiary, Significant Affiliate or other Person acting on its behalf to, offer
the Notes or any part thereof or any similar Securities for issue or sale to, or
solicit any offer to acquire any of the same from, any Person so as to require
the registration of the Notes pursuant to the Securities Act.
2.11 PENSION PLANS.
(a) COMPLIANCE. The Parent and the Lessee will, and will
cause each ERISA Affiliate to, at all times with respect to each
Pension Plan, comply with all applicable provisions of ERISA and the
IRC, except for such failures to comply that, in the aggregate, could
not reasonably be expected to have a Material Adverse Effect.
(b) PROHIBITED ACTIONS. Neither the Parent not the Lessee
will nor will they permit any ERISA Affiliate to:
(i) engage in any "prohibited transaction" (as such
term is defined in section 406 of ERISA or section 4975 of
the IRC) or "reportable event" (as such term is defined in
section 4043 of ERISA) that could result in the imposition of
a tax or penalty;
(ii) incur with respect to any Pension Plan any
"accumulated funding deficiency" (as such term is defined in
section 302 of ERISA), whether or not waived;
(iii) terminate any Pension Plan in a manner that
could result in the imposition of a Lien on the Property of
the Lessee or any Restricted
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Subsidiary pursuant to section 4068 of ERISA or the creation
of any liability under section 4062 of ERISA;
(iv) fail to make any payment required by section 515
of ERISA;
(v) incur any withdrawal liability under Title IV of
ERISA with respect to any Multiemployer Plan or any liability
as a result of the termination of any Multiemployer Plan; or
(vi) incur any liability or suffer the existence of
any Lien on the Property of the Lessee or any ERISA
Affiliate, in either case pursuant to Title I or Title IV of
ERISA or pursuant to the penalty or excise tax or security
provisions of the IRC,
if the aggregate amount of the taxes, penalties, funding deficiencies,
interest, amounts secured by Liens, and other liabilities in respect of
any of the foregoing at any time could reasonably be expected to have a
Material Adverse Effect.
(c) FOREIGN PENSION PLANS. To the extent that the Parent,
the Lessee or any other Restricted Subsidiaries are subject to any
requirements of any Foreign Pension Plan, the Parent and the Lessee
will, and will cause each Restricted Subsidiary to, comply with such
requirements if the failure to so comply would have, either
individually or in the aggregate, a Material Adverse Effect.
2.12 RESTRICTED SUBSIDIARY DEBT.
The Parent will not permit any Restricted Subsidiary (including,
without limitation, the Lessee) and the Lessee will not and will not permit any
other Restricted Subsidiary to, directly or indirectly, incur or become liable
with respect to any Debt, except:
(a) ACCEPTABLE REVOLVING CREDIT FACILITIES -- Debt of the
Lessee and the other Restricted Subsidiaries outstanding from time to
time under Acceptable Revolving Credit Facilities;
(b) RESTRICTED SUBSIDIARY PURCHASE MONEY DEBT -- Debt of the
Lessee and the other Restricted Subsidiaries secured by Purchase Money
Liens, provided that the aggregate amount of such Debt outstanding at
any time does not exceed TwentyFive Million Dollars ($25,000,000);
(c) INTERCOMPANY DEBT -- Debt of the Lessee or another
Restricted Subsidiary owing to the Parent or another Restricted
Subsidiary;
(d) ADDITIONAL DEBT -- additional Debt of the Lessee and the
other Restricted Subsidiaries not otherwise permitted pursuant to this
Section 2.12, so long as the aggregate amount of such Debt does not
exceed Ten Million Dollars ($10,000,000);
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(e) JAPAN DEBT -- additional Debt of the Lessee and the other
Restricted Subsidiaries incurred in Yen, not in any event to exceed
Seven Billion Five Hundred Million Yen (Yen7,500,000,000) principal
amount outstanding at any time, to be used (i) to satisfy the Lessee's
trade payable obligation to Mitsukoshi Limited, (ii) to provide
financing for a new "Tiffany & Co." retail store in Tokyo, Japan and
(iii) for other general corporate purposes in Japan; and
(f) REPLACEMENT DEBT -- Debt incurred by the Lessee in
connection with the extension, renewal, replacement, refunding and
refinancing of all or part of the 7.52% Senior Notes Due January 31,
2003 of the Parent in the outstanding aggregate principal amount of
Fifty-One Million Five Hundred Thousand Dollars ($51,500,000) and the
6.375% Convertible Subordinated Debentures Due March 25, 2001 of the
Parent in the aggregate principal amount of Fifty Million Dollars
($50,000,000), provided that immediately after giving effect to the
incurrence of such Debt the aggregate principal amount of such Debt
shall not exceed the then outstanding principal amount of Debt subject
to such extension, renewal, replacement, refunding or refinancing.
2.13 LIENS.
(a) NEGATIVE PLEDGE. The Parent and Lessee will not, and will
not permit any Restricted Subsidiary, to cause or permit, or agree or
consent to cause or permit in the future (upon the happening of a
contingency or otherwise), any of their Property, whether now owned or
hereafter acquired, to be subject to a Lien except:
(i) Liens securing taxes, assessments or governmental
charges or levies, charges in connection with the Parent's,
the Lessee's or another Restricted Subsidiary's obligations
in respect of condominium common expenses or the claims or
demands of materialmen, mechanics, carriers, warehousemen,
landlords and other like Persons, provided the payment
thereof is not at the time required by Section 2.2 of this
Agreement;
(ii) Liens incurred or deposits made in the ordinary
course of business
(A) in connection with workmen's
compensation, unemployment insurance, social security
and other like laws, and
(B) to secure the performance of letters of
credit, bids, tenders, sales contracts, leases
(including a landlord's Lien arising under law and
the filing of a financing statement for informational
purposes to evidence a lessor's interest in Property
leased to the Parent, the Lessee or another
Restricted Subsidiary), statutory obligations, surety
and performance bonds (of a type other than set forth
in Section 2.13(a)(iii)(B)) of this Agreement) and
other similar obligations not incurred in connection
with the borrowing of money, the obtaining of
advances or the payment of the deferred purchase
price of Property,
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provided, that (I) such Liens do not in the aggregate
materially detract from the value of such Property
and (II) the record title of the Parent, the Lessee,
or such other Restricted Subsidiary, as the case may
be, to, and the right to use such property, is not
materially adversely affected thereby;
(iii) (A) attachments, judgments and other similar
Liens arising in connection with court proceedings,
provided 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
(B) Liens to secure appeal bonds,
supersedeas bonds and other similar Liens arising in
connection with court proceedings (including, without
limitation, surety bonds and letters of credit) or
any other instrument serving a similar purpose,
so long as the aggregate amount so secured by Liens
described in this Section 2.13(a)(iii) will not at
any time exceed Twenty-Five Million Dollars
($25,000,000);
(iv) Liens on Property of a Restricted Subsidiary,
provided such Liens secure only obligations owing to the
Parent, the Lessee or any other Restricted Subsidiary;
(v) reservations, exceptions, encroachments,
easements, rights-of-way, covenants, conditions,
restrictions, leases and other similar title exceptions or
encumbrances affecting real Property provided they (A) were
in existence at the time the Property was acquired by the
Parent, the Lessee or another Restricted Subsidiary and (B)
(I) do not in the aggregate materially detract from the value
of said Properties (in light of the Parent's intended use
thereof) or materially interfere with their use in the
ordinary conduct of the owning Person's business or (II) are
necessary for the use of such Properties;
(vi) Purchase Money Liens, if, after giving effect
thereto and to any concurrent transactions
(A) each such Purchase Money Lien secures
Debt in an amount not exceeding the lesser of
(I) the cost of acquisition or
construction (measured at the time of such
acquisition or construction) and
(II) the Fair Market Value (measured
at the time of such acquisition or
construction)
of the particular Property to which such Debt
relates;
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(B) the aggregate amount of all Debt secured
by such Purchase Money Liens then outstanding does
not exceed Twenty-Five Million Dollars ($25,000,000);
and
(C) immediately after giving effect thereto,
no Default or Event of Default would exist;
(vii) Liens existing on the Closing Date, more
specifically described on Part 2.13(a)(vii) of Annex 2 to
this Agreement, and any extension, renewal or refunding (or
successive extensions, renewals or refundings), in whole or
in part (but without increase in the aggregate amount of the
obligations secured by such Liens), thereof; provided,
however, that the Lien so extended, renewed or refunded is
limited to the same Property as was subject to the Lien so
extended, renewed or refunded immediately prior thereto; and
(viii) Liens incurred in the ordinary course of
business not securing Debt in favor of Persons supplying the
Lessee or any Restricted Subsidiary with precious metals on a
consignment basis, provided that such Liens cover only the
following Property of the Lessee or such Restricted
Subsidiary:
(A) gold and silver bullion, gold and silver
granule and other gold, silver, platinum or precious
metals in whatever form including all substitutions,
replacements and products in which any gold, silver,
platinum or precious metals are incorporated or into
which gold, silver, platinum or precious metals are
processed or converted, whether now or hereafter
owned or acquired by the Lessee or such Restricted
Subsidiary or in which the Lessee or such Restricted
Subsidiary now or hereafter acquires an interest, and
all proceeds and products of and accessions to the
foregoing; and
(B) all inventory now or hereafter owned by
Lessee or such Restricted Subsidiary or in which
Lessee or such Restricted Subsidiary now or hereafter
acquires an interest, including all merchandise,
returned and repossessed goods, raw materials, goods
in process, finished goods and proceeds therefor
(hereinafter called the "INVENTORY"), and all
accounts of the Lessee or such Restricted Subsidiary
including all accounts receivable, notes, drafts,
acceptances and other forms of obligations and
receivables now owned or hereafter arising from
Inventory sold or otherwise disposed of by the Lessee
or such Restricted Subsidiary and proceeds thereof
and all contract rights and proceeds of the
foregoing.
(b) EQUAL AND RATABLE LIEN; EQUITABLE LIEN. In case any
Property shall be subjected to a Lien in violation of this Section
2.13, the Parent and/or the Lessee will forthwith make or cause to be
made provision whereby the Guaranteed Obligations and the Lessee
Obligations will be secured equally and ratably with all other
obligations secured thereby pursuant to such agreements and instruments
as shall be
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approved by the Required Holders, and the Parent and/or the Lessee
shall cause to be delivered to each holder of a Note an opinion of
counsel to such effect, and in any such case the Owner's (and the
Assignee's) interest in the Lease Guaranty, the Lease and the
Construction Agency Agreement shall have the benefit, to the full
extent that, and with such priority as, the Owner (and the Assignee)
may be entitled thereto under applicable law, of an equitable Lien on
such Property securing the Lease Guaranty, the Lease and the
Construction Agency Agreement. Such violation of this Section 2.13 will
constitute an Event of Default hereunder, whether or not any such
provision is made pursuant to this Section 2.13(b).
(c) FINANCING STATEMENTS. The Parent and the Lessee will
not, and will not permit any other Restricted Subsidiary to, sign or
file a financing statement under the Uniform Commercial Code of any
jurisdiction that names the Parent, the Lessee or such other Restricted
Subsidiaries as debtor, or sign any security agreement authorizing any
secured party thereunder to file any such financing statement, except,
in any such case, a financing statement filed or to be filed to perfect
or protect a security interest that the Parent, the Lessee or such
other Restricted Subsidiaries is entitled to create, assume or incur,
or permit to exist, under the foregoing provisions of this Section
2.13.
2.14 RESTRICTED PAYMENTS AND RESTRICTED INVESTMENTS.
(a) LIMITATION. The Parent and Lessee will not, and will not
permit any of its other Restricted Subsidiaries to, declare, make or
incur any liability to make any Restricted Payment or make or authorize
any Restricted Investment unless immediately after giving effect to
such action:
(i) the sum of (A) the aggregate amount of Restricted
Investments (valued immediately after such action), plus (B)
the aggregate amount of Restricted Payments of the Parent,
the Lessee and the other Restricted Subsidiaries declared or
made during the period commencing on January 31, 1995, and
ending on the date such Restricted Payment or Restricted
Investment is declared or made, inclusive, would not exceed
the sum of
(I) Ten Million Dollars ($10,000,000) plus
(II) fifty percent (50%) of Consolidated Net
Income for such period (or minus one hundred percent
(100%) of Consolidated Net Income for such period if
Consolidated Net Income for such period is a loss),
plus
(III) the aggregate amount of Net Proceeds
of capital stock for such period; and
(ii) no Default or Event of Default would exist.
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(b) TIME OF PAYMENT. The Parent and the Lessee will not, nor
will they permit any of the other Restricted Subsidiaries to, authorize
a Restricted Payment that is not payable within sixty (60) days of
authorization.
2.15 RESTRICTIONS ON DIVIDENDS OF SUBSIDIARIES, ETC.
The Parent and the Lessee will not, and will not permit any of the
other Restricted Subsidiaries to, enter into any agreement which would restrict
any Restricted Subsidiary's (including, without limitation, the Lessee's)
ability or right to pay dividends to, or make advances to or Investments in, the
Parent or, if such Restricted Subsidiary is not directly owned by the Parent,
the "parent" Subsidiary of such Restricted Subsidiary.
3. ADDITIONAL COVENANTS AND AGREEMENTS RELATING TO THE LEASE AND
CONSTRUCTION AGENCY AGREEMENT
The Lessee covenants, acknowledges and agrees that, on and after the
Closing Date and for so long as any of Notes shall be outstanding:
3.1 THE LEASE AND CONSTRUCTION AGENCY AGREEMENT.
The Lessee
(a) is and shall remain (subject to the provisions of the
Financing Documents and/or the Construction Agency Agreement) the
"lessee" under the Lease and the "Agent" under the Construction Agency
Agreement,
(b) has received a true and correct copy of the Indentures,
the Mortgage, the Assignment of Leases and Rents, the Assignment of
Contracts, Licenses and Permits and each of the other Financing
Documents and
(c) consents to all of the terms and conditions of each of
the Indentures, the Mortgage, the Assignment of Leases and Rents, the
Assignment of Contracts, Licenses and Permits and each of the other
Financing Documents, and consents to the mortgage and assignment of the
Owner's interest in (i) the Lease pursuant to the Mortgage and the
Assignment of Leases and Rents and (ii) the Construction Agency
Agreement pursuant to the Assignment of Contracts, Licenses and
Permits.
3.2 CERTAIN PAYMENTS.
Subject to the terms and conditions of the Owner Trust Indenture,
Lessee will pay all Interim Rental, Base Rental and Additional Rental, all other
rent, all payments on account of any liquidated damages, indemnities and other
monies due, and to become due, under the Lease (collectively, the "LEASE
PAYMENTS") (whether expressed therein to be paid to either or any of the Owner,
as lessor under the Lease, to the Owner Collateral Trustee or the holders from
time to time of the Notes) and all other Payments when and as owing, all such
Payments to be made directly to the Owner Collateral Trustee as provided in
Section 5(d) of the Lease to be deposited in the Note Payment Account and such
Payments to be applied as
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provided for in Section 3.4 of the Owner Trust Indenture, and all without
offset, deduction, defense, deferment, abatement or diminution.
3.3 BENEFITS OF LEASE AND CONSTRUCTION AGENCY AGREEMENT.
Subject to the terms and conditions of the Owner Financing Documents,
the Owner Collateral Trustee shall be entitled to the benefits of, and to
receive and enforce performance of, all of the covenants, indemnities and
undertakings to be performed by, and obligations of, the "Lessee" under the
Lease and the "Agent" under the Construction Agency Agreement, as though the
Owner Collateral Trustee were named the "Owner" under the Lease and the
Construction Agency Agreement, notwithstanding whether the Owner Collateral
Trustee shall have any additional rights under such agreements.
3.4 NO ABATEMENT OR SET-OFF.
Notwithstanding anything to the contrary contained in the Lease or the
Construction Agency Agreement, the Lease Payments and all other payment
obligations (the Lease Payments and such other payment obligations herein
collectively referred to as the "PAYMENTS") of the Lessee under the Lease and
the Construction Agency Agreement shall not be subject to any abatement
whatsoever, and shall not be subject to any defense, set off, counterclaim or
recoupment whatsoever, whether by reason of defect in the Owner's title, or any
interruption from whatsoever cause in the use, enjoyment or possession of the
Leased Property or any part thereof, or any damage to or loss or destruction of
the Leased Property or any part thereof, or by reason of any other indebtedness
or liability, howsoever and whenever arising, of the Owner or any other Person,
to the Lessee or to any other Person, or for any cause whatsoever, it being the
intent hereof that the Lessee shall be unconditionally and absolutely obligated
to pay, to the Owner Collateral Trustee (as provided by Section 3.2 hereof), all
of the Payments, and the Lessee hereby agrees to indemnify the Owner Collateral
Trustee against any Liens, charges or claims of any nature whatsoever (other
than Liens, charges or claims created or incurred by the Owner Collateral
Trustee not arising out of the transactions contemplated by the Owner Financing
Documents) resulting from the Lessee's breach of its obligations under the
Lease. Without limiting the generality of the foregoing, the Lessee shall cause
the Owner Collateral Trustee to be named as an additional loss payee on all
casualty insurance policies required under the Owner Financing Documents and as
an additional insured on all liability insurance policies required under the
Owner Financing Documents.
3.5 CERTAIN RIGHTS OF OWNER COLLATERAL TRUSTEE.
The Owner Collateral Trustee shall have the sole right to exercise all
rights, privileges and remedies (either in its own name or in the name of the
Owner and for the use and the benefit of the Owner Collateral Trustee) which by
the terms of the Lease and the Construction Agency Agreement are permitted or
provided to be exercised by the Owner, whether or not the Owner Collateral
Trustee shall have any additional rights thereunder.
3.6 NO LIABILITY OF OWNER COLLATERAL TRUSTEE.
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The Owner Collateral Trustee shall not, by virtue of this Agreement or
any of the other Owner Financing Documents, be or become subject to any
liability or obligation under the Lease, the Construction Agency Agreement or
otherwise, other than liabilities and obligations in favor of the holders from
time to time of the Notes.
3.7 TERMINATION OF LEASE AND CONSTRUCTION AGENCY AGREEMENT UNDER
CERTAIN CIRCUMSTANCES.
If and for so long as any Default or Event of Default shall exist, the
Owner Collateral Trustee shall have the immediate and continuing right of Owner,
any provision to the contrary in the Lease notwithstanding, to
(a) exercise the rights of the Owner under the Lease to
terminate the Lease, without payment of any penalty or premium by the
Owner Collateral Trustee, and to take possession of the Leased Property
without the Owner Collateral Trustee being held liable to any Person;
and
(b) enforce the rights of the "Owner" under the Construction
Agency Agreement against the Lessee, any provision to the contrary in
the Construction Agency Agreement notwithstanding.
Such actions shall in no way diminish the Lessee's obligation under the Lease or
the Construction Agency Agreement or to make payment of the Termination Value or
any other fee or obligation under the Lease or the Construction Agency
Agreement.
3.8 REPRESENTATIONS, WARRANTIES AND COVENANTS UNDER LEASE AND
CONSTRUCTION AGENCY AGREEMENT.
The Lessee acknowledges and agrees that all of the representations,
warranties and covenants of the Lessee to the Owner under the Lease and the
Construction Agency Agreement shall extend to, and be deemed to have been made
directly to, the Owner Collateral Trustee and the Purchasers as of the Closing
Date.
3.9 AMENDMENTS, ETC. TO LEASE AND CONSTRUCTION AGENCY AGREEMENT.
Neither the Lease nor the Construction Agency Agreement shall be
amended, modified, subordinated, terminated or changed in any way, without the
consent of all holders of Notes (in the case of any such amendment,
modification, subordination, termination or other change affecting a payment
obligation of the Lessee) or the Required Holders (in the case any amendment,
modification, subordination or other change not affecting a payment obligation
of the Lessee), and any attempted amendment, modification, subordination,
termination or other change without such consent shall be void. In the event
that the Lease or the Construction Agency Agreement shall be amended as herein
permitted, the Lease and the Construction Agency Agreement as so amended shall
continue to be subject to the provisions of this Agreement without the necessity
of any further act by any of the parties hereto. The Lessee agrees to remain
obligated under the Lease in accordance with its terms and agrees not to take
any action to terminate (except as expressly permitted by the Lease), rescind or
avoid the Lease, notwithstanding any bankruptcy, insolvency,
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reorganization, liquidation, dissolution or other proceeding affecting the
lessor under the Lease, or any assignee of such lessor or any action with
respect to the Lease which may be taken by any trustee, receiver or liquidator
or by any court. Except as provided in the Lease, the Lessee waives all rights
at any time conferred by law to quit, terminate or surrender the Lease, or to
any abatement or deferment of all Payments, including without limitation,
Interim Rental, Base Rental and Additional Rental and any other sums payable
under the Lease.
3.10 ADDITIONAL OBLIGATIONS AND COVENANTS OF THE LESSEE.
The Lessee will
(a) execute, deliver and furnish all notices, certificates,
communications, instruments, agreements, legal opinions and other
documents and papers required to be executed, delivered or furnished by
it (or its counsel) to the Owner pursuant to the provisions of the
Lease and the Construction Agency Agreement, to the Owner Collateral
Trustee;
(b) do all such acts and execute and deliver all such
further assurances required to be done or executed and delivered by it
pursuant to the provisions of the Lease and the Construction Agency
Agreement; and
(c) not in any manner, whether by affirmative act or by
omission, prevent the Owner from performing all of its obligations
under the provisions of the Financing Documents.
3.11 NONDISTURBANCE. In the event it should become necessary to
foreclose the Mortgage or the Owner Collateral Trustee or any of the holders of
the Owner Notes should come into possession of the Leased Property, neither the
Owner Collateral Trustee nor any such holder will join the Lessee in any summary
or foreclosure proceedings unless required by law in order to obtain
jurisdiction, but in such event no judgment foreclosing the Lease will be
sought, and neither the Owner Collateral Trustee nor any such holder will
disturb the use and occupancy of Lessee under the Lease so long as, subject to
the rights of Lessee under Section 24(e) of the Lease, Lessee is not in default
with respect to any of the terms, covenants or conditions of the Lease and has
made all payments thereunder in accordance with this Agreement and the
Assignment of Leases and Rents. The Lessee shall not seek to be made an adverse
party or defendant in any action or proceeding brought to enforce or foreclose
the Mortgage.
3.12 ATTORNMENT.
The Lessee agrees that it will attorn to and recognize any purchaser at
a foreclosure sale under the Mortgage, any transferee who acquires the Leased
Property by deed in lieu of foreclosure or other similar conveyance (whether
under judicial authority or supervision or not), and the successors and assigns
of such purchaser or transferee, as its landlord for the unexpired balance (and
any extensions, if exercised) of the term of the Lease upon the same terms and
conditions as are set forth in the Lease. Such attornment shall be effective and
self-operative without the execution of any further instrument. The Lessee
agrees,
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however, to execute and deliver at any time and from time to time, upon the
request of any such purchaser (a) any instrument or certificate which, in the
reasonable judgment of such purchaser, may be necessary or appropriate in any
foreclosure proceeding or otherwise to evidence such attornment, and (b) an
instrument or certificate regarding the status of the Lease, consisting of
statements, if true (and if not true, specifying in what respect), (i) that the
Lease is in full force and effect, (ii) of the date through which rentals have
been paid, (iii) of the duration and the date of commencement of the terms of
the Lease, (iv) of the nature of any amendments or modifications to the Lease,
(v) that no default, or state of facts, which with the passage of time, or
notice, or both, would constitute a default, exists on the part of either party
to the Lease, and (vi) of the dates on which payments of Interim Rental, Base
Rental and Additional Rental are due under the Lease. Anything contained in the
Lease to the contrary notwithstanding, the Lessee shall have no right to
terminate or alter the terms of the Lease by reason of foreclosure of the
Mortgage or acquisition of title to the Leased Property by the Owner Collateral
Trustee.
3.13 RELEASE AND LIMITATION.
If the Owner Collateral Trustee or any transferee who acquires the
Leased Property as aforesaid succeeds to the interest of the Owner under the
Lease, the Owner Collateral Trustee and any such transferee shall not be:
(a) liable for any act or omission of any prior landlord
(including the Owner);
(b) liable for the return of any security deposit;
(c) subject to any offsets or defenses which the Lessee
might have against any prior landlord (including the Owner);
(d) bound by any payment made by the Lessee other than in
accordance with this Agreement;
(e) liable for the construction of the Improvements; or
(f) bound by any amendment or modification, or any sublease
(except a sublease permitted pursuant to section 19 of the Lease) of
the Lease made without the Owner Collateral Trustee's consent.
3.14 OWNER COLLATERAL TRUSTEE.
Notwithstanding anything herein to the contrary, Lessee
acknowledges and agrees that the rights of the Owner Collateral Trustee granted
to it hereunder shall not be deemed to place the Owner Collateral Trustee in
control of the Leased Property nor to make the Owner Collateral Trustee liable
for the obligations of the Owner under the Lease unless and until the Owner
Collateral Trustee obtains actual possession of the Leased Property.
3.15 INDEMNITY. Owner Collateral Trustee shall be under no
obligation to take any action to protect, preserve or enforce any rights or
interests in, the Lease, the
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Construction Agency Agreement, the Leased Property or otherwise hereunder,
whether on its own motion or on the request of any other Person, that in the
opinion of Owner Collateral Trustee may involve loss, liability or expense to
it, unless the Lessee, the Parent or one or more of the holders of the Owner
Notes shall offer and furnish reasonable security or indemnity against loss,
liability and expense to Owner Collateral Trustee. Notwithstanding anything to
the contrary contained in this Agreement or any of the other Owner Financing
Documents, in the event that Owner Collateral Trustee is entitled or required to
commence an action to foreclose the Lease or the Leased Property or otherwise
exercise its remedies to acquire control or possession of the Leased Property,
Owner Collateral Trustee shall not be required to commence any such action or
exercise any such remedy if Owner Collateral Trustee has determined in good
faith that Owner Collateral Trustee may incur liability under any Environmental
Legal Requirements as the result of the presence at, or release on or from, the
Leased Property of any hazardous materials or substances unless Owner Collateral
Trustee has received security or indemnity from a Person in an amount and in a
form satisfactory to Owner Collateral Trustee in its sole discretion, protecting
Owner Collateral Trustee from all such liability.
3.16 SUBJECT TO THE INDENTURE. Any and all rights granted to Owner
Collateral Trustee under this Agreement are to be held and exercised by Owner
Collateral Trustee as Collateral Trustee under the Owner Trust Indenture for the
benefit of the holders of the Owner Notes. To the extent set forth in the Owner
Financing Documents, each of the holders of the Owner Notes shall be a
beneficiary of the terms of this Agreement. Any and all obligations of parties
to this Agreement, and the rights granted to the holders of the Owner Notes
under this Agreement, are created and granted subject to the terms of the Owner
Trust Indenture. Nothing in this Agreement expressed or implied is intended or
shall be construed to give to any Person other than Owner, the holders of the
Owner Notes and Owner Collateral Trustee any legal or equitable right, remedy or
claim under or in respect of this Agreement or any covenant, condition or
provision herein contained, and all such covenants, conditions and provisions
are and shall be held to be for the sole and exclusive benefit of Owner, the
holders of the Owner Notes and Owner Collateral Trustee.
4. ADDITIONAL COVENANTS AND AGREEMENTS RELATING TO THE LEASE
GUARANTY
The Parent covenants, acknowledges and agrees that, on and after the
Closing Date and for so long as any of its obligations under the Parent shall be
outstanding:
4.1 THE LEASE GUARANTY.
The Parent
(a) is and shall remain (subject to the provisions of the
Owner Financing Documents) the "Guarantor" under the Lease Guaranty,
(b) has received a true and correct copy of the Indentures,
the Mortgage, the Assignment of Leases and Rents, the Assignment of
Contracts, Licenses and Permits and each of the other Financing
Documents and
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(c) consents to all of the terms and conditions of each of
the Indentures, the Mortgage, the Assignment of Leases and Rents, the
Assignment of Contracts, Licenses and Permits and each of the other
Financing Documents, and consents to the mortgage and assignment of the
Owner's interest in the Lease, the Construction Agency Agreement and
the Lease Guaranty pursuant to the Mortgage and the Assignment of
Leases and Rents.
4.2 CERTAIN PAYMENTS.
(a) Subject to the terms and conditions of the Owner Trust
Indenture and Section 4.2(b) immediately below, the Parent will pay all
Guaranteed Obligations (whether expressed therein to be paid to either
or any of the Owner, as lessor under the Lease, or to the Owner
Collateral Trustee or the holders from time to time of the Notes) when
and as owing, all such payments to be made directly to the Owner
Collateral Trustee in the manner, and to be applied as, provided in the
Owner Trust Indenture, and all without offset, deduction, defense,
deferment, abatement or diminution.
(b) As provided in Section 4.2(a) immediately above, the
Parent acknowledges and agrees that, upon the request of the Owner
Collateral Trustee, it will pay all or a portion of the Guaranteed
Obligations under the Lease Guaranty directly to the Owner Collateral
Trustee in the manner provided for payments in the Owner Trust
Indenture in satisfaction of the obligations of the Owner under the
Notes in accordance with Section 7.10 of the Owner Trust Indenture.
4.3 BENEFITS OF LEASE GUARANTY.
Subject to the terms and conditions of the Owner Financing Documents,
the Owner Collateral Trustee shall be entitled to the benefits of, and to
receive and enforce performance of, all of the covenants, indemnities and
undertakings to be performed by, and obligations of, the Parent under the Lease
Guaranty, as though the Owner Collateral Trustee were named therein as the
"Owner" notwithstanding whether the Owner Collateral Trustee shall have any
additional rights thereunder.
4.4 NO ABATEMENT OR SET-OFF.
Notwithstanding anything to the contrary contained in the Lease
Guaranty, the Guaranteed Obligations shall not be subject to any abatement
whatsoever, and shall not be subject to any defense, set off, counterclaim or
recoupment whatsoever, whether by reason of defect in the Owner's title, or any
interruption from whatsoever cause in the use, enjoyment or possession of the
Leased Property or any part thereof, or any damage to or loss or destruction of
the Leased Property or any part thereof, or by reason of any other indebtedness
or liability, howsoever and whenever arising, of the Owner or any other Person,
to the Parent, the Lessee or to any other Person, or for any cause whatsoever,
it being the intent hereof that the Parent shall be unconditionally and
absolutely obligated to pay, to the Owner Collateral Trustee (as provided by
Section 4.2 hereof), all of the Guaranteed Obligations.
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4.5 CERTAIN RIGHTS OF OWNER COLLATERAL TRUSTEE.
The Owner Collateral Trustee shall have the sole right to exercise all
rights, privileges and remedies (either in its own name or in the name of the
Owner and for the use and the benefit of the Owner Collateral Trustee) which by
the terms of the Lease Guaranty are permitted or provided to be exercised by the
Owner, whether or not the Owner Collateral Trustee shall have any additional
rights thereunder.
4.6 NO LIABILITY OF OWNER COLLATERAL TRUSTEE.
The Owner Collateral Trustee shall not, by virtue of this Agreement or
any of the other Owner Financing Documents, be or become subject to any
liability or obligation under the Lease Guaranty or otherwise, other than
liabilities and obligations in favor of the holders from time to time of the
Notes.
4.7 TERMINATION OF LEASE UNDER CERTAIN CIRCUMSTANCES; PAYMENT OF
GUARANTEED OBLIGATIONS.
If and for so long as any Default or Event of Default shall exist, the
Owner Collateral Trustee shall have the immediate and continuing right to
exercise any and all rights of the Owner under the Lease Guaranty. Such actions
shall in no way diminish the Lessee's obligation under the Lease or the
Construction Agency Agreement nor diminish the Parent's obligations under the
Lease Guaranty to make payment of the Guaranteed Obligations or any other fee or
obligation under the Lease Guaranty or in any way diminish any other of the
Parent's obligations under the Lease Guaranty
4.8 REPRESENTATIONS, WARRANTIES AND COVENANTS UNDER LEASE
GUARANTY.
The Parent acknowledges and agrees that all of the representations,
warranties and covenants of the Parent to the Owner under the Lease Guaranty
shall extend to, and be deemed to have been made directly to, the Owner
Collateral Trustee and the Purchasers as of the Closing Date.
4.9 AMENDMENTS, ETC. TO LEASE GUARANTY.
The Lease Guaranty shall not, without the prior written consent of all
holders of Notes, be amended, modified, subordinated, terminated or changed in
any way, and any attempted amendment, modification, subordination, termination
or other change without such consent shall be void. In the event that the Lease
Guaranty shall be amended as herein permitted, the Lease Guaranty as so amended
shall continue to be subject to the provisions of this Agreement without the
necessity of any further act by any of the parties hereto.
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4.10 ADDITIONAL OBLIGATIONS OF THE PARENT.
The Parent will
(a) execute, deliver and furnish all notices, certificates,
communications, instruments, agreements, legal opinions and other
documents and papers required to be executed, delivered or furnished by
it (or its counsel) to the Owner pursuant to the provisions of the
Lease Guaranty, to the Owner Collateral Trustee;
(b) do all such acts and execute and deliver all such
further assurances required to be done or executed and delivered by it
pursuant to the provisions of the Lease Guaranty; and
(c) not in any manner, whether by affirmative act or by
omission, prevent the Owner from performing all of its obligations
under the provisions of the Financing Documents.
5. INFORMATION AS TO PARENT
5.1 FINANCIAL AND BUSINESS INFORMATION.
The Parent and the Lessee will deliver to each holder of Notes:
(a) QUARTERLY STATEMENTS -- as soon as available after the
end of each fiscal quarter in each fiscal year of the Lessee (other
than the last such fiscal quarter of each such fiscal year), and in any
event within ninety (90) days thereafter,
(i) a balance sheet of the Lessee and consolidated
balance sheets of (A) the Parent and its consolidated
subsidiaries and (B) the Parent and the Restricted
Subsidiaries, in each case as at the end of such fiscal
quarter, and
(ii) consolidated statements of operations,
shareholders' equity and cash flows, of (A) the Parent and
its consolidated subsidiaries and (B) the Parent and its
Restricted Subsidiaries, in each case for such fiscal
quarter,
setting forth in each case, in comparative form, the figures for the
corresponding periods in the immediately preceding fiscal year, all in
reasonable detail, prepared in accordance with GAAP applicable to
quarterly financial statements generally and certified as complete and
correct, subject to changes resulting from year-end adjustments, by a
Senior Financial Officer of the Parent, and accompanied by the
certificate required by Section 5.2;
(b) ANNUAL STATEMENTS -- as soon as available after the end
of each fiscal year of the Lessee, and in any event within one hundred
twenty (120) days thereafter,
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(i) a balance sheet of the Lessee and consolidated
balance sheets of (A) the Parent and its consolidated
subsidiaries and (B) the Parent and the Restricted
Subsidiaries, in each case, as at the end of such fiscal
year, and
(ii) consolidated statements of operations,
shareholders' equity and cash flows of, the (A) the Parent
and its consolidated subsidiaries and (B) the Parent and its
Restricted Subsidiaries,, as at the end of such fiscal year,
and, in each case for such fiscal year,
setting forth in each case, in comparative form, the figures for the
immediately preceding fiscal year, all in reasonable detail, prepared
in accordance with GAAP and certified as complete and correct by a
Senior Financial Officer of the Parent, and accompanied by
(I) an opinion of independent certified public
accountants of recognized national standing, which opinion
shall, without qualification (including, without limitation,
qualifications related to the scope of the audit or the
ability of the Parent, the Lessee or any other Subsidiary to
continue as a going concern), state that such financial
statements delivered pursuant to (b)(i)(A) and (b)(ii)(A) of
this Section 5.1 present fairly, in all material respects,
the financial position of the companies being reported upon
and their results of their operations and their cash flows
and have been prepared in conformity with GAAP, and that the
examination of such accountants in connection with such
financial statements has been made in accordance with
generally accepted auditing standards, and that such audit
provides a reasonable basis for such opinion in the
circumstances,
(II) a certification by a Senior Financial Officer of
the Parent that such consolidated statements are complete and
correct, and
(III) the certificates required by Section 5.2 and
Section 5.3 hereof;
(c) AUDIT REPORTS -- promptly upon receipt thereof, a copy
of each final report submitted to the Parent, the Lessee or any other
Subsidiary by independent accountants in connection with any annual,
interim or special audit made by them of the books of the Parent, the
Lessee or any other Subsidiary;
(d) SEC AND OTHER REPORTS -- promptly (and in any event,
within fifteen (15) days) upon their becoming available, one copy of
each financial statement, report, notice or proxy statement sent by the
Parent, the Lessee or any other Subsidiary to stockholders generally,
and of each regular or periodic report and any registration statement,
prospectus or written communication (other than transmittal letters and
routine correspondence and comment letters), and each amendment
thereto, in respect thereof filed by the Parent, the Lessee or any
other Subsidiary with, or received by, such Person in connection
therewith from, the National Association of Securities Dealers, any
securities exchange or the Securities and Exchange Commission or any
successor agency (other than any Form S-8 filed with the Securities and
Exchange Commission), and all press releases and other
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statements made available by the Parent, the Lessee or any other
Subsidiary to its shareholders or to any class of its Voting Stock
generally and to financial analysts and financial publications
concerning material developments in the business of the Parent, the
Lessee or any other Subsidiary;
(e) ERISA --
(i) immediately upon becoming aware of the occurrence
of any
(A) "reportable event" (as defined in
section 4043 of ERISA),
or
(B) "prohibited transaction" (as defined in
section 406 of ERISA or section 4975 of the IRC),
in connection with any Pension Plan or any trust created
thereunder, a written notice specifying the nature thereof,
what action the Parent or the Lessee, as the case may be, is
taking or proposes to take with respect thereto and, when
known, any action taken by the IRS, the Department of Labor
or the PBGC with respect thereto; and
(ii) prompt written notice of and, where applicable,
a description of
(A) any notice from the PBGC in respect of
the commencement of any proceedings pursuant to
section 4042 of ERISA to terminate any Pension Plan
or for the appointment of a trustee to administer any
Pension Plan,
(B) any distress termination notice
delivered to the PBGC under section 4041 of ERISA in
respect of any Pension Plan, and any determination of
the PBGC in respect thereof,
(C) the placement of any Multiemployer Plan
in reorganization status under Title IV of ERISA,
(D) any Multiemployer Plan becoming
"insolvent" (as defined in section 4245 of ERISA)
under Title IV of ERISA, and
(E) the whole or partial withdrawal of the
Lessee or any ERISA Affiliate from any Multiemployer
Plan and the withdrawal liability incurred in
connection therewith;
(f) CERTAIN ENVIRONMENTAL MATTERS -- prompt written notice
of and a description of any event or circumstance that, had such event
or circumstance occurred or existed immediately prior to the Closing
Date, would have been required to be disclosed as an exception to any
statement set forth in Section 1.13 hereof;
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(g) NOTICE OF DEFAULT OR EVENT OF DEFAULT -- within five
(5) days of a Senior Financial Officer of the Lessee or Parent becoming
aware of the existence of any condition or event that constitutes a
Default, an Event of Default, a written notice specifying the nature
and period of existence thereof and what action the Parent or the
Lessee, as the case may be, is taking or proposes to take with respect
thereto;
(h) NOTICE OF CLAIMED DEFAULT -- within five (5) days of a
Senior Financial Officer of the Lessee or the Parent becoming aware
that the holder of any Note, or of any Debt of the Parent, the Lessee
or any other Subsidiary, shall have given notice or taken any other
action with respect to a claimed Default, Event of Default or default
or event of default, a written notice specifying the notice given or
action taken by such holder and the nature of the claimed Default,
Event of Default or default or event of default and what action the
Parent or the Lessee, as the case may be, is taking or proposes to take
with respect thereto;
(i) ACTIONS, PROCEEDINGS -- promptly after the commencement
thereof, written notice of any action or proceeding relating to the
Parent, the Lessee or any other Subsidiary in any court or before any
Governmental Authority or arbitration board or tribunal as to which
there is a reasonable possibility of an adverse determination and that,
if adversely determined, is reasonably likely to have a Material
Adverse Effect;
(j) RULE 144A -- promptly upon request to any holder of a
Note (and to any "qualified institutional buyer" (as defined in Rule
144A) to whom such Note may be offered or sold by such holder), the
information required under paragraph (d)(4) of Rule 144A (or any
similar successor provision of Rule 144A) to permit compliance with
Rule 144A in connection with a resale of such Note, if such compliance
is required; and
(k) REQUESTED INFORMATION -- with reasonable promptness,
such other data and information (including, without limitation, each
so-called "management letter" or similar analysis submitted to the
Parent, the Lessee or any other Subsidiary by their respective
independent accountants) as from time to time may be reasonably
requested by any holder of Notes.
5.2 OFFICER'S CERTIFICATES.
Each set of financial statements delivered to each holder of Notes
pursuant to Section 5.1(a) or Section 5.1(b) shall be accompanied by a
certificate of a Senior Financial Officer of the Parent, setting forth:
(a) COVENANT COMPLIANCE -- the information (including
calculations in reasonable detail) required in order to establish
whether the Parent and the Lessee were in compliance with the
requirements of Section 2.4 through Section 2.7, inclusive, Section
2.12 and Section 2.13 during the period covered by the financial
statements then being furnished (including with respect to each such
Section, where applicable, the calculations of the maximum or minimum
amount, ratio or percentage,
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as the case may be, permissible under the terms of such Sections, and
the calculation of the amount, ratio or percentage then in existence);
and
(b) EVENT OF DEFAULT -- a statement that the signer has
reviewed the relevant terms of the Financing Documents and has made, or
caused to be made, under his or her supervision, a review of the
transactions and conditions of the Parent and its subsidiaries from the
beginning of the accounting period covered by the income statements
being delivered therewith to the date of the certificate and that such
review shall not have disclosed the existence during such period of any
condition or event that constitutes a Default or an Event of Default
or, if any such condition or event existed or exists, specifying the
nature and period of existence thereof and what action the Parent or
the Lessee, as the case may be, shall have taken or proposes to take
with respect thereto.
5.3 ACCOUNTANTS' CERTIFICATES.
Each set of annual financial statements delivered pursuant to Section
5.1(b)(i)(A) and Section 5.1(b)(ii)(A) shall be accompanied by a certificate of
the accountants who were engaged to audit such financial statements, stating
whether in making the examination necessary for the audit of such financial
statements, such accountants have become aware of any condition or event that
then constitutes a Default or an Event of Default and, if such accountants are
aware that any such condition or event then exists, specifying the nature and
period of existence thereof.
5.4 INSPECTION.
The Parent and the Lessee will permit the representatives of each
holder of Notes, at the expense of the Parent and the Lessee at any time when a
Default or Event of Default exists, and otherwise at the expense of such holder,
to visit and inspect the Properties of the Parent, the Lessee or any of the
other Subsidiaries (including, without limitation, the Leased Property), to
examine all their respective books of account, records, reports and other
papers, to make copies and extracts therefrom, and to discuss their respective
affairs, finances and accounts with their respective officers, managers,
employees and present and former independent public accountants (and by this
provision the Parent and the Lessee authorize said accountants to discuss the
finances and affairs of the Parent, the Lessee and the other Subsidiaries) all
at such reasonable times and as often as may be reasonably requested.
5.5 CONFIDENTIAL INFORMATION.
Each holder of Notes will employ reasonable procedures and standards
designed to maintain the confidential nature of all data and information that in
the future is furnished to or obtained by such holder pursuant to Section 5.1
and Section 5.4 (provided that a holder of Notes shall be deemed to have
complied with the foregoing requirement if in respect of such data and
information such holder shall employ its customary business practices as used
respecting its own proprietary business records), except such data and
information that was or is available to the public, or was not or is not treated
as confidential by any one
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or more of the Parent, the Lessee or the other Subsidiaries. Notwithstanding the
foregoing, any holder of Notes may disclose such data and information:
(a) the disclosure of which is, in its sole good faith
business and/or legal judgment, required in connection with regulatory
requirements (including, without limitation, the requirements of the
National Association of Insurance Commissioners) or other legal
requirements related to its affairs, including, without limitation, the
disclosure of such data and information in connection with or in
response to (i) compliance with any law, ordinance or governmental
order, regulation, rule, policy, subpoena, investigation or request, or
(ii) any order, decree, judgment, subpoena, notice of discovery or
similar ruling, or pleading issued, filed, served or purported on its
face to be issued, filed or served (A) by or under authority of any
court, tribunal, arbitration board or any governmental agency,
commission, authority, board or similar entity or (B) in connection
with any proceeding (including, without limitation, any proceeding to
enforce the obligations of the Parent or the Lessee under this
Agreement or any other Financing Document), cause or matter pending (or
on its face purported to be pending) before any court, tribunal,
arbitration board or any governmental agency, commission, authority,
board or similar entity provided the Parent is given reasonable prior
written notice of any disclosure to be made under clause (i) or clause
(ii) so that the Parent may take appropriate action to protect the
confidentiality of such data and information, notwithstanding such
disclosure;
(b) to any one or more of its employees, officers, directors,
agents, attorneys, accountants or professional consultants who would
have access to such data and information in the normal course of the
performance of such Person's duties for such holder, so long as such
holder employs reasonable procedures and standards designed to maintain
the confidential nature of all such data and information that is
disclosed to such Persons (provided that such holder shall be deemed to
have complied with the foregoing requirement if in respect of such data
and information such holder shall employ the customary business
practices as used by such disclosing holder respecting its own
proprietary business records);
(c) to Moody's, Standard & Poor's or any other nationally
recognized financial rating service that is reviewing the credit rating
of any holder of Notes or is rating or reviewing the rating of the
Notes; provided it shall be advised of the confidential nature of such
data and information prior to such disclosure; and
(d) to any prospective purchaser, securities broker or dealer
or investment banker (who shall have agreed in writing, prior to such
disclosure, to be bound by the provisions of this Section 5.5) in
connection with the resale or proposed resale of all or any portion of
the Notes by such holder.
No holder of Notes will be liable for the breach of this Section 5.5 by any
other holder of Notes or by any Person to which any confidential data or
information shall be delivered in accordance with this Section 5.5.
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6. INTERPRETATION OF THIS AGREEMENT
6.1 TERMS DEFINED.
As used herein, the following terms have the respective meanings set
forth below or set forth in the Section or other part hereof referred to
following such term or in the Definition Appendix attached hereto.
ACCEPTABLE REVOLVING CREDIT FACILITY -- means that certain Credit
Agreement, dated as of June 26, 1995, by and among the Parent, Lessee, Tiffany &
Co. International and the other Subsidiaries a party thereto, the Bank of New
York, as Issuing Bank and Swingline Lender, the Bank of New York as Arranging
Agent, the Bank of New York as Administrative Agent and the Lenders a party
thereto and any renewal, replacement, extension, refinancing or refunding
thereof so long as such renewal, replacement, refinancing or refunding is a
revolving credit facility established for the purpose of providing the Parent
and one or more of its Subsidiaries with working capital.
ADDITIONAL RENTAL -- has the meaning assigned to such term in the
Lease.
AFFILIATE -- means, at any time, a Person (other than a Restricted
Subsidiary)
(a) that directly or indirectly through one or more
intermediaries Controls, or is Controlled by, or is under common
Control with, the Parent,
(b) that beneficially owns or holds five percent (5%) or more
of the Voting Stock of the Parent,
(c) five percent (5%) or more of the Voting Stock (or in the
case of a Person that is not a corporation, five percent (5%) or more
of the Equity) of which is beneficially owned or held by the Parent or
a Restricted Subsidiary, or
(d) that is an officer or director of the Parent, the Lessee
or any other Subsidiary, at such time.
As used in this definition:
Control -- means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.
AGREEMENT, THIS -- means this Agreement and Consent to Assignment, as
it may be amended and restated from time to time.
APPROVED CONSTRUCTION DOCUMENTS -- has the meaning assigned to such
term in the Lease.
ARCHITECT -- has the meaning assigned to such term in the Definition
Appendix.
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ASSIGNEE -- has the meaning assigned to such term in the Lease.
ASSIGNMENT OF CONTRACTS, LICENSES AND PERMITS -- has the meaning
assigned to such term in the Definition Appendix.
ASSIGNMENT OF LEASES AND RENTS -- has the meaning assigned to such term
in the Definition Appendix.
BASE RENTAL -- has the meaning assigned to such term in the Lease.
BASIC TERM COMMENCEMENT DATE -- has the meaning assigned to such term
in the Definition Appendix.
BENEFICIARY COLLATERAL TRUSTEE -- introductory paragraph.
BENEFICIARY GUARANTY -- has the meaning assigned to such term in the
Definition Appendix.
BENEFICIARY NOTE PURCHASE AGREEMENT -- Recital C.
BENEFICIARY NOTES -- Recital D.
BENEFICIARY TRUST INDENTURE -- introductory paragraph.
BENEFICIARY TRUSTEE -- introductory paragraph.
BUSINESS DAY -- has the meaning assigned to such term in the Definition
Appendix.
CAPITAL LEASE -- means, at any time, a lease with respect to which the
lessee thereunder is required to recognize in accordance with GAAP the
acquisition of an asset and the incurrence of a liability at such time.
CLOSING -- has the meaning assigned to such term in the Definition
Appendix.
CLOSING DATE -- has the meaning assigned to such term in the Definition
Appendix.
COLLATERAL TRUSTEE -- introductory paragraph.
CONSOLIDATED DEBT -- means, at any time, the aggregate amount of Debt
of the Parent, the Lessee and the other Restricted Subsidiaries, determined at
such time after eliminating intercompany transactions among the Parent, the
Lessee and the other Restricted Subsidiaries.
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CONSOLIDATED EBIT -- means, for any period, the sum of
(a) Consolidated Net Income, plus
(b) the aggregate amount (to the extent, and only to the
extent, that such aggregate amount was deducted in the computation of
Consolidated Net Income for such period), of
(i) income tax expense and
(ii) Consolidated Interest Expense,
in each case accrued for such period by the Parent, the Lessee and the other
Restricted Subsidiaries, determined on a consolidated basis for such Persons.
CONSOLIDATED INTEREST EXPENSE -- means, for any period, the amount of
interest accrued on, or with respect to, Consolidated Debt for such period,
including, without limitation, amortization of debt discount and imputed
interest on Capital Leases.
CONSOLIDATED NET INCOME -- means, for any period, net earnings (or
loss) after income taxes of the Parent, the Lessee and the other Restricted
Subsidiaries, determined on a consolidated basis for such Persons in accordance
with GAAP for such period.
CONSOLIDATED SHAREHOLDERS EQUITY -- means at any time, shareholders
equity of the Parent, the Lessee and the other Restricted Subsidiaries at such
time, determined on a consolidated basis for such Persons in accordance with
GAAP.
CONSOLIDATED TOTAL ASSETS -- means at any time the total assets of the
Parent, the Lessee and the other Restricted Subsidiaries that would be shown as
assets on a consolidated balance sheet of the Parent, the Lessee and its other
Restricted Subsidiaries prepared in accordance with GAAP as of such time.
CONSOLIDATED TOTAL CAPITALIZATION -- means, at any time, the sum of
(a) Consolidated Debt, plus
(b) Consolidated Shareholders Equity
in each case determined at such time.
CONSTRUCTION AGENCY AGREEMENT -- has the meaning assigned to such term
in the Definition Appendix.
CONTROLLED SUBSTANCES -- means any substances or materials, the
presence of which may allow forfeiture of property pursuant to 21 U.S.C. Section
881, as amended from time to time.
DEBT -- means, at any time, with respect to any Person, without
duplication:
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(a) its liabilities for borrowed money (whether or not
evidenced by a Security);
(b) any obligations in respect of any Capital Lease of such
Person;
(c) any liabilities for borrowed money secured by any Lien
existing on Property owned by such Person (whether or not such
liabilities have been assumed);
(d) the present value of all payments due under any
arrangement for retention of title or any conditional sale agreement
(other than a Capital Lease) discounted at the implicit rate, if known,
with respect thereto or, if unknown, at five percent (5%) per annum;
(e) all obligations of such Person in respect of banker's
acceptances, other acceptances, letters of credit and other instruments
serving a similar function issued or accepted by banks and other
financial institutions for the account of such Person (whether or not
incurred in connection with the borrowing of money), but in no event
including any contingent obligations in respect of any such items
incurred in the ordinary course of business to obtain, or facilitate
the obtaining, of trade credit for the purchase of goods by such
Person; and
(f) any Guaranty of such Person of any obligation or
liability constituting Debt of another Person.
DEBT PREPAYMENT APPLICATION -- means, with respect to any Transfer of
property, the application by the Lessee or the other Restricted Subsidiaries,
within the one hundred eighty (180) day period following the consummation of
such Transfer, of cash in an amount equal to the Net Proceeds Amount with
respect to such Transfer to the prepayment of the principal of Debt of the
Lessee or such other Restricted Subsidiaries in accordance with the terms hereof
and of each agreement and instrument relating to such Debt (other than Debt
owing to the Parent, the Lessee or any of the other Restricted Subsidiaries or
any Affiliate and Debt in respect of any revolving credit or similar credit
facility providing the Lessee or any of the Restricted Subsidiaries 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 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 Debt).
DEFAULT -- has the meaning assigned to such term in either or both of
the Indentures.
DEFINITION APPENDIX -- means the Definition Appendix attached hereto.
DISPOSITION VALUE -- means, at any time, with respect to any Property
(a) in the case of Property that does not constitute
Subsidiary Stock, the book value thereof, valued at the time of such
disposition in good faith by the Parent and the Lessee, and
(b) in the case of property that constitutes Subsidiary
Stock, an amount equal to that percentage of book value of the assets
of the Restricted Subsidiary that issued such stock as is equal to the
percentage that the book value of such
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Subsidiary Stock represents of the book value of all of the outstanding
capital stock of such Restricted 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 at
the time of the disposition thereof, in good faith by the Parent.
DOLLARS OR $ -- means United States dollars.
ENVIRONMENTAL LEGAL REQUIREMENTS -- has the meaning assigned to such
term in the Definition Appendix.
EQUITY -- means ownership interests (including, without limitation,
capital stock of any class or classes, general or limited partnership interests
or other distributive interests) of or in a corporation, partnership or other
Person, the holders, members or owners of which are ordinarily, in the absence
of contingencies, entitled to elect corporate directors (or Persons performing
similar functions) or otherwise control fundamental operations and changes in
such corporation, partnership or Person.
ERISA -- means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
ERISA AFFILIATE -- means any corporation or trade or business that:
(a) is a member of the same controlled group of corporations
(within the meaning of section 414(b) of the IRC) as the Lessee; or
(b) is under common control (within the meaning of section
414(c) of the IRC) with the Lessee.
EVENT OF DEFAULT -- has the meaning assigned to it in either or both of
the Indentures.
EXCHANGE ACT -- means the Securities Exchange Act of 1934 of the United
States of America, together with all rules and regulations promulgated pursuant
thereto, as amended from time to time.
EXCLUDED TRANSFERS -- Section 2.6.
FAIR MARKET VALUE -- means, at any time and with respect to any
property, the sale value of such property that would be realized in an
arm's-length sale at such time between an informed and willing buyer and an
informed and willing seller (neither being under a compulsion to buy or sell).
FINANCING DOCUMENTS -- has the meaning assigned to such term in the
Definition Appendix.
FOREIGN PENSION PLAN -- means any plan, fund or other similar program
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(a) established or maintained outside of the United States of
America by any one or more of the Parent, the Lessee or the
Subsidiaries primarily for the benefit of the employees (substantially
all of whom are individuals not residing in the United States of
America) of the Lessee or such Subsidiaries, which plan, fund or other
similar program provides for retirement income for such employees or
results in a deferral of income for such employees in contemplation of
retirement, and
(b) not otherwise subject to ERISA.
GAAP -- means generally accepted accounting principles as in effect
from time to time in the United States of America.
GOVERNMENTAL AUTHORITY -- means:
(a) the government of
(i) the United States of America and any state, local
or other political subdivision thereof, or
(ii) any other jurisdiction (y) in which the Parent,
the Lessee or any other Subsidiary conducts all or any part
of its business or (z) that asserts jurisdiction over the
conduct of the affairs or Properties of the Parent, the
Lessee or any other Subsidiary; and
(b) any entity exercising executive, legislative, judicial,
regulatory or administrative functions of, or pertaining to, any such
government.
GUARANTEED OBLIGATIONS -- has the meaning assigned to such term in the
Lease Guaranty.
GUARANTY -- means, with respect to any Person (for the purposes of this
definition, the "GUARANTOR"), any obligation (except the endorsement in the
ordinary course of business of negotiable instruments for deposit or collection)
of the Guarantor guaranteeing or in effect guaranteeing any indebtedness,
dividend or other obligation of any other Person (the "PRIMARY OBLIGOR") in any
manner, whether directly or indirectly, including, without limitation,
obligations incurred through an agreement, contingent or otherwise, by the
Guarantor:
(a) to purchase such indebtedness or obligation or any
Property constituting security therefor;
(b) to advance or supply funds
(i) for the purpose of payment of such indebtedness
or obligation,
or
(ii) to maintain working capital or other balance
sheet condition or any income statement condition of the
Primary Obligor or otherwise to
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advance or make available funds for the purchase or payment
of such indebtedness or obligation;
(c) to lease Property or to purchase Securities or other
Property or services primarily for the purpose of assuring the owner of
such indebtedness or obligation of the ability of the Primary Obligor
to make payment of the indebtedness or obligation; or
(d) otherwise to assure the owner of the indebtedness or
obligation of the Primary Obligor against loss in respect thereof.
For purposes of computing the amount of any Guaranty in connection with any
computation of indebtedness or other liability, it shall be assumed that the
indebtedness or other liabilities that are the subject of such Guaranty are
direct obligations of the issuer of such Guaranty.
HAZARDOUS MATERIAL -- means any (i) hazardous wastes and/or toxic
chemicals, materials, substances or wastes as defined by the Environmental Legal
Requirements; (ii) any "oil," as defined by the Federal Water Pollution Control
Act, as amended by the Clean Water Act, 33 U.S.C. Section 1251 et seq., as
amended from time to time, and regulations promulgated thereunder (including
crude oil or any fraction thereof); (iii) any substance, the presence of which
is prohibited, regulated or controlled by any other applicable federal or state
or local laws, regulations, statutes or ordinances now in force or hereafter
enacted relating to waste disposal or environmental protection with respect to
exposure to, or manufacture, possession, presence, use, generation, storage,
transportation, treatment, release, emission, discharge, disposal, abatement,
cleanup, removal, remediation or handling; (iv) any asbestos or asbestos
containing materials, polychlorinated biphenyls in the form of electrical
equipment, fluorescent light fixtures with ballasts, cooling oils or any other
form, urea formaldehyde, atmospheric radon at levels over four picocuries per
cubic liter; (v) any solid, liquid, gaseous or thermal irritant or contaminant,
such as smoke, vapor, soot, fumes, alkalis, acids, chemicals, pesticides,
herbicides, sewage, industrial sludge or other similar wastes; (vi) industrial,
nuclear or medical by-products; (vii) underground storage tanks (whether filled
or unfilled); (viii) substance which is a Controlled Substance; and (ix) lead.
INDENTURES -- means the Beneficiary Trust Indenture and the Owner Trust
Indenture.
INTERGROUP TRANSFER -- Section 2.6.
INTERIM RENTAL -- has the meaning assigned to such term in the Lease.
INVENTORY -- Section 2.13.
INVESTMENTS -- means any investment, made in cash or by delivery of
Property, by the Parent, the Lessee or any other Restricted Subsidiary:
(a) in any Person, whether by acquisition of stock,
indebtedness or other obligation or Security, or by loan, Guaranty,
advance, capital contribution or otherwise; or
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(b) in any Property.
IRC -- means the Internal Revenue Code of 1986, together with all rules
and regulations promulgated pursuant thereto, as amended from time to time.
IRS -- means the Internal Revenue Service and any successor agency.
LEASE -- preliminary statement F.
LEASE GUARANTY -- preliminary statement G.
LEASED PROPERTY -- preliminary statement B.
LEASE PAYMENT -- Section 3.2.
LEGAL REQUIREMENTS -- has the meaning assigned to such term in the
Definition Appendix.
LESSEE -- introductory paragraph.
LESSEE DEBT -- means, at any time, the aggregate amount of Debt of the
Lessee, determined at such time.
LESSEE OBLIGATIONS -- means all of the obligations of Lessee under (a)
the Lease, including without limitation the Lease Payments, and (b) the
Construction Agency Agreement.
LESSEE TOTAL CAPITALIZATION -- means, at any time, the sum of
(a) Lessee Debt at such time, plus
(b) shareholders equity of the Lessee, determined at such
time in accordance with GAAP.
LICENSES AND PERMITS -- has the meaning assigned to such term in the
Definition Appendix.
LIEN -- means, with respect to any Person, any mortgage, lien, pledge,
charge, security interest or other encumbrance, or any interest or title of any
vendor, lessor, lender or other secured party to or of such Person under any
conditional sale or other title retention agreement or capital lease, upon or
with respect to any Property of such Person (including in the case of stock or
shares, stockholder or shareholder agreements, voting trust agreements and all
similar arrangements). The term "Lien" does not include negative pledge clauses
in agreements relating to the borrowing of money.
MARGIN SECURITY -- means "margin stock" within the meaning of
Regulations G, T and X of the Board of Governors of the Federal Reserve System,
12 C.F.R., Chapter II, as amended from time to time.
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MATERIAL ADVERSE EFFECT -- means a material adverse effect on the
business, prospects, profits, Properties or condition (financial or otherwise)
of the Parent, the Lessee and the Restricted Subsidiaries, taken as a whole, or
on the ability of the Parent or the Lessee to perform its respective obligations
set forth herein, in the Lease Guaranty, the Construction Agency Agreement and
under the Lease.
MULTIEMPLOYER PLAN -- means any "multiemployer plan" (as defined in
section 3(37) of ERISA) in respect of which the Lessee or any ERISA Affiliate is
an "employer" (as such term is defined in section 3 of ERISA).
NET PROCEEDS AMOUNT -- means, with respect to any Transfer of any
Property by any Person, an amount equal to the difference of
(a) the aggregate amount of the consideration (valued at the
Fair Market Value of such consideration at the time of the consummation
of such Transfer) received by such Person in respect of such Transfer,
minus
(b) all ordinary and reasonable out-of-pocket costs and
expenses actually incurred by such Person in connection with such
Transfer.
NOTE PURCHASE AGREEMENTS -- means the Owner Note Purchase Agreements
and the Beneficiary Note Purchase Agreements.
NOTES -- means the Owner Notes and the Beneficiary Notes.
ORDINARY COURSE TRANSFER -- Section 2.6.
OWNER -- introductory paragraph.
OWNER COLLATERAL TRUSTEE -- introductory paragraph.
OWNER FINANCING DOCUMENTS -- introductory paragraph.
OWNER NOTE PURCHASE AGREEMENT -- preliminary statement A.
OWNER NOTES -- preliminary statement B.
OWNER TRUST ESTATE -- the trust estate created by that certain Trust
Agreement 1995- 1, dated as of July 1, 1995, between Owner and Beneficiary
Trustee.
OWNER TRUST INDENTURE -- introductory paragraph.
PARENT -- has the meaning assigned to such term in the Definition
Appendix.
PAYMENTS -- Section 3.4.
PBGC -- means the Pension Benefit Guaranty Corporation, and any Person
succeeding to the functions of the PBGC.
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PENSION PLAN -- means, at any time, any "employee pension benefit plan"
(as such term is defined in section 3 of ERISA) maintained at such time by the
Lessee or any ERISA Affiliate for employees of the Lessee or such ERISA
Affiliate, excluding any Multiemployer Plan.
PERSON -- means an individual, partnership, corporation, limited
liability company, association, trust, unincorporated organization, or a
government or agency or political subdivision thereof.
PLACEMENT AGENT -- means BOT Financial Services, Inc.
PLACEMENT MATERIALS -- means the Placement Memorandum and each of the
other documents set forth on Part 1.1 of Annex 1.
PLACEMENT MEMORANDUM -- means the Private Placement Offering Memorandum
dated August, 1995, in respect of the issuance of the Notes, prepared by the
Placement Agent, including all appendixes, exhibits and schedules contained
therein.
PLANS AND SPECIFICATIONS -- has the meaning assigned to such term in
the Definition Appendix.
PROJECT -- has the meaning assigned to such term in the Definition
Appendix.
PROJECT BUDGET -- has the meaning assigned to such term in the
Definition Appendix.
PROPERTY -- means any interest in any kind of property or asset,
whether real, personal or mixed, and whether tangible or intangible.
PROPERTY DISPOSITION DATE -- Section 2.6.
PROPERTY REINVESTMENT APPLICATION -- means, with respect to any
Transfer of property, the acquisition by the Parent, the Lessee or any other
Restricted Subsidiary, within the one hundred eighty (180) day period following
the date of the consummation of such Transfer, of operating assets of the
Parent, the Lessee or any other Restricted Subsidiary to be used in the ordinary
course of business of such Person.
PURCHASE MONEY LIEN -- means
(a) a Lien held by any Person (whether or not the seller of
such Property) on tangible Property acquired or constructed by the
Parent, the Lessee or any other Restricted Subsidiary after the Closing
Date, which Lien secures all or a portion of the related purchase price
or construction costs of such Property, provided that
(i) such Lien is created contemporaneously with, or
within one hundred twenty (120) days of, such acquisition or
the substantial completion of such construction,
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(ii) such Lien encumbers only Property purchased or
constructed after the Closing Date and acquired with the
proceeds of the Debt secured thereby, and
(iii) such Lien is not thereafter extended to any
other Property;
(b) any Lien existing on any Property at the time such
Property is acquired after the Closing Date by the Parent, the Lessee
or any other Restricted Subsidiary (whether or not the Debt or other
obligations secured thereby have been assumed by the Parent, the Lessee
or such other Restricted Subsidiary), provided that
(i) no such Lien shall extend to or cover any
Property other than the Property subject to such Lien at the
time of any such transaction, and
(ii) such Lien was not created in contemplation of
any such transaction;
(c) any Lien existing on Property of any Person at the time
it becomes a Subsidiary or is merged into or consolidated with the
Parent, the Lessee or any other Restricted Subsidiary after the Closing
Date or at the time of a sale, lease or other disposition of all or
substantially all of the Property of a Person to the Parent, the Lessee
or any other Restricted Subsidiary after the Closing Date, provided
that
(i) no such Lien shall extend to or cover any
Property other than the Property subject to such Lien at the
time of any such transaction, and
(ii) such Lien was not created in contemplation of
any such transaction; and
(d) a Lien on Property arising in connection with a Capital
Leases so long as each such Lien encumbers only Property that is the
subject of the related Capital Lease and no other Property of the
Lessee or any other Subsidiary.
Any Lien existing on Property acquired by the Parent, the Lessee or another
Restricted Subsidiary or on Property of a Person that becomes a Restricted
Subsidiary after the Closing Date will be deemed to have been granted on the
date such Property is acquired or such Person becomes a Restricted Subsidiary.
PURCHASERS -- preliminary statement A.
REQUIRED HOLDERS -- means, at any time, the holders of more than
sixty-six and two-thirds percent (66-2/3%) in principal amount of the Notes at
the time outstanding (exclusive of Notes then owned by any one or more of the
Parent, the Lessee, the Owner, the Beneficiary Trustee, any Subsidiary and any
Affiliate).
RESTRICTED INVESTMENTS -- means all Investments except the following:
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(a) property to be used in the ordinary course of business of
the Parent, the Lessee and the other Restricted Subsidiaries;
(b) current assets arising from the sale of goods and
services in the ordinary course of business of the Parent, the Lessee
and the other Restricted Subsidiaries;
(c) Investments in the Parent or in one or more Restricted
Subsidiaries or any Person that concurrently with such Investment
becomes a Restricted Subsidiary;
(d) Investments existing on the date of the Closing and
disclosed in Part 2.14(a) of Annex 2;
(e) Investments in United States Governmental Securities,
provided that such obligations mature within 365 days from the date of
acquisition thereof;
(f) Investments in certificates of deposit or banker's
acceptances issued by an Acceptable Bank, provided that such
obligations mature within 365 days from the date of acquisition
thereof;
(g) Investments in commercial paper rated "A-1" or better by
S&P or "P-1" or better by Moodys and maturing not more than 270 days
from the date of creation thereof;
(h) Investments in Repurchase Agreements;
(i) Investments in tax-exempt obligations of any state of the
United States of America, or any municipality of any such state, in
each case rated "AA" or better by S&P, "Aa2" or better by Moody's or an
equivalent rating by any other credit rating agency of recognized
national standing, provided that such obligations mature within 365
days from the date of acquisition thereof;
(j) Investments in interest rate protection arrangements and
other hedging transactions;
(k) Investments in Transfers permitted under Section 2.6; and
(l) Investments in Debt permitted under Section 2.12(c).
For purposes of this Agreement, an Investment shall be valued at the lesser of
(i) cost and (ii) the value at which such Investment is to be shown on the books
of the Parent and its Subsidiaries in accordance with GAAP.
As used in this definition of "Restricted Investments":
Acceptable Bank -- means any bank or trust company (A) (i)
which is organized under the laws of the United States of America or
any State thereof and (ii) has capital, surplus and undivided profits
aggregating at least Five Hundred Million
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Dollars ($500,000,000) or (B) (i) which is organized under the laws of
a jurisdiction other than the United States of America or any State
thereof and (ii) which has undivided capital surplus of not less than
One Billion Dollars ($1,000,000,000) (or its foreign currency
equivalent) and, in each case, whose long-term unsecured debt
obligations (or the long-term unsecured debt obligations of the bank
holding company owning all of the capital stock of such bank or trust
company) shall have been given a rating of "A" or better by S&P, "A2"
or better by Moody's or an equivalent rating by any other credit rating
agency of recognized national or international standing.
Acceptable Broker-Dealer -- means any Person other than a
natural person (i) which is registered as a broker or dealer pursuant
to the Exchange Act and (ii) whose long-term unsecured debt obligations
shall have been given a rating of "A" or better by S&P, "A2" or better
by Moody's or an equivalent rating by any other credit rating agency of
recognized national standing.
Moody's -- means Moody's Investors Service, Inc.
Repurchase Agreement -- means any written agreement
(a) that provides for (i) the transfer of one or more
United States Governmental Securities in an aggregate
principal amount at least equal to the amount of the Transfer
Price (defined below) to the Parent, the Lessee or any of the
other Subsidiaries from an Acceptable Bank or an Acceptable
Broker-Dealer against a transfer of funds (the "Transfer
Price") by the Parent, the Lessee or such other Restricted
Subsidiary to such Acceptable Bank or Acceptable
Broker-Dealer, and (ii) a simultaneous agreement by the
Parent, the Lessee or such other Restricted Subsidiary, in
connection with such transfer of funds, to transfer to such
Acceptable Bank or Acceptable Broker-Dealer the same or
substantially similar United States Governmental Securities
for a price not less than the Transfer Price plus a
reasonable return thereon at a date certain not later than
365 days after such transfer of funds,
(b) in respect of which the Parent, the Lessee or
such other Restricted Subsidiary shall have the right,
whether by contract or pursuant to applicable law, to
liquidate such agreement upon the occurrence of any default
thereunder, and
(c) in connection with which the Parent, the Lessee
or such other Restricted Subsidiary, or an agent thereof,
shall have taken all action required by applicable law or
regulations to perfect a Lien in such United States
Governmental Securities.
S&P -- means Standard & Poor's Ratings Group, a division of
McGraw Hill, Inc.
United States Governmental Security -- means any direct
obligation of, or obligation guaranteed by, the United States of
America, or any agency controlled or supervised by or acting as an
instrumentality of the United States of America
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pursuant to authority granted by the Congress of the United States of
America, so long as such obligation or guarantee shall have the benefit
of the full faith and credit of the United States of America which
shall have been pledged pursuant to authority granted by the Congress
of the United States of America.
RESTRICTED PAYMENT -- means
(a) any dividend or other distribution (whether in the form
of cash or any other Property), direct or indirect, made on account of
any shares of capital stock of the Parent or any Restricted Subsidiary
(other than on account of capital stock owned legally and beneficially
by the Parent or another Restricted Subsidiary), except a dividend
payable solely in shares of capital stock of such Restricted
Subsidiary, and except stock splits in connection with which no
Property is distributed and only the number of outstanding shares of
such stock is increased, or
(b) any optional or mandatory redemption, retirement,
purchase or other acquisition, direct or indirect, of any shares of
capital stock of the Parent or any Restricted Subsidiary (other than
capital stock owned legally and beneficially by the Parent or a
Restricted Subsidiary), or of any warrants, rights, or options to
acquire any shares of such capital stock.
RESTRICTED SUBSIDIARY -- means the Lessee and each other Subsidiary of
which one hundred percent (100%) (by number of votes and exclusive of director's
qualifying shares) of each class of the Voting Stock is owned by the Parent or
another Restricted Subsidiary.
SECURITIES ACT -- means the Securities Act of 1933, as amended.
SECURITY -- means "security" as defined by section 2(1) of the
Securities Act.
SENIOR FINANCIAL OFFICER -- means, with respect to any Person, the
chief financial officer, the principal accounting officer, the treasurer or the
comptroller of such Person if such Person is a corporation or an individual
performing a similar function if such Person is not a corporation.
SENIOR OFFICER -- means, with respect to any Person, the chairman of
the board, the chief executive officer, the president, the controller, the
treasurer or any vice president of such Person if such Person is a corporation
or an individual performing a similar function if such Person is not a
corporation.
SIGNIFICANT AFFILIATE -- means any officer, director or holder of fifty
percent (50%) or more of the Voting Stock of the Parent, the Lessee or any
Restricted Subsidiary.
SUBSIDIARY -- means a corporation of which the Parent owns, directly or
indirectly, more than fifty percent (50%) (by number of votes) of each class of
the Voting Stock.
SUBSIDIARY STOCK -- means the capital stock (or any options or warrants
to purchase capital stock or other Securities exchangeable for or convertible
into capital stock) of any Restricted Subsidiary.
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SUBSTANTIAL PORTION -- means, with respect to any Transfer of Property,
any portion of Property of the Parent, the Lessee and the other Restricted
Subsidiaries, if the Disposition Value of such Property, when added to the
Disposition Value of all other Property of the Parent, the Lessee and the other
Restricted Subsidiaries that was subject to a Transfer (other than an Excluded
Transfer) during the 365-day period ending on and including the Property
Disposition Date of such Property exceeds an amount equal to ten percent (10%)
of Consolidated Total Assets determined as of the end of the then most recently
ended fiscal year of the Parent.
SUCCESSOR CORPORATION -- Section 2.8.
TANGIBLE NET WORTH -- means with respect to any Person , at any time,
Tangible Assets of such Person determined at such time minus the aggregate
amount of liabilities of such Person determined at such time. As used in this
definition:
"Tangible Assets" means all assets except:
(a) the aggregate amount of deferred assets, other than
prepaid insurance and prepaid taxes,
(b) patents, copyrights, trademarks, trade names, franchises,
goodwill and other similar intangible assets, and
(c) unamortized debt discount and expense.
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, Subsidiary Stock.
VOTING STOCK -- means capital stock of any class or classes of a
corporation the holders of which are ordinarily, in the absence of
contingencies, entitled to elect corporate directors (or Persons performing
similar functions).
6.2 ACCOUNTING PRINCIPLES.
Where the character or amount of any asset or liability or item of
income or expense, or any consolidation or other accounting computation is
required to be made for any purpose hereunder, it shall be done in accordance
with GAAP as in effect on the date of, or at the end of the period covered by,
the financial statements from which such asset, liability, item of income, or
item of expense, is derived, or, in the case of any such computation, as in
effect on the date as of which such computation is required to be determined,
provided, that if any term defined herein includes or excludes amounts, items or
concepts that would not be included in or excluded from such term if such term
was defined with reference solely to GAAP, such term will be deemed to include
or exclude such amounts, items or concepts as set forth herein.
6.3 DIRECTLY OR INDIRECTLY.
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Where any provision herein refers to action to be taken by any Person,
or that such Person is prohibited from taking, such provision shall be
applicable whether such action is taken directly or indirectly by such Person,
including actions taken by or on behalf of any partnership in which such Person
is a general partner.
6.4 SECTION HEADINGS AND TABLE OF CONTENTS AND CONSTRUCTION.
(a) SECTION HEADINGS AND TABLE OF CONTENTS, ETC. The titles
of the Sections of this Agreement and the Table of Contents appear as a
matter of convenience only, do not constitute a part hereof and shall
not affect the construction hereof. The words "herein," "hereof,"
"hereunder" and "hereto" refer to this Agreement as a whole and not to
any particular Section or other subdivision.
(b) CONSTRUCTION. Each covenant contained herein shall be
construed (absent an express contrary provision herein) as being
independent of each other covenant contained herein, and compliance
with any one covenant shall not (absent such an express contrary
provision) be deemed to excuse compliance with one or more other
covenants.
6.5 GOVERNING LAW.
THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE LAW OF THE STATE OF CONNECTICUT, EXCLUDING
CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH JURISDICTION THAT WOULD REQUIRE THE
APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH JURISDICTION.
7. MISCELLANEOUS
7.1 COMMUNICATIONS.
(a) METHOD; ADDRESS. All communications hereunder shall be in
writing, shall be hand delivered, sent by overnight courier of
international reputation or sent by facsimile transmission (confirmed
by delivery by overnight courier of international reputation sent the
same or the next Business Day as the day of transmission of such
facsimile transmission) and shall be addressed,
(i) if to the Lessee or Parent:
Tiffany & Co.
727 Fifth Avenue
New York, New York 10022
Attention: General Counsel
Phone: (212) 605-4601
Facsimile: (212) 605-4177
with a copy to
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Tiffany and Company
5 Sylvan Way
Parsippany, New Jersey 07054
Attention: Assistant Treasurer
Phone: (201) 971-3658
Facsimile: (201) 971-3672
or at such other address as the Parent or the Lessee shall have
furnished in writing to the Collateral Trustee and all holders of the
Notes at the time outstanding,
(ii) if to the Collateral Trustee,
Fleet National Bank of Connecticut
777 Main Street
Hartford, Connecticut 06115
Attention Corporate Trust Administration
Phone: (860) 986-4236
Facsimile: (860) 986-7920
or at such other address as the Collateral Trustee shall have furnished
in writing to the Lessee and all holders of the Notes at the time
outstanding, and
(iii) if to any of the holders of the Notes,
(A) if such holder is a Purchaser, at its
respective address set forth on Annex 1 to the
applicable Note Purchase Agreement, and further
including any parties referred to on such Annex 1
that are required to receive notices in addition to
such holder, and
(B) if such holder is not a Purchaser, at
its respective address set forth in the applicable
register for the registration and transfer of Notes
maintained by the Owner or Beneficiary Trustee, as
the case may be, pursuant to the applicable
Indenture,
or to any such party at such other address as such party may designate
by notice duly given in accordance with this Section 7.1.
(b) WHEN GIVEN. Any communication properly addressed and
sent in accordance with Section 7.1(a) shall be deemed to be received
when actually presented for delivery at the address of the addressee.
7.2 AMENDMENT AND WAIVER.
(a) REQUIREMENTS. This Agreement may be amended, and the
observance of any term hereof may be waived, with (and only with) the
written consent of the Parent, the Lessee and the Collateral Trustee.
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(b) REQUIRED HOLDERS' CONSENT. The Collateral Trustee will
not enter into any amendment or waiver in respect of this Agreement
without the written consent of the Required Holders and, in the case of
any such amendment or waiver which affects the payment obligations of
the Lessee or the Parent, all other holders of the Notes.
7.3 REPRODUCTION OF DOCUMENTS.
This Agreement, each of the other Financing Documents and all documents
relating thereto, including, without limitation,
(a) consents, waivers and modifications that may hereafter be
executed,
(b) documents received by the Purchasers at the closing of
your purchase of the Notes (except the Notes themselves), and
(c) financial statements, certificates and other information
previously or hereafter furnished to the Purchasers or any other holder
of Notes,
may be reproduced by the Collateral Trustee or any holder of Notes by any
photographic, photostatic, microfilm, micro-card, miniature photographic,
digital or other similar process and the Collateral Trustee and each holder of
Notes may destroy any original document so reproduced. The Parent and the Lessee
agree and stipulate that any such reproduction shall be admissible in evidence
as the original itself in any judicial or administrative proceeding (whether or
not the original is in existence and whether or not such reproduction was made
by the Collateral Trustee or such holder of Notes in the regular course of
business) and that any enlargement, facsimile or further reproduction of such
reproduction shall likewise be admissible in evidence. Nothing in this Section
7.3 shall prohibit the Parent, the Lessee, the Collateral Trustee or any holder
of Notes from contesting the validity or the accuracy of any such reproduction.
7.4 SURVIVAL.
All warranties, representations, certifications and covenants made by
the Parent and the Lessee herein or in any certificate or other instrument
delivered by it or on its behalf shall be considered to have been relied upon by
the Collateral Trustee and the holders of Notes and shall survive the delivery
to the Purchasers of the Notes regardless of any investigation made by them or
on their behalf. All statements in any such certificate or other instrument
shall constitute warranties and representations by the Parent and the Lessee
hereunder.
7.5 SUCCESSORS AND ASSIGNS.
This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties hereto. The provisions hereof are
intended to be for the benefit of the Collateral Trustee and all holders, from
time to time, of Notes, and shall be enforceable by the Collateral Trustee or
any such holder, whether or not an express
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assignment to such holder of rights hereunder shall have been made. Anything
contained in this Section 7.5 notwithstanding, the Parent and the Lessee may not
assign any of its respective rights, duties or obligations hereunder, under the
Lease Guaranty, the Lease or under any of the other Financing Documents other
than as specified in the Financing Documents.
7.6 ENTIRE AGREEMENT; SEVERABILITY.
This Agreement constitutes the final written expression of all of the
terms hereof and is a complete and exclusive statement of those terms. In case
any one or more of the provisions contained in this Agreement or in any other
Financing Document, or any application thereof, shall be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and therein, and any other application
thereof, shall not in any way be affected or impaired thereby.
7.7 DUPLICATE ORIGINALS, EXECUTION IN COUNTERPART.
Two (2) or more duplicate originals hereof may be signed by the
parties, each of which shall be an original but all of which together shall
constitute one and the same instrument. This Agreement may be executed in one or
more counterparts and shall be effective when at least one counterpart shall
have been executed by each party hereto, and each set of counterparts that,
collectively, show execution by each party hereto shall constitute one duplicate
original.
[REMAINDER OF PAGE INTENTIONALLY BLANK; NEXT PAGE IS SIGNATURE PAGE.]
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IN WITNESS WHEREOF, the parties hereto have entered into this Agreement
as of the day and year first above written.
TIFFANY & CO.
By /s/ William R. Chaney
---------------------------
Name: Willaim R. Chaney
Title: Chairman of Board of Director,
President and Chief Executive
Officer
TIFFANY AND COMPANY
By /s/ James N. Fernandez
---------------------------
Name: James N. Fernandez
Title: Senior Vice President
Chief Financial Officer
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FLEET NATIONAL BANK OF CONNECTICUT, NOT
IN ITS INDIVIDUAL CAPACITY BUT SOLELY AS OWNER
COLLATERAL TRUSTEE UNDER THE OWNER COLLATERAL
TRUST INDENTURE
By /s/ Susan C. Merker
--------------------------------------
Name: Susan C. Merker
Title: Assistant Vice President
FLEET NATIONAL BANK OF CONNECTICUT, NOT
IN ITS INDIVIDUAL CAPACITY BUT SOLELY AS BENEFICIARY
COLLATERAL TRUSTEE UNDER THE BENEFICIARY COLLATERAL
TRUST INDENTURE
By /s/ Susan C. Merker
--------------------------------------
Name: Susan C. Merker
Title: Assistant Vice President
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The undersigned First Fidelity Bank, National Association, not in its
individual capacity, but solely as the trustee under that certain Trust
Agreement 1995-1, dated as of July 1, 1995, as Owner, acknowledges receipt of a
copy of the foregoing Agreement and Consent to Assignment and is in agreement in
all respect therewith and confirms that the assignment of the Lease, the
Construction Agency Agreement and the Parent Guaranty which are referred to
therein have taken place.
FIRST FIDELITY BANK,
NATIONAL ASSOCIATION, A
NATIONAL BANKING
ASSOCIATION, NOT IN ITS
INDIVIDUAL CAPACITY, BUT
SOLELY AS TRUSTEE PURSUANT
TO AN AGREEMENT CAPTIONED
"TRUST AGREEMENT 1995-1"
DATED AS OF JULY 1, 1995,
AS AMENDED
By /s/ W. Jeffrey Kramer
---------------------------
Name W. Jeffrey Kramer
-------------------------
Title Vice President
-------------------------
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ANNEX 1
INFORMATION AS TO PARENT AND LESSEE
PART 1.1 PLACEMENT MATERIALS
Parent's Annual Report to Shareholders for the fiscal year ended
January 31, 1995
Parent's 1995 Proxy Statement
Parent's Annual Report on Form 10-K for the fiscal year ended January
31, 1995
Parent's Quarterly Reports on Form 10-Q for the fiscal quarters ended
April 30, 1995 and July 31, 1995
PART 1.2(a) FINANCIAL STATEMENTS
From Parent's Annual Report to Shareholders for the fiscal year ended
January 31, 1995:
Parent's Consolidated Statements of Operations for the fiscal
years ended January 31, 1995, 1994 and 1993
Parent's Consolidated Balance Sheets as of January 31, 1995
and 1994
Parent's Consolidated Statements of Cash Flows for the fiscal
years ended January 31, 1995, 1994 and 1993
Parent's Consolidated Statements of Stockholders' Equity as
of January 31, 1995, 1994 and 1993
From Parent's Annual Report on Form 10-Q for the fiscal quarter ended
April 30, 1995:
Parent's Consolidated Balance Sheets as of April 30, 1995
(unaudited) and January 31, 1995
Parent's Consolidated Statements of Income for the three
months ended April 30, 1995 and 1994 (unaudited)
Parent's Consolidated Statements of Stockholders' Equity for
the three months ended July 31, 1995 (unaudited)
Parent's Consolidated Statements of Cash Flows for the three
months ended April 30, 1995 and 1994 (unaudited)
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From Parent's Annual Report on Form 10-Q for the fiscal quarter ended
July 31, 1995:
Parent's Consolidated Balance Sheets as of July 31, 1995
(unaudited) and January 31, 1995
Parent's Consolidated Statements of Income for the three and
six months ended July 31, 1995 and 1994 (unaudited)
Parent's Consolidated Statements of Stockholders' Equity for
the three and six months ended July 31, 1995 (unaudited)
Parent's Consolidated Statements of Cash Flows for the six
months ended July 31, 1995 and 1994 (unaudited)
PART 1.2(b) DEBT
$130,000,000 Five-Year Revolving Credit Facility provided
under a certain Credit Agreement dated as of June 26, 1995 by
and among Tiffany & Co., Tiffany and Company, Tiffany & Co.
International, the Subsidiary Borrowers party thereto, the
Lenders party thereto, The Bank of New York, as Issuing Bank
and Swing Line Lender, The Bank of New York, as Arranging
Agent, and The Bank of New York, as Administrative Agent
(unsecured; $83,984,590 outstanding as of December 4, 1995),
together with the guaranties of Tiffany & Co., Tiffany and
Company, Tiffany & Co. International and Tiffany & Co. Japan
Inc. issued in connection therewith
$51,500,000 Tiffany and Co. 7.52% Senior Notes Due January 31,
2003 (unsecured; $51,500,000 outstanding), together with the
guaranties of Tiffany and Company, Tiffany & Co. International
and Tiffany & Co. Japan Inc. issued in connection therewith
$50,000,000 Tiffany & Co. 6.375% Convertible Subordinated
Debentures Due March 15, 2001 (unsecured; $50,000,000
outstanding)
PART 1.3 SUBSIDIARIES AND AFFILIATES
Subsidiaries
Tiffany & Co. International (Delaware - 100%)
Tiffany & Co. Japan Inc. (Delaware - 100%)
Tiffany - Faraone S.p.A. (Italy - 100%)
Tiffany & Co. Pte Ltd. (Singapore - 100%)
Tiffany & Co. Watch Center S.A. (Switzerland - 100%)
Tiffany & Co. of New York Ltd. (Hong Kong - 100%)
Tiffany & Co. Overseas Finance B.V. (Netherlands - 100%)
Tiffany & Co. A.G. (Switzerland - 100%)
Tiffany and Company (New York - 100%)
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Tiffany & Co. (United Kingdom - 100%)
Societe Francaise pour le Developpement de la Porcelaine d'Art
(France - 100%)
Tiffany & Co. (New York) Pty. Ltd. (Australia - 100%)
Howard H. Sweet & Son, Inc. (Delaware - 100%)
Tiffany & Co. K.K. (Japan - 51%)
Judel Products Corp. (West Virginia - 100%)
Tiffany & Co. ICT, Inc. (Delaware - 100%)
Affiliates (as of April 7, 1995)
Mitsukoshi Limited (holder of 13.6% of the common stock of the
Parent)
The Merchant Navy Officers Pension Fund (holder of 7.0% of the
common stock of the Parent)
Tiffany & Co. K.K. (51% of the common stock of which is held
by the Lessee, 49% of the common stock of which is held by
Mitsukoshi Limited)
PART 1.4 TITLE TO PROPERTY
The sections entitled "Trademarks" and "Designer Licenses" in Parent's
Annual Report on Form 10-K for the fiscal year ended January 31, 1995
and Exhibits 10.5 and 10.54 thereto are hereby incorporated herein and
made part hereof.
PART 1.10 RESTRICTIONS
Credit Agreement dated as of June 26, 1995 by and among Tiffany & Co.,
Tiffany and Company, Tiffany & Co. International, the Subsidiary
Borrowers party thereto, the Lenders party thereto, The Bank of New
York, as Issuing Bank and Swing Line Lender, The Bank of New York, as
Arranging Agent, and The Bank of New York, as Administrative Agent
Note Purchase Agreements dated December 1, 1992 by and between Tiffany
& Co. and the Purchasers listed in Schedule I thereto under which
Tiffany & Co. issued its 7.52% Senior Notes Due January 31, 2003
Indenture dated as of March 15, 1991 by and between Tiffany & Co., as
Issuer, and Manufacturers Hanover Trust Company, as Trustee, under
which Tiffany & Co. issued its 6.375% Convertible Subordinated
Debentures Due March 15, 2001
PART 1.26 EXCEPTIONS TO LEASE REPRESENTATIONS
None.
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ANNEX 2
PART 2.13(a)(vii) EXISTING LIENS
Security interest from Howard H. Sweet & Son, Inc. in favor of Rhode
Island Hospital Trust National Bank ("RIHT") covering certain precious
metal on consignment from RIHT
Security interest from Howard H. Sweet & Son, Inc. in favor of Credit
Suisse, New York Branch ("Credit Suisse") covering certain precious
metal on consignment from Credit Suisse
PART 2.14(a) INVESTMENTS
$1,000,000 New York City Investment Fund, L.L.C.
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================================================================================
DEFINITION APPENDIX
================================================================================
<PAGE> 161
Unless the context otherwise required. each of the following terms
shall have the following meaning for all purposes of the Lease, the Owner Trust
Indenture, the Beneficiary Trust Indenture, the Construction Agency Agreement
and such other agreements as may incorporate this Definition Appendix by
reference, except as otherwise specifically provided herein or therein. The
terms defined herein have the respective meanings set forth herein for all
purposes, and such meanings are equally applicable to both the singular and
plural forms of the terms defined.
ACQUISITION COSTS -- means all costs incurred by Owner to acquire the
Land, including, without limitation, any brokerage commissions payable by Owner
or Lessee, which costs are set forth in the Project Budget under the heading
"Acquisition Costs"
ADDITIONAL RENTAL -- means the amounts referred to as such in Section
5(b) of the Lease.
AFFILIATE -- means, at any time, a Person (other than a Restricted
Subsidiary)
(a) that directly or indirectly through one or more
intermediaries Controls, or is Controlled by, or is under common
Control with, the Parent,
(b) that beneficially owns or holds five percent (5%) or more
of the Voting Stock of the Parent,
(c) five percent (5%) or more of the Voting Stock (or in the
case of a Person that is not a corporation, five percent (5%) or more
of the Equity) of which is beneficially owned or held by the Parent or
a Restricted Subsidiary, or
(d) that is an officer or director of the Parent, the Lessee
or any other Subsidiary,
at such time.
As used in this definition:
Control -- means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.
AGENT -- means Tiffany and Company, a New York corporation, as agent
under the Construction Agency Agreement.
AGREEMENT AND CONSENT TO ASSIGNMENT -- means that certain Agreement and
Consent to Assignment, dated as of December 1, 1995, among Lessee, Parent, the
Owner Collateral Trustee and the Beneficiary Collateral Trustee, as may be
amended from time to time.
APPROVED CONSTRUCTION DOCUMENTS -- means the Construction Contract,
Architect's Contract, the Plans and Specifications and the other documents
included in the definition of "Approved Construction Documents" in Section
7.1(a) of the Construction Agency Agreement.
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ARCHITECT -- means Perkins & Will Architects, P.C., the architect who
has prepared the Plans and Specifications for the Improvements pursuant to the
Architect's Contract, and any successor architect consented to in writing by
Owner and the Owner Collateral Trustee under the Construction Agency Agreement.
ARCHITECT'S CONSENT -- as defined in the Owner Note Purchase Agreement.
ARCHITECT'S CONTRACT -- means that certain Agreement dated as of
December 15, 1993 between the Architect and Lessee, as the same may be amended,
supplemented or replaced from time to time, in accordance with the Construction
Agency Agreement.
ASSIGNEE -- shall have the meaning set forth in Section 19(b) of the
Lease.
ASSIGNMENT OF CONTRACTS, LICENSES AND PERMITS -- means that certain
Collateral Assignment and Security Agreement in respect of Contracts, Licenses
and Permits, between the Owner and the Owner Collateral Trustee, as may be
amended from time to time.
ASSIGNMENT OF LEASES AND RENTS -- means that certain Assignment of
Leases and Rents, dated as of December 1, 1995, between the Owner and the Owner
Collateral Trustee, as may be amended from time to time.
ASSOCIATION -- shall have the meaning set forth in Section 13 of the
Lease.
AUTHORIZED DENOMINATION -- shall (a) with respect to the Owner Notes
have the meaning set forth in Section 1.2 of the Owner Trust Indenture and (b)
with respect to the Beneficiary Notes have the meaning set forth in Section 1.2
of the Beneficiary Trust Indenture.
BANK -- Fleet National Bank of Connecticut, in its individual capacity.
BANKRUPTCY CODE -- means Title 11 of the United States Code (as such
may be amended from time to time) or the statutory successor thereto.
BANKRUPTCY LAW -- means any bankruptcy, reorganization, compromise,
arrangement, insolvency, readjustment of debt, dissolution or liquidation or
similar law, whether now or hereafter in effect.
BASE RENTAL -- shall have the meaning set forth in Section 5 of the
Lease.
BASE RENT PAYMENT DATE -- means each January 31 and each July 31,
commencing on July 31, 1997, in each year during the Term and inclusive of the
Termination Date.
BASIC LEASE TERM -- shall have the meaning set forth in Section 3 of
the Lease.
BASIC LEASE TERM EXPIRATION DATE -- means January 31, 2000.
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BASIC LEASE TERM COMMENCEMENT DATE -- means the earlier of the
Conversion Date and July 31, 1997.
BENEFICIARY or BENEFICIARY TRUSTEE -- means the beneficiary of the
Owner Trust Estate and its successors and assigns. The initial Beneficiary is
First Fidelity Bank, National Association, not in its individual capacity, but
solely as trustee under that certain Trust Agreement 1995-2 dated as of July 1,
1995, as amended.
BENEFICIARY CASH COLLATERAL ACCOUNT -- shall have the meaning set forth
in Section 3.3(a) of the Beneficiary Trust Indenture.
BENEFICIARY COLLATERAL TRUSTEE -- means Fleet National Bank of
Connecticut, a national banking association, in its capacity as "Collateral
Trustee" under the Beneficiary Trust Indenture.
BENEFICIARY FINANCING DOCUMENTS -- shall have the meaning assigned to
such term in the Beneficiary Note Purchase Agreements.
BENEFICIARY FINANCING STATEMENTS -- as defined in the Beneficiary Trust
Indenture.
BENEFICIARY GUARANTY -- means that certain Guaranty from Beneficiary
pursuant to which the Beneficiary agrees to guarantee the full payment and
performance by Owner of the Owner Notes, as may be amended from time to time.
BENEFICIARY NOTE PAYMENT ACCOUNT -- shall have the meaning set forth in
Section 3.2(a) of the Beneficiary Trust Indenture.
BENEFICIARY NOTE PURCHASE AGREEMENTS -- mean those certain Note
Purchase Agreements between the Beneficiary and each Purchaser, as may be
amended from time to time.
BENEFICIARY NOTES -- shall have the meaning set forth in Recital C of
the Beneficiary Trust Indenture.
BENEFICIARY PLEDGE AND SECURITY AGREEMENT -- BENEFICIARY NOTES -- means
the Pledge and Security Agreement -- Beneficiary Notes, from Beneficiary in
favor of the Beneficiary Collateral Trustee to secure the Beneficiary Notes, as
may be amended from time to time.
BENEFICIARY PLEDGE AND SECURITY AGREEMENT -- GUARANTY -- means the
Pledge and Security Agreement, from Beneficiary in favor of the Owner Collateral
Trustee to secure the Beneficiary Guaranty, as may be amended from time to time.
BENEFICIARY TRUST AGREEMENT -- means that certain Trust Agreement
1995-2 dated as of July 1, 1995, between the First Fidelity Bank, National
Association, and Kramer, as amended by Amendment No. 1 thereto.
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BENEFICIARY TRUST INDENTURE -- shall mean that certain Collateral Trust
Indenture, dated as of December 1, 1995, between Beneficiary and Bank, as may be
amended and supplemented from time to time.
BENEFICIAL INTEREST -- means the beneficial interest of the Beneficiary
in and to the trust estate created under the Owner Trust Agreement.
BFS -- means BOT Financial Services, Inc., a Massachusetts corporation.
BUSINESS DAY -- means any day other than a Saturday, Sunday or a public
or bank holiday under the laws of the State of New York or the State of
Connecticut.
CASUALTY -- shall have the meaning set forth in Section 16(a) of the
Lease.
CASUALTY AND CONDEMNATION ACCOUNT -- shall have the meaning set forth
in Section 3.2(a) of the Owner Trust Indenture.
CLOSING -- as defined in the Note Purchase Agreement.
CLOSING DATE -- means December 11, 1995.
COLLATERAL -- shall mean (a) with respect to the Owner Financing
Documents, any property in which the Owner Collateral Trustee is granted a
security interest, pursuant to the Owner Trust Indenture or the other Owner
Financing Documents and (b) with respect to the Beneficiary Financing Documents,
any property in which the Beneficiary Collateral Trustee is granted a security
interest, pursuant to the Beneficiary Trust Indenture or the other Beneficiary
Financing Documents.
COMMENCEMENT DATE -- shall have the meaning set forth in Section 3 of
the Lease.
CONSTRUCTION ACCOUNT -- shall have the meaning set forth in Section
3.3(a) of the Owner Trust Indenture.
CONSTRUCTION AGENCY AGREEMENT -- means that certain Construction Agency
Agreement between Owner and Lessee, as amended by that certain Amended and
Restated Construction Agency Agreement, dated as of December 1, 1995, and as may
be further amended from time to time.
CONSTRUCTION CONTRACT -- means that certain contract between the
General Contractor and Lessee, dated as of July 31, 1995, as may be amended from
time to time.
CONSTRUCTION LENDER -- means Stellar Capital Corporation, and its
successors and assigns.
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CONSTRUCTION LOAN -- means that certain construction loan made to Owner
by the Construction Lender to finance the design and construction of the
Improvements the repayment of which was financed by the Owner Notes.
CONSTRUCTION LOAN AGREEMENT -- means that certain Loan Agreement, dated
August 1, 1995, by and among the Owner, the Lessee and the Construction Lender
pursuant to which the Construction Loan was made to the Owner.
CONSTRUCTION PERIOD -- means the period commencing on the Commencement
Date and ending on January 31, 1997.
CONSTRUCTION PERIOD PAYMENT DATE -- shall have the meaning set forth in
Section 2.1 of the Owner Trust Indenture.
CONVERSION DATE -- means the first day of the calendar month following
the date upon which all of the following conditions have been satisfied: (i) the
Improvements have been completed in accordance with the terms of the
Construction Agency Agreement and are ready for occupancy by Lessee and (ii) all
conditions set forth in Section 4(a) of the Lease have been satisfied in full.
COSTS TO REPAIR -- shall have the meaning set forth in Section 16(b) of
the Lease.
DEFAULT -- means any fact or circumstance which constitutes, or upon
the lapse of time, or giving of notice, or both, could constitute, with respect
to the Lease, the Construction Agency Agreement, the Owner Trust Indenture or
the Beneficiary Collateral Trust Indenture, an "Event of Default" as defined in
or within the meaning of such agreements.
DEFAULT RATE -- shall have the meaning set forth in Section 2.1(a) of
the Owner Trust Indenture.
DEFICIENCY -- shall have the meaning set forth in Section 31 of the
Lease.
DETERMINATION DATE -- means the date as of which a determination or
calculation is made.
DEVELOPMENT COSTS -- means all amounts paid or payable by the Owner or
Agent within the categories encompasses by the line items of the Project Budget
pursuant to the Construction Agency Agreement, the other Transaction Documents,
the Approved Construction Documents and any other agreements relating to the
Project which have been approved by Owner and the Owner Collateral Trustee or
for which such approval is not required under any of the Transaction Documents,
and shall also include, in any event, whether or not otherwise included in the
foregoing, all "Acquisition Costs," all "Hard Costs" and all "Soft Costs" and
all costs of designing, constructing, permitting and completing the Improvements
and owning, developing, leasing, operating, maintaining, repairing, restoring
and managing the Leased Property including, without limitation, all other costs
of construction, tenant inducements, leasing commissions, advertising, interest,
taxes,
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insurance, fees for architects, engineers, lawyers, accountants and consultants,
carrying costs, loan fees and other expenses of owning, developing and operating
the Leased Property.
DOLLARS -- shall mean lawful money of the United States.
DRAW CONDITIONS FAILURE -- means the failure or refusal of the LC
Issuer to pay a draw request on the Letter of Credit for any reason whatsoever,
including, without limitation, by reason of the allegation by the LC Issuer that
the conditions in the Letter of Credit for a drawing thereon have not been met,
the insolvency of the LC Issuer or the expiration of the Letter of Credit.
END OF TERM ADJUSTMENT -- means the amounts payable pursuant to Section
31(a) or, as applicable, Section 31(b) of the Lease.
ENVIRONMENTAL ENFORCEMENT ACTION -- means all written actions, orders,
directives, notices of violation, requirements or liens instituted, threatened
in writing, required, completed, imposed or placed by any governmental authority
and all claims made by any other person against any party to any of the Owner
Financing Documents, the Beneficiary Financing Documents, the Trust Company,
Kramer, LC Issuer or BFS or with respect to the Leased Property, arising out of
or in connection with any of the Hazardous Materials Legal Requirements, any
environmental condition, or the assessment, monitoring, clean-up containment
remediation or removal of, or damages caused or alleged to be caused by, any
Hazardous Materials (i) located on or under the Leased Property, (ii) emanating
from the Leased Property, or (iii) generated, stored, transported, utilized,
disposed, managed, or released on, under or from the Leased Property.
ENVIRONMENTAL INDEMNITY -- means that certain Environmental Indemnity,
of Lessee and Parent in favor of the Financing Parties.
ENVIRONMENTAL LEGAL REQUIREMENTS -- means all applicable past (which
have current effect), present or future federal, state , county and local laws,
rules, regulations, codes and ordinances, or any judicial or administrative
interpretations thereof, and the requirements of any governmental agency or
authority having or claiming jurisdiction with respect thereto, including,
without limitation, all orders, decrees, judgments, rulings, requirements,
directives or notices of violation, imposed through any public or private
enforcement proceedings, that create one or more duties, obligations,
responsibilities or liabilities with respect to:
(i) the regulation or protection of the environment;
(ii) the health and safety of persons and property;
(iii) any environmental pollution, impairment or
disruption;
and
(iv) any environmental permits, licenses, emissions or
affluent reduction plans and reporting requirements.
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The term "Environmental Legal Requirements" includes, without
limitation, all Hazardous Materials Legal Requirements.
EQUITY -- means ownership interests (including, without limitation,
capital stock of any class or classes, general or limited partnership interests
or other distributive interests) of or in a corporation, partnership or other
Person, the holders, members or owners of which are ordinarily, in the absence
of contingencies, entitled to elect corporate directors (or Persons performing
similar functions) or otherwise control fundamental operations and changes in
such corporation, partnership or Person.
EQUITY CONTRIBUTION -- means the amount of equity contributed by the
Beneficiary to the Owner, which amount is $1,925,000.
ERISA -- shall have the meaning set forth in Section 6.1 of the
Agreement and Consent to Assignment.
EVENT OF DEFAULT -- means with respect to the Lease, the Construction
Agency Agreement, the Owner Trust Indenture or the Beneficiary Trust Indenture,
an "Event of Default" as defined in or within the meaning of such agreements.
EVENT OF LOSS -- shall have the meaning set forth in Section 16(c) of
the Lease.
EVENT OF LOSS TERMINATION DATE -- means in respect of any Taking or
Casualty, (a) if prior to the Basic Term Commencement Date, the thirtieth (30th)
day after the final determination that such Taking or Casualty constitutes an
Event of Loss or (b) if after the Basic Term Commencement Date, the Base Rent
Payment Date next following the date of such Event of Loss (if there is no
further Base Rent Payment Dates following such Event of Loss, the last day of
the Basic Lease Term or applicable Extension Lease Term in which such Event of
Loss occurs).
EXCEPTED RIGHTS -- means the right of the Indemnified Parties to
receive and to demand, collect, sue for or otherwise obtain (i) the indemnity
payments paid or payable to the Indemnified Parties under sections 8(a), 21, or
22 of the Lease, and (ii) the amounts paid or payable to the Owner, the
Beneficiary, Trust Company, Kramer, LC Issuer or BFS pursuant to Section 26 of
the Lease, and (iii) the proceeds of any liability insurance which the Owner,
Beneficiary, Trust Company, Kramer and LC Issuer are entitled to be named as
insured or additional insured.
EXCHANGE ACT -- means the Securities Exchange Act of 1934 of the United
States of America, together with all rules and regulations promulgated pursuant
thereto, as amended from time to time.
EXISTING LEASE -- shall have the meaning set forth in the Preliminary
Statement of the Lease.
EXTENSION LEASE TERM -- shall have the meaning set forth in Section 3
of the Lease.
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EXCULPATED PARTY -- shall have the meaning set forth in Section 6.2 of
the Owner Trust Indenture.
FINANCING DOCUMENTS -- means the Beneficiary Financing Documents and
the Owner Financing Documents.
FINANCING PARTIES -- means the Bank, the Purchasers, the Owner
Collateral Trustee and the Beneficiary Collateral Trustee and their respective
successors and assigns.
FINAL COMPLETION DATE -- shall have the meaning set forth in Section
10.15(b) of The Construction Agency Agreement.
FORCE MAJEURE -- means (A) any delay due to strikes, lockouts or other
labor or industrial disturbance, civil disturbance, future order of or delay
caused by any government, court or regulatory body claiming jurisdiction
(including, without limitation delays in processing or release of necessary
permits, licenses and approvals), act of the public enemy, war, riot, sabotage,
blockade, embargo, failure or inability to secure materials, supplies or labor
through ordinary sources by reason of shortages or priority or similar
regulation or order of any government or regulatory body, lightning, earthquake,
fire, storm, hurricane, tornado, flood, washout, explosion, other acts of God,
or other events or delays reasonably beyond the control of Lessee; and (B) for
the purposes of determining fulfillment of the conditions set forth in Section
4(a) of the Lease and compliance with Section 10.15 of the Construction Agency
Agreement, Force Majeure shall also mean (i) any delay in Substantial Completion
attributable primarily to the General Contractor, the Architect, the
Construction Contractor's subcontractors, sub-subcontractors or lower tier
subcontractors or any material supplier to any of the foregoing; (ii) any delay
attributable to any change order made by reason of disagreement between any of
the Architect, General Contractor or any subcontractor as to the proper meaning
of any of the Approved Construction Documents (provided, that such change order
has been approved if approval is required under the Transaction Documents),
(iii) any delay caused by any unforeseen condition on the Land affecting
Substantial Completion of the Improvements; and (iv) any casualty or other loss
occurring on or about the Leased Property during the course of construction
(whether or not insured). Force Majeure shall be deemed to exist only so long as
Lessee specifically notifies the Owner Collateral Trustee and Owner in writing
of such delay within a reasonable period of time following Lessee's actual
knowledge of the event or condition, but in no event later than thirty (30) days
after obtaining such knowledge, and exercises due diligence and reasonable
efforts to remove or overcome such Force Majeure.
FULL COMPLETION AND FULLY COMPLETED -- means Substantial Completion
plus completion of all Punch List Items and minor items.
GAAP -- means generally accepted accounting principles as in effect
from time to time.
GENERAL CONTRACT -- as defined in
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GENERAL CONTRACTOR -- means Turner Construction Company, and any
successor general contractor consented to in writing by Owner under the
Construction Agency Agreement.
GUARANTOR -- means Tiffany & Co., a Delaware corporation, the guarantor
under the Lease Guarantee.
GUARANTY -- shall have the meaning set forth in Section 6.1 of the
Agreement and Consent to Assignment.
HARD COSTS -- means those costs which are associated with the labor,
materials and work required to demolish any existing facilities on the Land and
thereafter construct and complete the Improvements, including, but not limited
to, work, labor and materials required pursuant to any Legal Requirements
applicable to transactions contemplated under the Transaction Documents. The
categories of costs constituting Hard Costs are shown on the Project Budget.
HAZARDOUS MATERIALS -- means friable asbestos, flammable materials,
explosives, radioactive or nuclear substances, polychlorinated biphenyls, oil
and other petroleum products, radon gases, urea formaldehyde, chemicals, gases,
solvents, pollutants or contaminants in quantities that are a detriment or pose
a danger to the environment or to the health or safety of any person, and any
other hazardous or toxic materials, wastes and substances in quantities which
are defined, determined or identified as such in any past, present or future
federal, state or local laws, rules, regulations, codes or ordinances or any
judicial or administrative interpretation thereof. Without limitation on the
generality of the foregoing, Hazardous Materials shall include any solid,
liquid, powder, sludge-like or gaseous material or substance that: (i) meets the
definition of "hazardous substances", "hazardous waste", "extremely hazardous
substances", "extremely hazardous waste", "hazardous material", "extremely
hazardous material" or regulated "solid waste" under the Hazardous Materials
Legal Requirements; (ii) is a "discarded material" as defined in 40 C.F.R.
261.2(a)(2); and (iii) in sufficient quantities may be harmful or create a
foreseeable risk of unreasonable harm to public health or welfare or to natural
resources.
HAZARDOUS MATERIALS LEGAL REQUIREMENTS -- mean all applicable past
(which have current effect), present or future federal, state or local laws,
rules, regulations, codes or ordinances or any judicial or administrative
interpretation thereof, including, without limitation, all orders, decrees,
judgments, rulings, requirements, directives or notices of violation, imposed
through any public or private enforcement proceedings, that create duties,
obligations, responsibilities and/or liabilities with respect to: (i)
environmental pollution, impairment or disruption; or (ii) any environmental
permits, licenses, emissions, or effluent reduction plans, and reporting
requirements; and (iii) in each instance including, without limitation, laws
governing the existence, use, storage, treatment, discharge, release,
containment, transportation, generation, manufacture, refinement, handling,
production, disposal, or management of any Hazardous Materials, or otherwise
regulating or providing for the protection of the environment, and further
including, without limitation, the Comprehensive Environmental Response
Compensation and Liability Act (42 U.S.C. 9601 et seq), the Hazardous Material
Transportation Act (49 U.S.C. {1801 et seq), the Public Health Service Act (42
U.S.C. {300(f) et seq), the Pollution Prevention Act (42 U.S.C. {13101 et
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seq), the Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C. {136 et
seq), the Resource Conservation and Recovery Act (42 U.S.C. {6901 et seq), the
Federal Clean Water Act (33 U.S.C. {1251 et seq), the Federal Clean Air Act (42
U.S.C. {7401 et seq), the Toxic Substances Control Act (15 U.S.C. Section 2602
et seq), the New Jersey Environmental Cleanup Responsibility Act (N.J.S.A.
13:1K-6 et seq) now known as The Industrial Site Recovery Act ("ISRA"), the
Spill Compensation and Control Act (N.J.S.A. 58:10-23-11 et seq), the
underground Storage Tank Act (N.J.S.A. 58:10A-21 et seq), the New Jersey Water
Pollution Control Act (N.J.S.A. 58:10A-1 et seq), the Air Pollution Control Act
(N.J.S.A. 26:2C-2 et seq) and the Solid Waste Management Act (N.J.S.A. 13:1E et
seq), and all regulations adopted and publications promulgated pursuant thereto.
HOLDERS -- means, at any time, (a) with respect to the Owner Trust
Indenture, each of the holders of Owner Notes outstanding at such time and (b)
with respect to the Beneficiary Trust Indenture, each of the holders of
Beneficiary Notes outstanding at such time.
IMPROVEMENTS -- shall have the meaning set forth in the Preliminary
Statement of the Lease.
INDEMNIFIED PARTIES -- shall have the meaning set forth in Section 20
of the Lease.
INDEMNIFICATION PERIOD -- shall have the meaning set forth in Section
8(a) of the Lease.
INSTITUTIONAL INVESTOR -- shall mean the Purchasers, any subsidiary or
affiliate of any of the Purchasers, any holder or beneficial owner of Notes that
is an "accredited investor" as defined in Section 2(15) of the Securities Act
and any "qualified institutional borrower" as defined in 17 C.F.R. Section 230,
144A, as amended from time to time.
INTERIM RENT PAYMENT DATE -- means each January 31 and each July 31 in
each year during the Construction Period.
INTERIM LEASE TERM -- shall have the meaning set forth in Section 3 of
the Lease.
INTERIM RENTAL -- shall have the meaning set forth in Section 5(a)(i)
of the Lease.
INVESTMENT -- shall mean the acquisition of any real or tangible
personal property or of any stock or other security, any loan, advance, bank
deposit, money market fund, contribution to capital, extension of credit (except
for accounts receivable arising in the ordinary course of business and payable
in accordance with customary terms), or purchase or commitment or option to
purchase or otherwise acquire real estate or tangible personal property or stock
or other securities of any party or any part of the business or assets
comprising such business, or any part thereof.
INVESTMENT GRADE -- means, with respect to any Person, that the
long-term unsecured debt obligations or corporate credit of such Person is rated
BBB- or higher by S&P or Baa3 or higher by Moody's.
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INVESTOR LOAN -- means the loan to the Beneficiary Trustee from the
Construction Lender in the principal amount of $1,925,000 which was repaid with
the proceeds of the Beneficiary Notes.
KRAMER -- means W. Jeffrey Kramer.
LAND -- shall have the meaning set forth in the Preliminary Statement
of the Lease.
LC DOCUMENTS -- means the Reimbursement and Remarketing Agreement, the
LC Pledge and Security Agreement, the LC Environmental Indemnity and the Letter
of Credit and any other documents included within the definition of
Reimbursement Documents, as defined in the Reimbursement and Remarketing
Agreement.
LC ENVIRONMENTAL INDEMNITY -- means that certain Environmental
Indemnity, of Lessee and Parent in favor of LC Issuer.
LC ISSUER -- means BOT Financial Corporation, a Delaware corporation,
or its designee.
LC PLEDGE AND SECURITY AGREEMENT -- means the LC Pledge and Security
Agreement executed and delivered by Beneficiary to and for the benefit of LC
Issuer, a form of which is attached as Exhibit B to the Reimbursement and
Remarketing Agreement.
LEASE -- means that certain Lease Agreement, dated as of August 1,
1995, between the Owner and Lessee, as amended by that certain Amended and
Restated Lease Agreement, dated as of December 1, 1995, effective as of August
1, 1995, as the same may be further amended or supplemented from time to time.
LEASE DEFAULT -- means an "Event of Default" under and within the
meaning of the Lease.
LEASED PROPERTY -- shall have the meaning set forth in Section 2 of the
Lease.
LEASE GUARANTY -- means that certain Amended and Restated Lease
Guaranty Agreement from the Guarantor to the Owner, as may be amended from time
to time.
LEGAL REQUIREMENTS -- shall mean, with respect to any Person or
property, all applicable federal, state, county and local laws, by-laws, rules,
regulations, codes and ordinances, and the requirements of any governmental
agency or authority having or claiming jurisdiction with respect to such Person
or property, including, but not limited to, those applicable to zoning,
subdivision, building, health, fire, safety, sanitation, the protection of the
handicapped, and environmental matters and shall also include all orders and
directives of any court, governmental agency or authority having or claiming
jurisdiction with respect to such Person or property.
LESSEE -- means Tiffany and Company, a New York corporation, which is
Lessee under the Lease, and its permitted successors and assigns pursuant to
Section 19 of the Lease.
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LETTER OF CREDIT -- means the Letter of Credit issued by the LC Issuer
in the amount up to the Maximum Owner Risk Amount and any substitutions,
replacements, renewals and extensions thereof.
LICENSES AND PERMITS -- means all licenses, permits, authorizations and
agreements issued by or agreed to by any governmental authority, or by a private
party pursuant to a Permitted Title Exception, and including, but not limited
to, building permits, occupancy permits and such special permits, variances and
other relief as may be required pursuant to Legal Requirements which may be
applicable to the Property or the Project.
LIEN -- means liens, mortgages, encumbrances, pledges, charges and
security interests of any kind.
LIMITED LESSEE RISK CONDITIONS -- means all of the following: (A) no
Default and no Event of Default shall have occurred and be continuing under the
Lease; (B) no amendment, modification, supplement, consent, waiver, approval,
settlement, extension, compromise or accommodation of the Lease has been entered
into or given without the prior written consent of the LC Issuer, (C) the
conditions set forth in Section 4(a) of the Lease shall have been met in full to
the satisfaction of the Owner by January 31, 1997 (or such later date determined
in accordance with Section 4(a) of the Lease for delays due to an act or event
of Force Majeure), and (D) no Nonreturn Option Notice shall have been delivered
by Lessee pursuant to Section 30(b) of the Lease.
LISTED PERMITS -- shall have the meaning set forth in Section 12(h) of
the Lease.
MAJORITY HOLDERS -- in respect of Owner Notes or Beneficiary Notes
shall mean at any time, holders of more than fifty percent (50%) in principal
amount of such Notes outstanding at such time (exclusive of such Notes held by
one or more of Owner Trustee, Beneficiary Trustee, the Lessee, the Parent, any
Restricted Subsidiary or any Affiliate.
MAKE-WHOLE AMOUNT -- shall mean with respect to any date (a "PREPAYMENT
DATE") and principal amount of Notes required for any reason to be paid
hereunder on such Prepayment Date before the regularly scheduled maturity of
such principal amount (the "PREPAID PRINCIPAL AMOUNT"), the greater of:
(a) zero dollars ($0); and
(b) the result of
(i) the sum of the present values of the then
remaining scheduled payments of principal and interest (minus,
in the case of the first of such interest payments, and before
determining the present value thereof, the amount of interest
accrued on such Prepaid Principal Amount since the scheduled
interest payment date immediately preceding such Prepayment
Date) that would be payable in respect of such Prepaid
Principal Amount but for the prepayment thereof, minus
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(ii) such Prepaid Principal Amount,
in determining such present values, a discount rate equal to the Make-Whole
Discount Rate (with respect to such Prepayment Date and such Prepaid Principal
Amount) divided by two (2), and a discount period of six (6) months of thirty
(30) days each, shall be used. MakeWhole Amount shall be calculated for each
principal amount of each series of Owner Notes and Beneficiary Notes on each
Prepayment Date.
As used in this definition:
Make-Whole Discount Rate -- means, with respect to any
Prepayment Date and any Prepaid Principal Amount to be paid on such
Prepayment Date, the sum of:
(a) the Treasury Rate in respect of such Prepaid
Principal Amount determined, in the case of any prepayment
pursuant to (i) with respect to the Owner Notes, Section 2.2
or Section 2.3 of the Owner Trust Indenture or (ii) with
respect to the Beneficiary Notes, Section 2.2 or Section 2.3
of the Beneficiary Trust Indenture, as of the date that is two
(2) Business Days before such Prepayment Date, and, in the
case of any prepayment under Section 7.2 of the Owner Trust
Indenture or Section 7.2 of the Beneficiary Trust Indenture,
on such Prepayment Date; plus
(b) fifty one-hundredths percent (.50%) per annum.
Treasury Rate -- means, with respect to any date and any
Prepaid Principal Amount,
(a) the semi-annual pay equivalent of the yield
reported as of 10:00 a.m., New York City time, on such date on
the display designated as page "USD" on the Bloomberg
Financial Markets System (or such other display as may replace
page "USD" on such system) providing the most current yields
for actively traded United States of America Treasury
securities with maturities corresponding to the remaining
Weighted Average Life to Maturity of such Prepaid Principal
Amount (such Weighted Average Life to Maturity being
determined as of the date of such calculation and rounded to
the nearest one twelfth (1/12)), or
(b) if and only if Bloomberg Financial Markets
Systems ceases to exist or fails to report such yield, the
semi-annual pay equivalent of such yield as reported on such
reasonably comparable electronic service as may be designated
by the Required Holders and that is generally accepted by
institutional investors as a source of United States of
America Treasury rate information, or
(c) if and only if Bloomberg Financial Markets
systems ceases to exist or fails to report such yield and the
Required Holders shall fail to agree upon a comparable
electronic service pursuant to clause (b) of this definition,
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the semi-annual pay equivalent of such yield reported under
the heading "This Week" and under the caption "Treasury
Constant Maturities" of the maturity corresponding to the
remaining Weighted Average Life to Maturity of such Prepaid
Principal Amount (such Weighted Average Life to Maturity being
determined as of the date of such calculation and rounded to
the nearest one twelfth (1/12)) as most recently published and
made available to the public in the statistical release
designated "H.15(519)" or any successor publication that is
published weekly by the Untied States of America Federal
Reserve System and that establishes yields on actively traded
United States of America Treasury securities or, if no such
successor publication is available, then any other source of
current information in respect o interest rates on the
securities of the United States of America that is generally
available and, in the judgment of the Required Holders,
provides information reasonably comparable to the H.15(519)
statistical release.
If no maturity exactly corresponds to such rounded Weighted Average
Life to Maturity, the semi-annual pay equivalents of the yields for the
two (2) most closely corresponding published maturities next above and
below the rounded Weighted Average Life to Maturity of the Notes shall
be calculated pursuant to the immediately preceding sentence and the
Treasury Rate shall be interpolated from such yields on a linear basis,
rounding with respect to each such relevant period to the nearest one
twelfth (1/12).
Weighted Average Life to Maturity -- means, with respect to
any date and any Prepaid Principal Amount, the number of years obtained
by dividing the Remaining Dollar-Years of such Prepaid Principal Amount
in respect of such date by such Prepaid Principal Amount.
Remaining Dollar-Years -- means, with respect to any date and
any Prepaid Principal Amount, the result obtained by:
(a) multiplying, in the case of each required payment
of principal (including payment at maturity), or part thereof,
that would be payable in respect of such Prepaid Principal
Amount but for the prepayment thereof,
(i) an amount equal to such required payment
of principal (or par thereof), by
(ii) the number of years (calculated to the
nearest one-twelfth) that will elapse between such
date and the date such required principal payment
would be due if such Prepaid Principal Amount had not
been prepaid, and
(b) calculating the sum, with respect to each of such
required payments of principal, of each of the products
obtained in the preceding subsection (a).
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MAXIMUM LESSEE RISK AMOUNT -- means, for any date,
(a) during the Interim Lease Term, the percentage set forth
in Exhibit C under the caption "Maximum Lessee Risk Percentage" and
(b) during the Basic Lease Term and any Extension Lease Term,
the percentage set forth in Exhibit F to the Lease under the caption
"Maximum Lessee Risk Percentage" applicable for such date,
in each case, multiplied by $37,000,000.
MAXIMUM OWNER RISK AMOUNT -- means, for any date,
(a) during the Interim Lease Term, the percentage set forth
in Exhibit C under the caption "Maximum Owner Risk Percentage" and
(b) during the Basic Lease Term and any Extension Lease Term,
the percentage set forth in Exhibit F to the Lease under the caption
"Maximum Owner Risk Percentage" applicable for such date,
in each case, multiplied by $37,000,000.
MAXIMUM TERM -- shall mean the, Interim Lease Term, the Basic Lease
Term plus one hundred and eight (108) months constituting, in the aggregate, the
maximum number of months in all Extension Lease Terms and in no event shall the
Maximum Term extend beyond the Series A Maturity Date.
MEMORANDUM OF LEASE -- shall have the meaning set forth in Section 36
of the Lease.
MORTGAGE -- means the Mortgage and Security Agreement executed and
delivered by Owner to and for the benefit of the Owner Collateral Trustee to
secure all of Owner's Obligations to the holders of the Owner Notes.
NET CASUALTY AWARD -- shall have the meaning set forth in Section 16(b)
of the Lease.
NET PROCEEDS -- means either or both of a Net Casualty Award or a Net
Taking Award.
NET PROCEEDS OF SALE -- means with respect to the Leased Property sold
by Owner to a third party pursuant to Section 30(b) of the Lease, the net amount
of the proceeds of sale of the Leased Property, after deducting from the gross
proceeds of such sale (i) all sales taxes and other taxes as may be applicable
to the sale or transfer of the Leased Property, (ii) all fees, costs and
expenses of such sale incurred by Owner and (iii) any other amounts for which,
if not paid, Owner would be liable or which, if not paid, would constitute a
Lien on the Leased Property, but in determining Net Proceeds of Sale, the
amounts payable under the Owner Notes and Beneficiary Notes shall not be
deducted from the gross proceeds of such sale.
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NET TAKING AWARD -- shall have the meaning set forth in Section 16(b)
of the Lease.
NONRETURN OPTION NOTICE -- shall have the meaning set forth in Section
30(d) of the Lease.
NOTE PAYMENT DATE -- means each Construction Period Payment Date, each
Series A Payment Date, each Series B Payment Date, the Series A Maturity Date,
the Series B Maturity Date, the Termination Date, the Event of Loss Termination
Date and each other date on which any payment is due on any Note whether by
acceleration or otherwise.
NOTE PURCHASE AGREEMENTS -- means the Owner Note Purchase Agreement and
the Beneficiary Note Purchase Agreement.
NOTES -- means the Owner Notes and the Beneficiary Notes.
OWNER or OWNER TRUSTEE -- means First Fidelity Bank, National
Association, a national banking association, not in its individual capacity but
solely as trustee under that certain Trust Agreement 1995-1 dated as of July 1,
1995.
OWNER'S ACQUISITION EQUITY -- means the amount of Owner's Equity used
to pay Acquisition Costs.
OWNER CASH COLLATERAL ACCOUNT -- shall have the meaning set forth in
Section 3.5(a) of the Owner Trust Indenture.
OWNER COLLATERAL TRUSTEE -- shall have the meaning set forth in the
introductory paragraph of the Owner Trust Indenture.
OWNER'S CONVEYANCE -- means any of the following: (i) the transfer by
Owner of its interest in the Leased Property to Lessee pursuant to Sections
4(b), 16(c) or 29(b) of the Lease; or (ii) the transfer by Owner of its interest
in the Leased Property to a third party pursuant to Section 30(b) of the Lease.
OWNER FINANCING DOCUMENTS -- means the Owner Note Purchase Agreement,
the Owner Trust Indenture, the Mortgage, the Agreement and Consent to
Assignment, the Assignment of Leases and Rents, the Assignment of Contracts,
Licenses and Permits, the Beneficiary Guaranty, the Pledge and Security
Agreement -- Guaranty and each and every other document heretofore and hereafter
executed by Owner and delivered to the Financing Parties in connection with the
Owner Notes.
OWNER FINANCING STATEMENTS -- shall have the meaning assigned to such
term in the Owner Trust Indenture.
OWNER LIEN -- means any Lien resulting solely from claims arising
against or acts or omissions of the Owner or Beneficiary arising out of events
and conditions unrelated to the transactions contemplated by the Lease,
Construction Agency Agreement and the Transaction Documents.
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OWNER NOTE PAYMENT ACCOUNT -- shall have the meaning set forth in
Section 3.4(a) of the Owner Trust Indenture.
OWNER NOTE PURCHASE AGREEMENTS -- means those certain Note Purchase
Agreements dated as of December 1, 1995, among the Owner and each Purchaser, as
may be amended from time to time.
OWNER NOTES -- shall have the meaning set forth in Recital C of the
Owner Trust Indenture.
OWNER TRUST AGREEMENT -- means that certain Trust Agreement 1995-1,
dated as of July 1, 1995 between Beneficiary Trustee and First Fidelity Bank,
National Association, as amended by Amendment No. 1 thereto.
OWNER TRUST ESTATE -- means the trust estate created by the Owner Trust
Agreement.
OWNER TRUST INDENTURE -- means that certain Collateral Trust Indenture,
dated as of December 1, 1995, between Owner and Bank, as may be amended and
supplemented from time to time.
OWNER'S EQUITY -- means the sum of $1,925,000.
OWNER'S OBLIGATIONS -- shall have the meaning set forth in the
Declaration of Trust in the Owner Trust Indenture.
OWNER'S OBLIGATIONS -- shall have the meaning set forth in the Owner
Trust Indenture.
PARENT -- means Tiffany & Co., a New York corporation.
P&S -- means that certain Agreement for Purchase and Sale of Real
Property by and between Prubeta-3, as seller, and Tiffany and Company, as
purchaser, dated as of November 4, 1994 relating to the purchase and sale of the
Land.
PERMITTED ASSESSMENTS -- means: (i) detailed visual inspections of the
Leased Property, including without limitation all storage areas, storage tanks,
drains, drywells and leaching areas; (ii) the taking of soil and surface and
sub-surface water samples; (iii) the performance of soil and ground water
analysis; and (iv) the performance of such other investigations or analysis as
are necessary and appropriate and consistent with sound professional
environmental engineering practice in order for Owner to obtain a reasonably
complete assessment of the compliance of thee Leased Property and the use
thereof with all Hazardous Materials Legal Requirements and to make a
determination as to whether or not there is any material risk of contamination
not previously disclosed to Owner to the Leased Property.
PERMITTED DISTRIBUTIONS -- shall have the meaning set forth in Section
5.7 of the Owner Trust Indenture.
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PERMITTED INVESTMENTS -- shall have the meaning set forth in Section
5.8 of the Owner Trust Indenture
PERMITTED LIENS -- means those matters set forth in Schedule 1 attached
hereto and more particularly set forth in the Stewart Title Guaranty Company
"Commitment for Title Insurance," Binder #14482N (Serial No. C-4401-244-806),
Schedule B - Section II, and for real estate taxes not yet due and payable, the
Lease, the Mortgage and the Assignment of Leases and Rents.
PERMITTED TITLE EXCEPTIONS -- shall have the meaning set forth in
Exhibit B to the Mortgage and those utility easements or rights of passage as
may be necessary to enable Lessee to operate the Leased Property for the uses
permitted under Section 6 of the Lease.
PERMITTED TRANSACTIONS -- shall have the meaning set forth in Section
5.6 of the Owner Trust Indenture.
PERMITTED TRANSFERS -- shall have the meaning in Section 5.6 of the
Owner Trust Indenture.
PERMITTED TRUST INVESTMENTS -- means Investments of the type described
in clause (a), clause (b) or (e) of the definition of Permitted Investments in
Section 5.8 of the Owner Trust Indenture.
PERSON -- means any individual, corporation, partnership, joint
venture, association, limited liability company, joint stock company, trust,
trustee(s) of a trust, unincorporated organization, or government or
governmental authority, agency or political subdivision thereof.
PLACEMENT MEMORANDUM -- means the Private Placement Offering
Memorandum, prepared by BOT Financial Services, Inc, dated August 1995, and the
exhibits and annexes contained therein.
PLANS AND SPECIFICATIONS -- means the plans, specifications and working
drawings prepared by the Architect and more particularly listed on Exhibit E to
the Construction Loan Agreement.
PREPAID PRINCIPAL AMOUNT -- as defined in the definition of Make-Whole
Amount.
PREPAYMENT DATE -- as defined in the definition of Make-Whole Amount.
PRINCIPAL PARTIES -- shall have the meaning set forth in Section 8(a)
of the Lease.
PROJECT -- means the development of the Property and the construction
of the Improvements pursuant to the Construction Agency Agreement and the Plans
and Specifications.
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PROJECT BUDGET -- means the line item budget for all acquisition,
construction and nonconstruction costs, including contingencies and carrying
costs, for the Improvements. A copy of the Project Budget is annexed to the
Construction Agency Agreement as Exhibit A.
PROJECT SCHEDULE -- means the "Proposed Schedule of Work" approved by
the Owner and the Owner Collateral Trustee and attached to the Construction
Agency Agreement as Exhibit B.
PROPERTY -- means the Land and Improvements.
PUNCH LIST ITEMS -- shall mean details of construction, decoration and
mechanical and electrical adjustment which in the aggregate are minor in
character and do not materially interfere with the Lessee's use or enjoyment of
the Improvements.
PURCHASE PRICE -- shall have the meaning given to such term in Section
29(b) of the Lease.
PURCHASERS -- shall have the meaning set forth in the Preliminary
Statement of the Lease.
REIMBURSEMENT AND REMARKETING AGREEMENT -- means that certain
Reimbursement and Remarketing Agreement, dated August 1, 1995, by and among the
Owner, Beneficiary and the LC Issuer, as amended and restated by that certain
Amended and Restated Reimbursement and Remarketing Agreement dated as of
December 1, 1995, as may be from time to time further amended.
REIMBURSEMENT DOCUMENTS -- shall have the meaning set forth in the
Reimbursement and Remarketing Agreement.
REINVESTMENT PREMIUM -- as of any Determination Date, shall mean an
amount equal to the greater of
(a) the excess, if any, of (i) the sum of the respective
Present Values of (A) all payments of Base Rental remaining to be paid
after such Determination Date through the expiration of the Maximum
Term, that would have been payable following such Determination Date if
the Lease had been renewed through and inclusive of the expiration of
the Maximum Term, and (B) the Purchase Price at such expiration of the
Maximum Term (the amount of each such payment being referred to as a
"Payment"), over (ii) the Termination Value applicable at the
Determination Date, and
(b) the aggregate Make-Whole Amounts due in respect of the
Owner Notes and the Beneficiary Notes in connection with the payments
being made thereon resulting from payments then due from the Lessee on
the Determination Date.
For purposes of this definition, "Present Value" shall be determined by
discounting each Payment in accordance with generally accepted financial
practice on a semiannual basis at a discount rate equal to the sum of applicable
Treasury Yield plus 0.50%; and the "Treasury
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Yield" for such purpose shall be determined as of 10:00 A.M. New York City time
on the fifth Business Day prior to the date such payment is due by references to
the yields of those actively traded "On the Run" United States Treasury
securities having a maturity equal to the Weighted Average Life to Maturity of
such Payments as of the Determination Date; provided that if such Weighted
Average Life to Maturity is not equal to the maturity of an actively traded "On
the Run" United States Treasury security, such yield shall be obtained by linear
interpolation (calculated to the nearest one-twelfth of a year) from the yields
of actively traded "On the Run" United States Treasury securities having a
maturity closest to such Weighted Average Life to Maturity. "Weighted Average
Life to Final Maturity" of the Payments as of the Determination Date means the
number of years or fraction thereof obtained by dividing the then Remaining
Dollar-Years of the Payments by the then outstanding amount of such Payments.
"Remaining Dollar-Years" means the sum of the amounts obtained by multiplying
the amount of each then remaining Payment by the number of years (or fraction
thereof) which will elapse between the time of such determination and the date
of payment of each Payment. The determination of the Reinvestment Premium by
Owner shall, in the absence of manifest error, be deemed conclusive.
RENT --means Interim Rental, Base Rental and Additional Rental, as the
case may be.
RENT PAYMENT DATE -- means an Interim Rent Payment Date or a Base Rent
Payment Date, as the context may require.
RENTAL PERIOD -- means each period for which a payment of Interim
Rental or Base Rental is to be made during the Interim Lease Term, the Basic
Lease Term and each Extension Lease Term.
REPAIR WORK -- as defined in Section 9.1 of the Owner Trust Indenture.
REQUIRED HOLDERS -- in respect of Owner Notes or Beneficiary Notes
shall mean at any time, holders of more than sixty-six and two-thirds percent
(66-2/3%) in principal amount of such Notes outstanding at such time (exclusive
of such Notes held by one or more of Owner Trustee, Beneficiary Trustee, the
Lessee, the Parent, any Restricted Subsidiary or any Affiliate).
RESPONSIBLE OFFICER -- means, when used in connection with (a) the
Owner, any officer or employee of the Trust Company authorized to take the
relevant action and (b) the Owner Collateral Trustee, any officer or employee of
the Bank authorized to take the relevant action.
RESTRICTED SUBSIDIARY -- means the Lessee and each other Subsidiary of
which one hundred percent (100%) (by number of votes and exclusive of director's
qualifying shares) of each class of the Voting Stock is owned by the Parent or
another Restricted Subsidiary.
SECURITIES ACT -- shall mean the Securities Act of 1933 of the United
States of America, together with all rules and regulations promulgated pursuant
thereto, as amended from time to time.
20
<PAGE> 181
SECURITY -- shall have the meaning set forth in Section 6.1 of the
Agreement and Consent to Assignment.
SECURITY DOCUMENTS -- means the Owner Trust Indenture, the Beneficiary
Trust Indenture, the Mortgage, the Assignment of Leases and Rents, the
Assignment of Contracts, Licenses and Permits, the Beneficiary Pledge and
Security Agreement -- Notes, the Beneficiary Pledge and Security Agreement --
Guaranty and each and every other document executed by the Owner or Beneficiary
in favor of the Owner Collateral Trustee or Beneficiary Collateral Trustee,
respectively, granting an interest in any Collateral.
SENIOR FINANCIAL OFFICER -- means, with respect to any corporation, a
Senior Officer who is the chief financial officer, the treasurer or the
controller of such corporation.
SENIOR OFFICER -- means, with respect to any corporation, the chairman
of the board, the president, any vice president, the secretary or the treasurer
of such corporation.
SERIES A BENEFICIARY NOTES -- shall have the meaning set forth in
Recital C of the Beneficiary Trust Indenture.
SERIES A MATURITY DATE -- means January 31, 2009.
SERIES A OWNER NOTES -- shall have the meaning set forth in Recital C
of the Owner Trust Indenture.
SERIES A PAYMENT DATE -- shall have the meaning set forth in Section
2.1(a) of the Owner Trust Indenture.
SERIES B BENEFICIARY NOTES -- shall have the meaning set forth in
Recital C of the Beneficiary Trust Indenture.
SERIES B MATURITY DATE -- means July 31, 2000.
SERIES B OWNER NOTES -- shall have the meaning set forth in Recital C
of the Beneficiary Trust Indenture.
SERIES B PAYMENT DATE -- shall have the meaning set forth in Section
2.1(b) of the Owner Trust Indenture.
SIGNIFICANT AFFILIATE -- shall have the meaning set forth in the
Agreement and Consent to Assignment.
SOFT COSTS -- means all costs other than Acquisition Costs and Hard
Costs, which are required incident to the Improvements, such as, but not limited
to, architectural and engineering expenses, interest, legal and accounting
expenses, costs of obtaining licenses and permits, financing costs, leasing
fees, closing costs and expenses of developing, marketing, operating and
maintaining the Leased Property. A list of the categories of Soft Costs is set
forth in the Project Budget.
21
<PAGE> 182
SUBSIDIARY -- means a corporation of which the Parent owns, directly or
indirectly, more than fifty percent (50%) (by number of votes) of each class of
the Voting Stock.
SUBSTANTIAL COMPLETION AND SUBSTANTIALLY COMPLETED -- The term
"Substantial Completion", or "Substantially Completed", as it applies to the
Improvements shall mean the date when (except for Punch List Items and minor
items which can be fully completed without material interference with the use of
the Improvements, and other items which, because of the season, weather or
nature of the items are not practical to perform at the time) all work required
by the Plans and Specifications and the other Approved Construction Documents
has been completed and the certificate of occupancy for the Project and such of
the leasable space as is occupied by any occupants has been issued.
SUBSTANTIAL COMPLETION DATE -- means January 31, 1997 unless an act or
event of Force Majeure shall have occurred prior to such date which prevents
Lessee from completing the Improvements by January 31, 1997, then the earlier of
(a) the date which is the number of days which the act or event of Force Majeure
delayed completion of the Improvements beyond January 31, 1997 and (b) July 31,
1997.
SUCCESSOR OWNER -- shall have the meaning set forth in Section 19(b) of
the Lease.
TAKING -- means the taking, condemnation, seizure, confiscation or
requisition of use or title of all or a substantial portion of the Leased
Property by any governmental body or authority or any other Person legally
vested with such powers so as to render the Leased Property unusable for
Lessee's intended use as of the Commencement Date.
TERM -- means the full term of the Lease, including the Interim Lease
Term, the Basic Lease Term and each Extension Lease Term, except as expressly
modified in the Lease.
TERMINATION DATE -- means the last day of the Interim Lease Term unless
the Basic Lease Term Commencement Date occurs in which case the Termination Date
shall mean the last day of the Basic Lease Term or, if the Lease has been
renewed pursuant to Section 29(a), the last day of the last Extension Lease Term
for which the Lease is renewed.
TERMINATION VALUE -- shall have the meaning given to such term in
Section 16(c) of the Lease.
TIFFANY -- shall mean Tiffany and Company, a New York corporation,
which is a wholly owned subsidiary of Tiffany & Co, a Delaware corporation.
TITLE INSURANCE COMPANY -- means First American Title Insurance Company
and its successors.
TRANSACTION DOCUMENTS -- means the Lease, the Construction Agency
Agreement, the Financing Documents, the LC Documents and the Approved
Construction Documents.
TRANSACTIONS -- means all transactions described or otherwise
contemplated in the Lease, Construction Agency Agreement and each other
Transaction Document.
22
<PAGE> 183
TRUST COMPANY -- means First Fidelity Bank, National Association, a
national banking association, in its individual capacity.
UCC -- means the Uniform Commercial Code in effect in the State of New
Jersey.
WORK -- means the entire, completed construction or the various
separately identifiable parts thereof required to be furnished under the
Approved Construction Documents with respect to the Improvements.
23
<PAGE> 184
EXHIBIT A
LAND DESCRIPTION
All that tract or parcel of land and premises, situate, lying and being in the
Township of Parsippany-Troy Hills in the County of Morris and State of New
Jersey, more particularly described as follows:
Beginning at a point in the southerly sideline of Sylvan Way (a variable width
right-of-way) distant 1048.67 feet easterly along said southerly sideline and
the several courses thereof from the intersection of the easterly sideline of
Dryden Way (a variable width right-of-way), both sidelines produced, and running
thence and continuing along Sylvan Way:
(1) Easterly along the arc of a 460.02 foot radius curve to the left
through a central angle of 21 degrees 39 minutes 29 seconds, a distance
of 173.89 feet to a point of tangency; thence
(2) North 70 degrees 57 minutes 22 seconds East, a distance of 87.99 feet
to a point of a curvature; thence
(3) Along the arc of a 837.65 foot radius curve to the right, through a
central angle of 43 degrees 52 minutes 18 seconds, a distance of 641.39
feet to a point; thence
(4) Leaving Sylvan Way, South 12 degrees 46 minutes 08 seconds West, a
distance of 81.27 feet to a point of curvature; thence
(5) Along the arc of a 1063.12 foot radius curve to the left, through a
central angle of 05 degrees 30 minutes 10 seconds, a distance of 102.10
feet to a point of tangency; thence
(6) South 07 degrees 15 minutes 58 seconds West, a distance of 436.46 feet
to a point; thence
(7) South 09 degrees 06 minutes 31 seconds West, a distance of 256.33 feet
to a point; thence
(8) South 21 degrees 55 minutes 03 seconds West, a distance of 146.65 feet
to a point; thence
(9) South 06 degrees 42 minutes 13 seconds East, a distance of 341.14 feet
to a point; thence
(10) South 68 degrees 18 minutes 29 seconds West, a distance of 817.84 feet
to a point; thence
EXHIBIT A-1
<PAGE> 185
(11) South 88 degrees 44 minutes 58 seconds West, a distance of 505.97 feet
to a point; thence
(12) North 41 degrees 28 minutes 07 seconds West, a distance of 238.23 feet
to a point; thence
(13) North 21 degrees 43 minutes 08 seconds West, a distance of 459.68 feet
to a point; thence
(14) North 54 degrees 09 minutes 13 seconds East, a distance of 638.21 feet
to a point; thence
(15) North 67 degrees 49 minutes 27 seconds East, a distance of 828.31 feet
to a point; thence
(16) North 59 degrees 10 minutes 16 seconds West, a distance of 344.16 feet
to a point; thence
(17) North 38 degrees 00 minutes 52 seconds West, a distance of 207.97 feet
to the point and place of Beginning.
Containing 40.713 acres of land
The above description is in accordance with a survey prepared by Schoor DePalma,
Engineers and Design Professionals, dated October 25, 1995 and last revised on
December 8, 1995.
EXHIBIT A-2
<PAGE> 186
EXHIBIT A1
IMPROVEMENTS DESCRIPTION
Those improvements to be constructed in accordance with the Plans &
Specifications.
EXHIBIT A1-1
<PAGE> 187
EXHIBIT B1
RENTAL PAYMENT SCHEDULE
INTERIM RENTAL PAYMENT SCHEDULE
<TABLE>
<CAPTION>
Interim Rental Payment Date Interim Rental
- --------------------------------------------------------------------------------
<S> <C>
1/31/96 490,553.82
- --------------------------------------------------------------------------------
7/31/96 1,479,853.82
- --------------------------------------------------------------------------------
1/31/97 1,479,853.82
- --------------------------------------------------------------------------------
</TABLE>
EXHIBIT B1-1
<PAGE> 188
EXHIBIT B2
RENTAL PAYMENT SCHEDULE
BASE RENTAL PAYMENT SCHEDULE
<TABLE>
<CAPTION>
================================================================================
Base Rent Payment Date Base Rental
- --------------------------------------------------------------------------------
<S> <C>
7/31/97 1,675,383.91
- --------------------------------------------------------------------------------
1/31/98 1,675,383.91
- --------------------------------------------------------------------------------
7/31/98 1,675,383.91
- --------------------------------------------------------------------------------
1/31/99 1,675,383.91
- --------------------------------------------------------------------------------
7/31/99 1,675,383.91
- --------------------------------------------------------------------------------
1/31/00 1,675,383.91
- --------------------------------------------------------------------------------
7/31/00 1,675,383.91
- --------------------------------------------------------------------------------
1/31/01 1,688,720.55
- --------------------------------------------------------------------------------
7/31/01 1,688,720.55
- --------------------------------------------------------------------------------
1/31/02 1,688,720.55
- --------------------------------------------------------------------------------
7/31/02 1,688,720.55
- --------------------------------------------------------------------------------
1/31/03 1,688,720.55
- --------------------------------------------------------------------------------
7/31/03 1,688,720.55
- --------------------------------------------------------------------------------
1/31/04 1,688,720.55
- --------------------------------------------------------------------------------
7/31/04 1,688,720.55
- --------------------------------------------------------------------------------
1/31/05 1,688,720.55
- --------------------------------------------------------------------------------
7/31/05 1,688,720.55
- --------------------------------------------------------------------------------
1/31/06 1,688,720.55
- --------------------------------------------------------------------------------
7/31/06 1,688,720.55
- --------------------------------------------------------------------------------
1/31/07 1,688,720.55
- --------------------------------------------------------------------------------
7/31/07 1,688,720.55
- --------------------------------------------------------------------------------
1/31/08 1,688,720.55
- --------------------------------------------------------------------------------
7/31/08 1,688,720.55
- --------------------------------------------------------------------------------
1/31/09 1,688,720.55
================================================================================
</TABLE>
EXHIBIT B2-1
<PAGE> 189
EXHIBIT C
MAXIMUM LESSEE RISK AMOUNT/MAXIMUM OWNER RISK AMOUNT
(AS A PERCENTAGE OF $37,000,000)
[PRIOR TO BASIC LEASE TERM COMMENCEMENT DATE]
<TABLE>
<CAPTION>
================================================================================
Maximum Lessee Risk Amount Maximum Owner Risk Amount
================================================================================
<S> <C>
88.662066% 12.779208%
================================================================================
</TABLE>
EXHIBIT C-1
<PAGE> 190
EXHIBIT D
TERMINATION VALUE
(AS A PERCENTAGE OF $37,000,000)
<TABLE>
<CAPTION>
===================================================================
Rent Payment Date Termination Value
===================================================================
<S> <C>
1/31/96 101.734112%
- -------------------------------------------------------------------
7/31/96 101.590183%
- -------------------------------------------------------------------
1/31/97 101.441274%
- -------------------------------------------------------------------
7/31/97 100.758753%
- -------------------------------------------------------------------
1/31/98 100.052103%
- -------------------------------------------------------------------
7/31/98 99.320467%
- -------------------------------------------------------------------
1/31/99 98.562963%
- -------------------------------------------------------------------
7/31/99 97.778673%
- -------------------------------------------------------------------
1/31/00 96.966649%
- -------------------------------------------------------------------
7/31/00 96.125909%
- -------------------------------------------------------------------
1/31/01 95.219390%
- -------------------------------------------------------------------
7/31/01 94.278379%
- -------------------------------------------------------------------
1/31/02 93.301561%
- -------------------------------------------------------------------
7/31/02 92.287576%
- -------------------------------------------------------------------
1/31/03 91.235009%
- -------------------------------------------------------------------
7/31/03 90.142391%
- -------------------------------------------------------------------
1/31/04 89.008200%
- -------------------------------------------------------------------
7/31/04 87.830852%
- -------------------------------------------------------------------
1/31/05 86.608706%
- -------------------------------------------------------------------
7/31/05 85.340058%
- -------------------------------------------------------------------
1/31/06 84.023138%
- -------------------------------------------------------------------
7/31/06 82.656109%
- -------------------------------------------------------------------
1/31/07 81.237064%
- -------------------------------------------------------------------
7/31/07 79.764025%
- -------------------------------------------------------------------
1/31/08 78.234936%
- -------------------------------------------------------------------
7/31/08 76.647666%
- -------------------------------------------------------------------
1/31/09 75.000000%
===================================================================
</TABLE>
EXHIBIT D-1
<PAGE> 191
EXHIBIT E
PURCHASE PRICE
(AS A PERCENTAGE OF $37,000,000)
<TABLE>
<CAPTION>
================================================================================
Termination Date Purchase Price
- --------------------------------------------------------------------------------
<S> <C>
1/31/97 101.441274%
- --------------------------------------------------------------------------------
1/31/00 96.966649%
- --------------------------------------------------------------------------------
1/31/01 95.219390%
- --------------------------------------------------------------------------------
1/31/02 93.301561%
- --------------------------------------------------------------------------------
1/31/03 91.235009%
- --------------------------------------------------------------------------------
1/31/04 89.008200%
- --------------------------------------------------------------------------------
1/31/05 86.608706%
- --------------------------------------------------------------------------------
1/31/06 84.023138%
- --------------------------------------------------------------------------------
1/31/07 81.237064%
- --------------------------------------------------------------------------------
1/31/08 78.234936%
- --------------------------------------------------------------------------------
1/31/09 75.000000%
================================================================================
</TABLE>
EXHIBIT E-1
<PAGE> 192
EXHIBIT F
MAXIMUM LESSEE RISK AMOUNT AND MAXIMUM OWNER RISK AMOUNT
(AS A PERCENTAGE OF $37,000,000)
[AFTER BASIC LEASE TERM COMMENCEMENT DATE]
<TABLE>
<CAPTION>
================================================================================
If the Determination Maximum Maximum
Date occurs in the Lessee Owner Risk
period Risk Amount Amount
- --------------------------------------------------------------------------------
<S> <C> <C>
at any time prior to or 82.979470% 13.987179%
on 1/31/00
- --------------------------------------------------------------------------------
one year period ended 83.601829% 11.617561%
1/31/01
- --------------------------------------------------------------------------------
one year period ended 81.997189% 11.304372%
1/31/02
- --------------------------------------------------------------------------------
one year period ended 80.267989% 10.967020%
1/31/03
- --------------------------------------------------------------------------------
one year period ended 78.400194% 10.608006%
1/31/04
- --------------------------------------------------------------------------------
one year period ended 76.382696% 10.226011%
1/31/05
- --------------------------------------------------------------------------------
one year period ended 74.203496% 9.819642%
1/31/06
- --------------------------------------------------------------------------------
one year period ended 71.849635% 9.387429%
1/31/07
- --------------------------------------------------------------------------------
one year period ended 69.307113% 8.927823%
1/31/08
- --------------------------------------------------------------------------------
one year period ended 66.560809% 8.439191%
1/31/09
================================================================================
</TABLE>
EXHIBIT F-1
<PAGE> 1
EXHIBIT 10.120
WATCH SUPPLIER AGREEMENT
This Agreement is made this 30th day of October 1995 by and among
Tiffany and Company, a New York corporation with its executive offices and a
principal place of business at 727 Fifth Avenue, New York, New York 10022 U.S.A.
and Tiffany & Co. Watch Center S.A., incorporated in the Canton of Vaud,
Switzerland, with its offices and principal place of business at 1133
Lussy-sur-Morges, Switzerland (both companies being hereinafter collectively
referred to as Tiffany) and TWF SA (formerly known as Tiffany & Co. Watch
Factory S.A.), incorporated in the Canton of Vaud, Switzerland, with its offices
and principal place of business at 1133 Lussy-sur-Morges, Switzerland and T
Watch & Co. S.A., with its offices and principal place of business at 1133
Lussy-sur-Morges, Switzerland.
Whereas, this same day Tiffany & Co. International, a subsidiary of
Tiffany & Co., is selling the entire share capital of TWF SA to T Watch & Co.
SA; and
Whereas, TWF SA and T Watch & Co. SA are willing, immediately after
the signing of this agreement, to have T Watch & Co. SA merge with TWF SA which
will cease to exist (both companies being hereafter collectively referred to as
"Vendor"); and
Whereas, Tiffany is the owner of the Trademarks, as defined below,
and wishes to establish Vendor as the principal source of certain watches which
Tiffany and its Affiliates will purchase from Vendor for sale under the
Trademarks; and
Whereas, Vendor wishes to manufacture certain watches to Tiffany's
specifications and sell them to Tiffany and its Affiliates; and
Whereas, Tiffany and Vendor wish to establish the terms and
conditions upon which Vendor will manufacture and sell and Tiffany will purchase
certain watches;
Now Therefore, in consideration of the foregoing facts and
objectives, and the mutual promises undertaken below, the parties agree as
follows:
ARTICLE I
DEFINED TERMS
For the purposes of this Agreement, the following capitalized words
and phrases shall have the following meanings:
"Adjusted Base Cost" means the Base Cost for each SKU adjusted
effective as of the first day of each Fiscal Year (other than
Fiscal Year 1996) by application of the
<PAGE> 2
Inflation Index to the Adjusted Base Cost as of the end of the
previous Fiscal Year as follows: prior Adjusted Base Cost x 1.X
where X equals the Inflation Index. Throughout Fiscal Year 1996 the
Adjusted Base Cost shall equal the Base Cost. Throughout any Fiscal
Year in which a New Watch is first produced the Adjusted Base Cost
shall equal the Base Cost of such New Watch.
"Affiliate" means, with respect to either party to this Agreement,
a business entity controlling, controlled by or under common
control with such party, directly or indirectly, through ownership
of stock or other equity ownership of more than fifty percent
(50%).
"Base Cost" means: for each SKU listed in SCHEDULE BC, the Base
Cost listed therein; or for any New Watch, the Base Cost agreed by
the parties by means of an amendment to SCHEDULE BC.
"Case Family" means Watches which share the same case, movement and
bracelet (where applicable), and differ only because of dial, bezel
or strap treatments.
"Casing Cost" means the Casing Cost indicated in SCHEDULE BC for an
SKU listed therein or the Casing Cost indicated in SCHEDULE BC for
the listed SKU most comparable to the Watch under consideration.
"Classic Watches" mean watches produced by Vendor prior to the date
of this Agreement but not included in the Design Families.
"Closing Date" means October 30, 1995, the date of this Agreement
and the effective date of the sale by Tiffany & Co. International
of its voting shares in Vendor to T Watch & Co. SA.
"Component Cost" means the cost of the components of a Watch
established to Tiffany's reasonable satisfaction by means of
Vendor's established component costs and/or competitive bids, but
exclusive of Precious Materials costs.
"Delivered Watches" means Watches remaining in the custody of
Vendor following completion of Vendor's delivery obligations set
forth in Section 3.2 below.
"Design Defect" means a defect in the fundamental design of a Watch
that manifests itself through repeated failures of the case,
movement, bracelet or clasp that is not the result of a discrete
material or manufacturing failure.
"Design Families" mean Tiffany's ATLAS, TESORO, DIVERS, INTAGLIO,
STREAMERICA, SIGNATURE II and ULTRA THIN series of Watches as
indicated by "type" in Schedule BC.
"Exclusive Watches" mean watches within the Design Families
produced by
2
<PAGE> 3
Vendor prior to the date of this Agreement, as well as all watches
which may be subsequently added through an amendment to SCHEDULE BC
and designated Exclusive.
"Existing Components" mean Watch components owned by Vendor as of
the Closing Date.
"Existing Component Cost" means the costs per Existing Component
shown in Schedule EC.
"EX WORKS" shall have the meaning provided in Incoterms 1990 as
published by the International Chamber of Commerce.
"Fall Order" shall have the meaning indicated in Section 4.2 below.
"Fiscal Year" means a 12-month period ending January 31. A Fiscal
Year is referred to by the calendar year in which it commences,
e.g. the Fiscal Year ending January 31, 1997 is referred to as
Fiscal 1996.
"Gemstones" mean diamonds, emeralds, rubies and sapphires meeting
the quality and dimensional standards set forth in SCHEDULE GS.
"Gemstone SKU" means a watch whose face, bezel or bracelet is
decorated with one or more Gemstones.
"Gold SKU" means a Watch constructed with a solid gold case or with
a solid gold case and a solid gold bracelet. Gold SKUs do not
include Watches with steel-and-gold cases or with steel-and-gold
bracelets.
"Inflation Index" means the change (expressed as a decimal
fraction) in the Evolution comparee des indices des prix, as
published by Chambre vaudoise du commerce et de l'industrie (Prix a
la consommation (mai 1993 = 100)) from 1 January to 31 December of
the calendar year ending immediately before the computation of
Adjusted Base Costs.
"Minimum Portion" means, with respect to the total number of
Exclusive Watches (i) ordered by Tiffany or any of its Affiliates
from any source (including from any other Affiliate of Tiffany) or
(ii) produced by Tiffany directly, for, in either (i) or (ii),
delivery within any Fiscal Year, the following percentages:
3
<PAGE> 4
<TABLE>
<CAPTION>
Fiscal Years: Fiscal Years:
------------- -------------
<S> <C>
1996: 100% 2002: 100%
1997: 100% 2003: 75%
1998: 100% 2004: 50%
1999: 100% 2005: 25%
2000: 100% thereafter: nil
2001: 100%
</TABLE>
"New Watches" mean watches not produced by Vendor prior to the date
of this Agreement.
"Non-Exclusive Watches" mean Classic Watches and New Watches.
"Parts" mean components and parts, including movements, faces,
bezels, stems, bracelets and clasps for all Watches, including
Watches produced prior to the date of this Agreement.
"Precious Materials" mean Precious Metals and Gemstones.
"Precious Materials Costs" means the cost of, or any costs
associated with, Precious Materials, whether supplied by Tiffany to
Vendor pursuant to Article V below or otherwise obtained.
"Precious Metals" mean gold and platinum.
"Retained Components" mean Watch components owned by Tiffany or one
of its Affiliates as of the date of this Agreement and available
for purchase by Vendor.
"Retained Components Cost" means the cost per Retained Component
shown in Schedule RC.
"Required Insurance" means a policy or policies of property
insurance covering Delivered Watches, Precious Materials and/or
Retained Components in the hands of Vendor against all risks but
excluding losses due to mysterious disappearance or employee
pilferage, naming each of Vendor and Tiffany or Tiffany's Affiliate
as insureds, as their respective interests may appear.
"Share Purchase Note" means the Promissory Note dated the Closing
Date issued by T Watch & Co. SA to Tiffany's Affiliate, Tiffany &
Co. International Inc. for the original sum of SF 5'951'568.
"Shrinkage" means Delivered Watches, Precious Materials and/or
Retained Components missing at stocktaking, the loss of which is
not recoverable under any
4
<PAGE> 5
policy of Required Insurance actually maintained (or which would
not have been recoverable under Required Insurance had the Required
Insurance been maintained) other than Delivered Watches, Precious
Materials and/or Retained Components missing.
"SKU" means the stock keeping unit number assigned by Tiffany for
each Watch.
"Spring Order" shall have the meaning indicated in Section 4.2
below.
"Tooling" means stamping tools, dies, jigs, molds, fixtures and
other necessary tooling, as well as plans, specifications, designs,
drawings, materials lists and patterns for Watches.
"Trademarks" mean the trademarks TIFFANY, TIFFANY & CO., ATLAS,
TESORO, DIVERS, INTAGLIO, STREAMERICA, SIGNATURE II and ULTRA THIN
for watches, as well as any other designation used by Tiffany in
marketing the Watches.
"Transportation Services" means packing and addressing Watches for
shipment to the distribution points of Tiffany and it's Affiliates
throughout the world, including to non-Affiliated distributors and
retailers; obtaining, on behalf of Tiffany, any export license and
official authorizations necessary and carrying out all customs
formalities for the exportation of Watches from Switzerland and,
where necessary, for their transit through another country;
arranging contracts of carriage and coordinating insurance coverage
with the addressee and Tiffany; and receiving, unpacking and
performing initial inspection of returns of Watches from such
distribution points.
"Valid Sample" means a statistically valid sample based on MIL STD
105-D AQL:105.
"Vendor-Supplied Precious Materials" mean Precious Materials which
are supplied by Vendor other than gold supplied by Vendor in
connection with the construction of steel-and-gold watch cases and
steel-and-gold watch bracelets.
"Watches" mean Exclusive Watches and Non-Exclusive Watches
produced by Vendor for Tiffany and/or its Affiliates.
ARTICLE II
TIFFANY TO PURCHASE ITS REQUIREMENTS FROM VENDOR
2.1 Tiffany agrees to purchase and Vendor agrees to sell Watches in
accordance with the terms of this Agreement.
5
<PAGE> 6
2.2 Subject to the conditions in this Agreement, Tiffany agrees that it
will purchase the Minimum Portion of its requirements for Exclusive
Watches from Vendor.
2.3 Vendor agrees that it will accept all purchase orders for Watches
meeting the terms of this Agreement issued by Tiffany or its
Affiliates.
2.4 Tiffany will not have any obligation to place orders for New
Watches with Vendor, but may do so as provided in Article VII
below.
2.5 Vendor may sell watches to persons other than Tiffany and its
Affiliates, but Vendor agrees that it will not sell watches of the
same design as, or substantially similar in design to, any
Exclusive Watch, including all Exclusive Watches sold to Tiffany
and/or its Affiliates prior to or after the date of this Agreement.
Vendor further agrees that it will not sell watches of the same
design as any Non-Exclusive Watch, including all Non-Exclusive
Watches sold to Tiffany and/or its Affiliates prior to or after the
date of this Agreement.
ARTICLE III
PRICING AND PAYMENT
3.1 Unless otherwise expressly provided to the contrary in this
Agreement, the price payable for all Watches shall be Adjusted Base
Cost, plus (i) all taxes which must, under applicable law, be
collected by Vendor on the sale of Watches to Tiffany or its
Affiliates and the cost of all Vendor-Supplied Precious Materials.
3.2 All prices are EX WORKS Vendor's factory in Lussy-sur-Morges,
Switzerland and the parties' obligations in terms of delivery and
receipt shall be governed by Incoterms EX WORKS conditions.
3.2.1 Notwithstanding any provisions to the contrary in
INCOTERMS, Vendor shall, after delivery, hold all
Delivered Watches for the benefit of Tiffany in a
secure storage vault in Lussy-sur-Morges. This
obligation shall be compensated Vendor as part of the
Transportation Services.
3.2.2 Tiffany shall maintain Required Insurance in respect
of the Delivered Watches while they remain in
Vendor's possession.
3.2.3 In the event of any Shrinkage in respect of the
Delivered Watches, Vendor will compensate Tiffany in
the amount of the purchase price paid by Tiffany for
such Delivered Watch.
3.2.4 Tiffany through its agents and employees will be
permitted access to Vendor's facility during regular
business hours for the purpose of taking
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<PAGE> 7
physical inventories of Delivered Watches.
3.3 The price for all Watches purchased by Tiffany or its Affiliates
from Vendor shall be paid in Swiss Francs.
3.4 Adjusted Base Costs shall be determined as of the time that Tiffany
issues its purchase order and not as of the time of shipment.
3.5 The net amount due for all Watches purchased shall be payable
thirty (30) days following delivery. In the event payment is not
remitted within that time period, the unpaid balance will bear
interest at the rate of four percent (4%) per annum until paid in
full. Without prejudice to other remedies available to Vendor under
applicable law or this Agreement, Vendor may, in the event that
payment is nor remitted within the aforesaid time period, sell for
Tiffany's account Precious Materials owned by Tiffany and within
the possession of Vendor pursuant to this Agreement and offset such
amounts due against the proceeds of such sale, provided however,
that Vendor shall first give Tiffany written notice of its
intention to make such a sale and provide Tiffany with at least
five (5) days in which to satisfy such debts. In the event that
amounts owing under prior purchase orders issued by Tiffany to
Vendor are due and owing, Vendor shall be under no obligation to
accept additional purchase orders from Tiffany until such amounts
are paid in full.
3.6 If Tiffany or its Affiliate is both the holder of the Share
Purchase Note and the issuer of a purchase order, Tiffany or such
Affiliate, as the case may be, shall be entitled to offset amounts
due and payable on the Share Purchase Note against amounts payable
for Watches sold and delivered under this Agreement. Such offset
shall be accomplished as follows: first against accrued interest,
if any, and thereafter against the outstanding principal amount of
the note.
3.7 Tiffany or its Affiliate, as the case may be, shall be entitled to
offset amounts due under Section 9.5 below for the purchase by
Vendor of Retained Components against amounts payable for Watches
sold and delivered under this Agreement.
3.8 Tiffany or one of its Affiliates shall have the option, exercisable
at any time by giving thirty (30) days prior written notice, to
purchase all of Vendor's then remaining stock of Existing
Components for the Existing Component Cost, delivery and terms of
sale to be EX WORKS Vendor's factory in Lussy-sur-Morges, payment
to be due on delivery. In support of this option, Vendor agrees
that it will sell none of the Existing Components except to Tiffany
or as directed by Tiffany.
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<PAGE> 8
ARTICLE IV
ORDER QUANTITIES AND DELIVERY TIMES
4.1 Tiffany will not have any obligation to purchase Watches except to
the extent that it has submitted its written purchase order and
such order has been accepted by Vendor in writing.
4.2 Tiffany shall be entitled to place two purchase orders for Watches
in each Fiscal Year, the "Spring Order" and the "Fall Order".
4.2.1 The Spring Order must be submitted to Vendor on or
before March 1 of each Fiscal Year and must meet the
following requirements:
4.2.1.1 subject to the following limitation,
delivery of the entire order quantity must
be accomplished no later than January 31 of
the Fiscal Year in which the order is
submitted;
4.2.1.2 the order shall not require delivery of more
than aggregate 3,500 units in any one month;
and
4.2.1.3 subject to the foregoing limitation, the
order may provide for interim delivery dates
specific to any or all SKUs included in the
order as follows:
<TABLE>
<CAPTION>
Delivery Date % To Be Delivered
------------- -----------------
<S> <C>
September 1 20%
October 1 30%
November 1 30%
December 1 10%
January 1 10%
</TABLE>
4.2.2 The Fall Order must be submitted to Vendor on or
before August 1 of each Fiscal Year and must meet the
following requirements:
4.2.2.1 subject to the following limitation,
delivery of the entire order quantity must
be accomplished no later than September 1 of
the Fiscal Year following that in which the
order is submitted;
4.2.2.2 the order shall not require delivery of more
than aggregate 3,500 units in any one month;
and
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<PAGE> 9
4.2.2.3 subject to the foregoing limitation, the
order may provide for interim delivery dates
in the Fiscal Year following that in which
the order is submitted specific to any or
all SKUs included in the order as follows:
<TABLE>
<CAPTION>
Delivery Date % To Be Delivered
------------- -----------------
<S> <C>
March 1 20%
April 1 20%
May 1 20%
June 1 20%
July 1 20%.
</TABLE>
4.3 Tiffany shall include with both the Spring and Fall Orders a
Delivery Schedule meeting the requirements of Section 4.2 above.
4.4 When a Spring Order is properly submitted by Tiffany, Vendor must
accept it in writing and confirm the Delivery Schedule in writing
on or before the March 27 immediately following submission of the
Spring Order. When a Fall Order is properly submitted by Tiffany,
Vendor must accept it in writing and confirm the Delivery Schedule
in writing on or before the August 21 immediately following
submission of the Fall Order.
4.5 If Vendor fails or refuses to accept a proper order for Watches as
provided in Section 4.4 above, Vendor shall be in default of its
obligations under this Agreement and Tiffany may, without waiving
any of its rights and remedies under this Agreement or under
applicable law, avoid the limitations of Section 2.2 above in order
to fulfill its requirements for Exclusive Watches.
4.6 If Tiffany elects to submit purchase orders that fail to comply
with the requirements of Section 4.2 above, Vendor may elect
whether or not it will accept such orders; however, if Vendor
elects to accept such non-complying orders, such orders shall be
subject to the terms of this Agreement and enforceable in
accordance with the delivery schedules agreed by the parties at the
time of order issuance and acceptance.
4.7 Subject to the provisions of Section 4.8 below, time shall be of
the essence of Vendor's delivery obligations and if Vendor fails to
meet its delivery obligations with respect to a confirmed purchase
order by more than nine calendar days Tiffany shall have the right,
at its written election, to defer delivery of the late portion of
the purchase order for a period in excess of three months but not
more than six months, or to accept late delivery within a period of
three months and reduce the purchase price of the late portion as
follows:
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<PAGE> 10
<TABLE>
<CAPTION>
Number of Days Late % Price Reduced
------------------- ---------------
<S> <C>
10 to 30 days 5%
31 to 60 days 10%
Over 60 days 15%.
</TABLE>
If Tiffany has made such an election, and Vendor fails to make
delivery of the late portion of the purchase order in question by
the deferred delivery date or within the three month period, as the
case may be, Tiffany shall have the right, at its written election,
to cancel the undelivered portion of the purchase order.
4.8 Notwithstanding Section 4.7 above, Vendor shall not be responsible
for delays in deliveries if such delay arises out of any cause or
event beyond its reasonable control and without its fault or
negligence including, but not limited to labor disputes, wars,
flood, fire, tooling failure or other Acts of God; however, no
delay resulting from the failure of Vendor's suppliers to make
timely delivery of parts or components shall be excusable unless
such delay arises out of a cause or event beyond the reasonable
control of and without the fault or negligence of both Vendor and
the intended supplier of such part or component.
4.9 Unless excused by Section 4.8 above, if, with respect to either a
Spring Order or a Fall Order, Vendor fails to deliver at least 90%
of the Watches ordered on or before the confirmed delivery dates,
Tiffany may, on written notice, terminate its obligations under
Section 2.2 above without affecting the balance of the obligations
under this Agreement.
4.10 In the event the total number of Watches within any Case Family
included with a Spring or Fall Order fails to meet or exceed the
following minimum quantities per order per Case Family, then Vendor
may be entitled to a price in excess of Adjusted Base Cost as
hereinafter described:
<TABLE>
<CAPTION>
Type of Watch Case Minimum Order Quantity
------------------ ----------------------
<S> <C>
Silver 1,000 per Case Family
Steel/Steel and Gold 500 per Case Family
All Gold 150 per Case Family.
</TABLE>
In the event the foregoing minimums are not ordered, Vendor may
elect (i) to accept the purchase order at Adjusted Base Cost or
(ii) to negotiate a special, one-order-only price for the SKUs in
the below-minimum Case Family.
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<PAGE> 11
4.11 In all correspondence, invoices, bills of lading, packing lists,
purchase orders and purchase acknowledgements, Watches shall be
referred to by their SKUs.
4.12 In the event that Tiffany wishes to place purchase orders for
Watches other than the Spring Order or the Fall Order, Vendor shall
not be obligated to accept such orders but may accept such order
subject to the terms of this Agreement.
ARTICLE V
PRECIOUS MATERIALS
5.1 For all Gold SKUs ordered Tiffany shall, at its own cost and
expense, provide Vendor with Precious Metals to be used in the
construction of the watch cases and watch bracelets.
5.2 For all Gold SKUs, the quantity of gold supplied by Tiffany for
each Watch ordered shall be 106.38% of the gram weight of gold to
be returned to Tiffany in the form of a finished case or bracelet
when the Watch in question is delivered for sale.
5.3 For Gold SKUs included in the Spring Order the necessary quantities
of Precious Metals shall be placed at Vendor's disposal by Tiffany
on or before May 1 of the Fiscal Year in which the Spring Order is
placed.
5.4 For Gold SKUs included in the Fall Order the necessary quantities
of Precious Metals shall be placed at Vendor's disposal by Tiffany
on or before October 15 of the Fiscal Year in which the Fall Order
is placed.
5.5 For all Gemstone SKUs ordered Tiffany shall, at its own cost and
expense, provide Vendor with Gemstones to be used in the decoration
of the Watches unless Tiffany shall provide written notice Vendor
to the contrary at least thirty (30) days prior to Tiffany's
issuance of the purchase order for the Gemstone SKU. If Tiffany
provides such notice, Vendor shall, within fifteen (15) days of
receipt of such notice, provide Tiffany with a written quote for a
new Adjusted Base Price for the Gemstone SKU in question and such
price shall be the Adjusted Base Price applicable to that order for
that Gemstone SKU.
5.6 For Gemstone SKUs included in the Spring Order the necessary
quantities of Gemstones shall be placed at Vendor's disposal by
Tiffany on or before June 1 of the Fiscal Year in which the Spring
Order is placed.
5.7 For Gemstone SKUs included in the Fall Order the necessary
quantities of Gemstones shall be placed at Vendor's disposal by
Tiffany on or before December
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<PAGE> 12
1 of the Fiscal Year in which the Fall Order is placed.
5.8 Once Precious Materials have been placed at the disposal of Vendor,
Vendor shall bear all risks associated with the custody of such
Precious Materials, and shall indemnify and hold Tiffany harmless
from any losses incurred from any cause whatsoever from the time
such Precious Materials have been placed at Vendor's disposal until
such time as such Precious Materials are returned to the custody of
Tiffany or their rightful owner, either through the return of
Precious Materials in raw materials form or by the delivery of
finished product as provided above.
5.9 In performance of its obligations under this Article V, Tiffany may
elect to deliver Precious Materials owned by Tiffany or one of its
Affiliates or to arrange for the delivery of Precious Materials
owned by a third party. Vendor agrees to take such further steps
and execute and file such necessary documents and make such
necessary notifications so as to secure such rightful owner's title
to such Precious Materials against the interests of the other
creditors of Vendor.
5.10 Vendor agrees to procure and maintain property insurance covering
the value of Precious Materials placed at Vendor's disposal and
naming Tiffany or such third-party owners as additional insureds as
their interests may appear and to provide Tiffany with reasonably
satisfactory evidence of such insurance whenever requested.
5.11 Tiffany through its agents will be permitted access to Vendor's
facility during regular business hours for the purpose of taking
physical inventories of Precious Materials placed by Tiffany at the
disposal of Vendor.
ARTICLE VI
WARRANTIES, QUALITY AND TOOLING
6.1 Unless otherwise provided in Schedule SP or Schedule QC, Vendor
shall continue to produce Watches to the specifications and quality
control standards previously adhered to between Vendor and
Tiffany's Affiliates.
6.1.1 Vendor agrees that it will, on or before November 15,
1995, provide Tiffany with detailed and accurate
specification sheets for all Watches manufactured by
Vendor to the date of this Agreement.
6.2 Vendor warrants that all Watches delivered by Vendor to Tiffany
shall remain free of defects in materials and workmanship for a
period equal to the lesser of (a) one year following delivery to
the ultimate retail customer for the Watch or (b) two
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<PAGE> 13
years following delivery of the Watch to Tiffany. Not included in
this warranty are watch crystals, batteries, plated buckles and
leather straps. At Tiffany's election, Vendor shall either (i)
repair or replace any defective watch subject to the foregoing
warranty which is returned to Vendor at Vendor's facility in
Lussy-sur-Morges or (ii) provide replacement parts to Tiffany free
of charge and reimburse Tiffany for the cost of completing the
repair itself or causing the repair to be done by a third-party
repair service. Notwithstanding the foregoing, Vendor shall not be
responsible under this warranty for the cost of repairs or
replacement parts with respect to damage caused by poor workmanship
by Tiffany or by any third party performing watch service or
repair. Tiffany shall bear the cost of returning watches to
Vendor's facility for warranty repairs and Vendor shall bear the
cost of returning the repaired or replacement watch to Tiffany or
Tiffany's Affiliate, as the case may be.
6.3 Tiffany may, at its own cost and expense, select Watches delivered
or to be delivered pursuant to any purchase order and cause them to
be tested applying one or more of the tests listed in SCHEDULE QC.
Such selection must occur in Lussy-sur-Morges but may occur either
before or after the Watches have been delivered to Tiffany or its
Affiliate and Vendor agrees to provide Tiffany's personnel or
agents access to its facility for the purpose of making a selection
of Watches to be tested. In the event that a Valid Sample tested
before shipment fail to meet one or more of the Functional
standards set forth in SCHEDULE QC, Tiffany shall have the right to
reject the lot, or to delay shipment and require Vendor, at
Vendor's own cost and expense, to conduct such further testing
and/or make such repairs or modifications as shall be necessary to
assure conformance to the applicable standards. In the event that
any Watch tested before shipment fails to meet one or more of the
Aesthetic or Specificative Standards set forth in Schedule QC,
Tiffany shall have the right to delay shipment of the lot and
require Vendor, at Vendor's own cost and expense, to conduct such
further testing and/or make such repairs or modifications as shall
be necessary to assure conformance to the applicable standards.
Such delay in shipment shall be without prejudice to Tiffany's
rights under Sections 4.7 and 4.9 above. No testing or failure to
test any Watch or lot of Watches at Vendor's facility shall
prejudice Tiffany's right to reject non-conforming goods on
delivery or as otherwise provided under applicable law, provided
that no watch may be rejected for handling scratches except before
shipment from Lussy-sur-Morges.
6.3.1 As Watches are approved for shipping within Vendor's
facility, they will be stamped or labeled by
Tiffany's agent in such a way as to distinguish them
uninspected or rejected Watches.
6.3.2 While awaiting inspection results, Watches in the lot
from which samples were taken will be physically
segregated or labeled by Vendor in such a way as to
distinguish them from uninspected or approved
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<PAGE> 14
Watches.
6.3.3 Vendor shall give Tiffany sufficient advance notice
of all shipments to allow the testing provided for
above.
6.3.4 All references to "lot" above mean a shipment of
watches having the same SKU.
6.4 Vendor acknowledges that all Tooling for Watches produced for
Tiffany or its Affiliates prior to or after the date of this
Agreement is for the exclusive benefit of Tiffany or its
Affiliates, will be maintained throughout the term of this
Agreement for the exclusive benefit of Tiffany or its Affiliates,
will not be used to except to produce Watches for sale to Tiffany
and will be available to Tiffany for purposes of inspection and
duplication. With respect to Tooling now or hereafter placed in the
hands of one of Vendor's component suppliers, Vendor shall assure
that such supplier executes and delivers to Tiffany a written
statement acknowledging that such tooling is being held for the
exclusive benefit of Tiffany, will not be used except to produce
Watches for sale to Tiffany and will be available to Tiffany for
purposes of inspection and duplication.
6.5 Tiffany agrees to reimburse the cost for all Tooling acquired by
Vendor in connection with the performance of this Agreement. .
Before incurring any Tooling cost, Vendor shall provide written
notice to Tiffany of the projected cost of such tooling, and shall
not proceed to incur such cost until Tiffany has issued its written
notice of approval. It shall be Vendor's obligation under this
Agreement to create, maintain and otherwise update all drawings
necessary for the production of the Watches for the benefit of
Tiffany; Vendor shall not receive any additional consideration,
other than the Base Price, for the performance of this obligation.
6.6 Tiffany will have access to all Tooling in the possession of Vendor
throughout the term of this Agreement for the purpose of assuring
backup production capacity and, in connection therewith, shall be
entitled to arrange for the duplication of all items of Tooling, at
Tiffany's cost and expense, and for the removal of such backup
Tooling to its own possession and control.
6.7 With respect to New Watches, except New Watches designed by
Tiffany, Vendor warrants that such Watches will be free of Design
Defects that become evident within three years of the introduction
of such Watches to the consumer, provided that the cost of
correcting Design Defects shall be shared on an equal basis by
Vendor and Tiffany.
6.8 Vendor warrants and agrees that all Watches sold to Tiffany
pursuant to this Agreement shall be produced in compliance with the
applicable specifications and in compliance with all applicable
laws, regulations, rulings and industry standards,
14
<PAGE> 15
that all goods specified to be constructed of a Precious Metal of a
specified degree of purity shall be constructed as so specified and
that all goods shall be properly labelled as required by law and
industry standards.
6.9 Vendor will provide Tiffany with accurate information concerning
the country of origin of all significant Watch components
(movement, case and bracelet) and warrants and agrees that the
country-of-origin labeling of all Watches purchased shall be
accurate and in conformance with all applicable laws and industry
standards.
6.10 Vendor warrants and agrees that it has not and will not offer to
give to any employee, agent or representative of Tiffany or one of
Tiffany's Affiliates any gratuity or gift of more than nominal
value with the view towards securing any business or concession
from Tiffany or influencing such person with respect to the terms,
conditions or performance of any contract with or order from
Tiffany.
ARTICLE VII
NEW WATCHES
7.1 Vendor may submit watch designs to Tiffany for consideration and
Tiffany may submit watch designs to Vendor for purposes of
obtaining a Base Price quotation. In either event, such submission
shall be deemed confidential information subject to the provisions
of Section 15.5 below.
7.2 Vendor and Tiffany shall cooperate in the development of a
procedure for new product development which shall include a
schedule for all elements of the product development cycle, a
formula for the sharing of product development costs, mutual
accountability and capital and unit cost forecasting.
ARTICLE VIII
PRIOR AGREEMENTS
8.1 This Agreement supersedes and replaces all prior agreements between
Tiffany or any of Tiffany's Affiliates, on the one hand, and Vendor
on the other hand, concerning the manufacturing or marketing of
watches or the use of the Trademarks.
8.2 Vendor shall deliver to Tiffany and its Affiliates an
acknowledgement by DLG Holdings Limited that neither Tiffany nor
any of its Affiliates shall have any further obligation to DLG
Holdings or any other person under that certain Consulting
Agreement dated June 21, 1991, whether as a guarantor or otherwise,
it being understood that Vendor will remain liable under such
Consulting Agreement to DLG Holdings Limited.
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<PAGE> 16
8.3 Vendor shall deliver to Tiffany and its Affiliates an
acknowledgement by Hysek Stylings that neither Tiffany nor any of
its Affiliates has any further royalty obligations to Hysek
Stylings with respect to any watch in any Design Family.
8.4 Vendor shall deliver to Tiffany and its Affiliates an
acknowledgement by Jorg Hysek that neither Tiffany nor any of its
Affiliates has any further royalty obligations to Mr. Hysek under
that certain Design Assignment Agreement dated 24 April 1987.
ARTICLE IX
RETAINED COMPONENTS
9.1 Tiffany will arrange for transfer of title to the Retained
Components to such of Tiffany's Affiliate in Lussy-sur-Morge.
9.2 Vendor agrees to store the Retained Components at Vendor's risk at
Vendor's facility in Lussy-sur-Morge so that the Retained
Components shall be at Vendor's immediate disposal. Effective April
1, 1996, Vendor shall keep the Retained Components physically
distinct and separate from Vendor's own inventory and materials.
9.3 Vendor agrees to procure and maintain Required Insurance covering
the value of the Retained Components and to provide Tiffany with
reasonably satisfactory evidence of such insurance whenever
requested.
9.4 Vendor agrees to purchase its requirements for components of the
type remaining in the inventory of Retained Components from
Tiffany's Affiliate until the inventory of Retained Components is
exhausted.
9.5 The terms of delivery of Retained Components shall be EX WORKS the
facility of Tiffany's Affiliate in Lussy-sur-Morge.
9.6 The price for Retained Components shall be the Retained Component
Cost.
9.7 The price for Retained Components shall be paid by offset against
amounts due for Watches purchased under this Agreement. Amounts
offset shall be applied first against amounts due under the Share
Purchase Note and then against amounts due as the price for
Retained Components.
9.8 In the event of loss or damage to a Retained Component, Vendor will
pay Tiffany the price referred to in Section 9.6 above.
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<PAGE> 17
9.9 Tiffany or its agents will be permitted access to Vendor's facility
during regular business hours for the purpose of taking physical
inventories of the Retained Components.
9.10 With each shipment of Watches made, Vendor shall include a list of
the Retained and Existing Components incorporated in each Watch
delivered together with their respective Retained Component Costs
and the Existing Component Costs.
ARTICLE X
TERM AND TERMINATION OF AGREEMENT
10.1 Unless sooner terminated as provided below in this Article 10, the
term of this Agreement shall expire on January 31, 2006.
10.2 The occurrence of any one or more of the following events
(regardless of the reason therefor) shall constitute a default
under this Agreement allowing the non-defaulting party to (i)
terminate this Agreement on written notice; (ii) to pursue other
remedies available at law, equity or otherwise under this
Agreement; (iii) to terminate the Agreement and pursue such
remedies or (iv) if the default is by Vendor, allowing Tiffany to
terminate it obligations under Section 2.2 above without
terminating the balance of this Agreement:
10.2.1 Any party shall fail to pay any monies due under this
Agreement (or any purchase order) and the same shall
not be paid within thirty (30) days after written
notice from the party to whom such monies shall be
due;
10.2.2 Any party shall fail or neglect to perform, keep, or
observe any term, provision, condition, covenant,
warranty or representation contained in this
Agreement or in any other agreement, contract or
undertaking contemplated under this Agreement) and
the same shall not be cured to the other party's
satisfaction within thirty (30) days after written
notice identifying such event or condition, provided,
however, that the breach by Vendor of any single
purchase order shall not in itself be a default under
this Agreement unless such breach shall materially
and substantially prejudice Tiffany;
10.2.3 The insolvency of any party (for this purpose,
"insolvency" shall mean the inability to satisfy its
debts as they come due);
10.2.4 The institution of any proceeding or arrangement by
or against any party relating to or in the nature of
bankruptcy, insolvency, or an assignment for the
benefit of creditors, which proceeding or arrangement
is consented to or is not dismissed or discontinued
within sixty (60) days after the institution of such
proceeding or arrangement;
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<PAGE> 18
10.2.5 The making of any assignment for the benefit of
creditors or the appointment of a receiver of or for
any party or of or for all or substantially all of
the business, assets, or properties of any party; and
10.2.6 The transfer or attempted transfer by Vendor (or any
transaction the effect of which is to transfer) any
license, right or privilege granted under the
Agreement except as specifically authorized
hereunder.
10.3 Termination, cancellation or expiration of the Agreement shall not
discharge the obligation of either party to pay monies due under
this Agreement nor shall it affect the continued effectiveness of
any purchase orders issued by Tiffany and accepted by Vendor under
the terms of this Agreement and each party to such purchase order
shall remain obligated under such purchase order.
10.4 In the event any party refuses to renew or extend this Agreement,
no party shall be entitled to any compensation therefor or as a
result thereof. To the extent any provision of applicable law may
provide for such compensation, it is hereby expressly waived by all
parties. In the event that the employees, agents or servants of
either party to this Agreement shall make a claim against the other
party in respect of such non-renewal or non-extension, then the
party employing such employees, agents or servants shall fully
indemnify and hold he other party harmless from such claims.
10.5 Vendor agrees to inform Tiffany promptly in the event of any actual
or proposed change of control of Vendor. In the event of a change
in control of Vendor which has not been agreed in advance by
Tiffany, Tiffany may, at its election, terminate this Agreement
effective thirty (30) days following written notice. "Change of
control" means a change in Vendor's controlling Affiliate.
ARTICLE XI
TRADEMARKS AND DESIGNS FOR WATCHES
11.1 Vendor shall not, by reason of this Agreement, obtain any rights in
the Trademarks or in the designs for any Watches. Vendor
acknowledges Tiffany's exclusive proprietary rights over the
Trademarks and Watch designs and shall not contest such rights.
11.2 Vendor shall not attempt to register or assert any rights in the
Trademarks or any of Tiffany's watch designs.
11.3 In execution of purchase orders for Watches placed by Tiffany or
its Affiliates with Vendor, Vendor shall be permitted to apply one
or more of the Trademarks to Watches produced for sale to Tiffany
or one or more of its Affiliates, as directed by Tiffany.
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<PAGE> 19
11.4 On the expiration or termination of this Agreement, Vendor shall
offer to sell all Watches and any components bearing any of the
Trademarks remaining in its inventory to Tiffany. In the event
Tiffany declines to purchase any of such Watches or components,
Vendor shall remove the Trademarks from such Watches and components
before selling or otherwise disposing of such Watches and/or
components.
ARTICLE XII
TRANSPORTATION SERVICES
12.1 Vendor will provide to Tiffany and its Affiliates Transportation
Services.
12.2 All Transportation Services shall be performed by Vendor on behalf
of Tiffany or Tiffany's Affiliate. Performance of Transportation
Services will not affect the terms of Section 3.2 above.
12.3 Tiffany or its Affiliate will promptly reimburse Vendor for all
out-of-pocket expenses incurred by Vendor in the performance of
Transportation Services. It is understood that Transportation
Services will be performed by Vendor's own employees and not
through third-party service providers.
12.4 Vendor will be paid a per-Watch-shipped fee for providing
Transportation Services, such fee to be payable by Tiffany monthly
for watches shipped in the prior month. Such fee shall be
determined retroactively on the basis of the aggregate number of
Watches shipped during the prior Fiscal Year as follows:
<TABLE>
<CAPTION>
Watches Shipped in Prior Fiscal Year Fee Per Watch Shipped
------------------------------------ ---------------------
<S> <C>
24,000 or less SF 9.75
in excess of 24,000 a lower fee to be negotiated
between the parties in good faith
based upon per shipment cost
savings incurred due to higher
shipment volume
</TABLE>
Notwithstanding the foregoing, throughout Fiscal 1995 and 1996,
Tiffany will be charged SF 9.75 per Watch shipped.
12.5 Tiffany may elect to terminate Vendor's obligation to provide
Transportation Services by giving written notice to Vendor at least
three months in advance of the effective date of such termination.
Such termination will not effect either party's remaining
obligations under this Agreement.
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<PAGE> 20
ARTICLE XIII
LEASE
13.1 Tiffany will arrange that its Affiliate lease from Vendor, and
Vendor agrees to lease, approximately 40 square meters of space for
showroom and office purposes in the same building in
Lussy-sur-Morges housing Vendor's production facilities. Such lease
will be at market rental rates and shall be coterminous with the
term of this Agreement. Vendor will provide all necessary building
services in connection with such lease, including cleaning, heat
and electricity. Vendor will assume the costs of constructing such
necessary walls and doorways so that such space is self-contained
and secured apart from Vendor's operations in said building, and
Tiffany will assume the cost of fixturing (including any necessary
secure storage facilities), furnishing and decorating such space.
Such lease shall be documented through a separate, written lease
agreement which will supersede this Section 13.1.
ARTICLE XIV
PARTS AND AFTER-SALES SERVICE
14.1 Vendor shall maintain a complete inventory of Parts in
Lussy-sur-Morge sufficient to satisfy the on-going requirements of
Watch purchasers throughout the world.
14.2 Parts shall be available for purchase by Tiffany and its Affiliates
at Adjusted Base Cost plus 48% .
14.3 Parts shall be available for purchase by persons other than Tiffany
and its Affiliates at Adjusted Base Cost plus 58%.
14.4 Included in the price for Parts are all shipping and handling fees
necessary to deliver the Parts to the customer.
14.5 Vendor shall provide warranty and non-warranty repair service for
Watches at its facility in Lussy-sur-Morge for Tiffany, its
Affiliates and other persons, including non-Affiliated members of
Tiffany's worldwide distribution network. Except for services which
Vendor is obligated to provided under Article VI above, Vendor
shall be entitled to charge reasonable fees for such services.
Vendor will regularly publish its schedule of service charges for
Watch repairs.
ARTICLE XV
MISCELLANEOUS
15.1 This Agreement constitutes the entire agreement between the parties
hereto with respect to the subject matter hereof. This Agreement
may not be amended or modified orally, but only by writing signed
by each of the parties hereto.
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15.2 Except as otherwise expressly provided herein or by law, the
failure of either party hereto to enforce at any time any term,
provision or condition of this Agreement, or to exercise any right
or option herein, shall not operate as a waiver thereof, nor shall
any single or partial exercise preclude any other right or option
herein; and except as otherwise expressly provided herein, no
waiver whatsoever shall be valid unless in writing, signed by the
waiving party, and only to the extent therein set forth.
15.3 Subject to the limitations contained in this Agreement on permitted
assigns, this Agreement shall be binding on and inure to the
benefit of the parties hereto and their heirs, administrators,
executors, successors and assigns. Any assignment or delegation in
violation of this Section 14.3 or Section 14.4 shall be null and
void and of no effect. Neither Tiffany nor Vendor may assign all or
any part of its respective rights under this Agreement or delegate
all or any part of its respective obligations under this Agreement,
except to the following permitted transferees and provided that
such permitted transferee, prior to such assignment or delegation,
shall agree to be bound by the terms and conditions of this
Agreement (and, accordingly, enjoy the rights and be subject to the
obligations of the transferor hereunder): Tiffany (and any
transferee permitted under clauses (i) (ii) or (iii) below) may
assign this Agreement and its rights and interests hereunder or any
part hereof to (i) a transferee of all or substantially all of its
business and assets, or (ii) a successor of its business by way of
merger, consolidation or other business combination or (iii) to a
purchaser of all or substantially all of the assets necessary to
carry on its business, provided, in each of instances (i) through
(iii) above, that such assignee is, following such assignment,
legally entitled to sell watches under the TIFFANY & CO. trademark
to the same extent that Tiffany was so entitled at the time of such
assignment or (iv) to any one of its Affiliates; and Vendor (and
any transferee permitted below) may assign this Agreement and its
rights and interests hereunder or any part hereto to any of its
Affiliates. No assignment, whether permitted or not, shall relieve
the assigning party of any liability under this Agreement.
15.4 Notwithstanding Section 15.3 above, it is understood that Tiffany
may permit any one or more of its Affiliates to purchase Watches
from Vendor pursuant to the terms of this Agreement and any
reference to Tiffany in this Agreement shall be deemed to be a
reference to Tiffany's Affiliate where the context so requires.
Tiffany shall remain responsible as guarantor of its Affiliate's
obligations under any purchase order.
15.5 Neither Vendor nor Tiffany shall, at any time during the term of
this Agreement or thereafter, disclose or use for any purpose,
other than as contemplated by this Agreement, any revealed or
otherwise acquired confidential business information and data
relating to the business of the other, except to the extent such
information
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is or has become publicly available through no act or failure of
such party or as required by competent governmental authority.
Neither party shall disclose to the press or to any other third
party the nature of this Agreement, its existence or contents
unless such press release or disclosure is approved in writing by
the other, or unless such disclosure is required by applicable law
or the requirements of any securities exchange upon which the
securities of Tiffany's ultimate parent corporation are listed.
15.6 If any provision or any portion of any provision of this Agreement
shall be construed to be illegal, invalid, or unenforceable, such
shall be deemed stricken and deleted from this Agreement to the
same extent and effect as if never incorporated herein, but all
other provisions of this Agreement and the remaining portion of any
provision which is legal, valid and enforceable shall continue in
full force and effect.
15.7 The headings of the Articles of this Agreement are for convenience
only and do not limit or affect the terms or conditions of this
Agreement.
15.8 Any disputes arising with respect to, or in connection with, this
Agreement shall be finally decided by one or more arbitrators in
accordance with the Rules of Arbitration of the Chamber of Commerce
and Industry of Geneva. Such arbitration shall be conducted in the
English language. The place of arbitration shall be Geneva,
Switzerland.
15.9 Each of the parties hereto agrees to execute, acknowledge and
deliver all such further instruments and assurances, and to take
all such further actions, consistent with the terms of this
Agreement, as shall be necessary or desirable to carry out this
Agreement, and to consummate and effect the transaction
contemplated hereby.
15.10 The parties hereto agree that any and all performance hereunder,
breach hereof, or dispute arising in connection herewith shall be
interpreted governed and construed pursuant to the laws of
Switzerland without regard to principles of conflicts of law.
15.11 Except as otherwise provided herein, any notice necessary or
desirable under this Agreement all be in writing, and shall be
deemed to have been validly served, given or delivered ten (10)
days following posting by registered airmail, with proper postage
prepaid, and addressed to the party to be notified as follows:
(i) If to Tiffany, at:
Tiffany and Company
727 Fifth Avenue
New York, NY 10022
Attn: General Counsel
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(ii) If to Vendor, at:
T WATCH & CO. SA
1133 Lussy-sur-Morges
Switzerland
Notices, other than notices under Article X and Sections 14.3, 14.8
or 4.9 above, may also be given by facsimile transmission to the
following facsimile numbers, effective on transmission:
(iii) If to Tiffany: 1-212-605-4177 Attn: Watch Buying Office
(iv) If to Vendor: 41-21-803-1540 Attn: Jean Jacque Besson.
Either party may change its address or facsimile number for
purposes of this Section by notice given as provided by posted
notice, as provided above.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date and year first indicated above.
/s/ /s/
- ----------------------------- -------------------------
Tiffany & Co. TWF SA
/s/ /s/
- ---------------------------- -------------------------
Tiffany & Co. Watch Center S.A. T Watch & Co. SA
23
<PAGE> 1
AGREEMENT
AGREEMENT made this 23rd day of February, 1996, by and between (i) Tiffany & Co.
Japan Inc. (formerly known as Tiffany-Japan (Delaware) Inc.) ("Tiffany-Japan"),
a corporation organized and existing under the laws of the State of Delaware
with its Japan branch offices at 3-1-31, Minami-Aoyama, Minato-ku, Tokyo 107,
Japan, (ii) Tiffany and Company ("Tiffany"), a corporation organized and
existing under the laws of the State of New York with its executive offices at
727 Fifth Avenue, New York, NY 10022 United States of America and (iii)
Mitsukoshi Limited ("Mitsukoshi"), a corporation organized and existing under
the laws of Japan with its executive offices at 4-1, Nihombashi Muromachi 1-
chome, Chuo-Ku, Tokyo 103, Japan.
WITNESSETH:
Whereas, Mitsukoshi, Tiffany-Japan and Tiffany are parties to a certain
Agreement dated 12 June 1993 (the "93 Agreement");
Whereas, Tiffany-Japan has entered into a lease dated January 30, 1996 (the
"Lease") with Mitsui Real Estate Co. ("Landlord") for retail premises in the
first and second floor of the Ginza Iwasaki Building, 2-7-17, Ginza Chuo-ku,
Tokyo (the "Premises");
Whereas, under the terms of the Lease, Tiffany-Japan will, at its own cost and
expense, renovate, fixture, fit-out and decorate the Premises as a TIFFANY & CO.
store;
Whereas, the Lease provides that Tiffany-Japan may not sublease the Premises,
except with and subject to Landlord's permission, and Landlord has agreed to
grant its permission for a sublease of the Premises from Tiffany-Japan to
Mitsukoshi, but only for the purposes of operating a TIFFANY & CO. retail store
and on the condition that such sublease term expire no later than September 30,
2001;
Whereas, it is mutually desired that Mitsukoshi facilitate the sale of
Tiffany-Japan's merchandise on the Premises and that Mitsukoshi retain a
percentage of the proceeds of such sales in consideration of the services it
will provide under this Agreement; and
Whereas, the parties expect that the entire TIFFANY & CO. business in Japan will
benefit from the prestige of the Ginza Store .
NOW THEREFORE, in consideration of the foregoing facts and objectives, and the
mutual promises set forth below, the parties hereto agree as follows:
<PAGE> 2
ARTICLE I
DEFINED TERMS
AS USED IN THIS AGREEMENT, THE FOLLOWING INITIALLY CAPITALIZED WORDS AND PHRASES
SHALL HAVE THE MEANINGS ASCRIBED TO THEM BELOW:
"Affiliate" means, with respect to any party to this Agreement, a company or
other business entity controlling, controlled by or under common control with
such party through stock ownership exceeding fifty percent (50%).
"Consigned Merchandise" shall mean Tiffany Merchandise consigned by Mitsukoshi
to Tiffany-Japan for sale in the Ginza Store pursuant to the terms of the 93
Agreement.
"Current Retail Price" means the retail price established by Tiffany-Japan, from
time to time, for sale of Tiffany Merchandise in Japan.
"Expiration Date" means September 30, 2001.
"Fine Merchandise" means individual items of Tiffany Merchandise as defined in
the 93 Agreement.
"Flowers" means fresh flowers used to decorate the Ginza Store.
"Furniture and Equipment" means any and all such furniture, fixtures, equipment
and other furnishings as will be used for or in connection with the sale of
Tiffany Merchandise at the Ginza Store other than the POS System.
"Ginza Boutique" means the Mitsukoshi Boutique located within Mitsukoshi's Ginza
Department Store.
"Ginza Store" means the TIFFANY & CO. store to be established on the Premises.
"Inventory System" means a computer system for inventory accounting to be
supplied by Tiffany-Japan, which will be linked by data-line with the inventory
accounting system used by Tiffany-Japan.
"Liability Insurance" means a comprehensive general liability, policy naming
both Mitsukoshi and Tiffany-Japan as insureds, covering operations conducted at
the Premises and having the following limits of liability: (Yen2.5 Billion
Aggregate and (Yen2.5 Billion any single occurence.
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"Maintenance" means such services or replacements necessary to maintain the
Premises and the Ginza Store in a first-class state of cleanliness and repair.
"Mitsukoshi Boutique" means a TIFFANY & CO. boutique qualifying as either a New
Boutique or an Existing Boutique under the 93 Agreement.
"Net Sales" means the aggregate retail selling price for sales of Tiffany
Merchandise made in the Ginza Store, not reduced by the amount of any rent, fee
or commission, if any, paid to Mitsukoshi as a percentage of sales, but reduced
by consumption or other tax collected from the consumer and by Qualified
Returns.
"Office Equipment" means facsimile machines, personal computers, word processing
equipment, copying machines, filing cabinets and the like.
"Operating Manual" means the operating manual for Mitsukoshi Boutiques published
by Tiffany-Japan as such manual may be amended from time to time.
"Organizational Chart" means the organizational chart for the Ginza Store
attached as Schedule OC.
"Packaging Materials" means packaging materials (including, but not limited to,
blue boxes, ribbons, wrapping materials, felt bags, jewelry boxes and shopping
bags) meeting Tiffany-Japan's standards for design, color and quality.
"POS System" means a point-of-sale transaction processing system, including
seven (7)cash registers and all necessary data lines, processing equipment,
software and data-storage devices, all to be specified and supplied by
Mitsukoshi, and linked by data-line and compatible with the transaction
processing system used by Mitsukoshi.
"Qualified Returns" means the following returns of Tiffany Merchandise accepted
from consumers for credit: returns accompanied by a receipt indicating purchase
at the Ginza Store or any Mitsukoshi Boutique, provided such Tiffany Merchandise
has not been damaged by mishandling or abuse by the consumer.
"Selling Percentage" means Twenty-nine Percent (29%) of Net Sales for the month
in question for all Tiffany Merchandise other than Fine Merchandise and
Seventeen Percent (17%) for Fine Merchandise.
"Security" means physical security for the Premises and the Tiffany Merchandise
stored in the Premises, including security guards and the on-going subscription,
operation and maintenance costs for the Security System;
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"Security System" means security systems, fire, burglary, robbery alarms, and
alarm response systems, including but not limited to, closed circuit television
surveillance systems, motion detectors and other linked detectors to be
specified and installed in the Premises by Tiffany-Japan.
"Shipping, Packing and Receiving" means those services necessary to receive
Tiffany Merchandise, transfer it between TIFFANY & CO. selling locations, place
it in storage, bring it to and place it on the sales floor, pack it for delivery
to the customer and ship it (including to the customer or back to Tiffany-Japan)
other than costs incurred under Section 6.5.2 below.
"Staff" means all personnel required for the operation of the Ginza Store on a
day-to-day basis, including Mitsukoshi Staff and Tiffany Staff, as shown on the
Organizational Chart.
"EVP/COO" shall have the meaning provided in Section 8.7 below.
"Mitsukoshi Staff" means ten (10) employees of Mitsukoshi or one of its
Affiliates including POS Staff and employees performing the functions
set forth in Schedule MS.
"POS Staff" means employees of Mitsukoshi or one of its Affiliates who
shall manage and operate the POS System, take charge of all customer
receipts on behalf of Mitsukoshi and have responsibility for cash and
credit card vouchers and the cash registers.
"President of the Ginza Store" shall have the meaning provided in
Section 8.7 below.
"Tiffany Staff" means all members of Staff other than Mitsukoshi Staff.
Tiffany Staff includes Sales and Marketing Staff as well as all other
members of Staff who are employees of Tiffany-Japan or one of its
Affiliates and provided to Mitsukoshi under the Staffing Agreement.
"Sales and Marketing Staff" means employees of Tiffany-Japan given
responsibility pursuant to the Staffing Agreement for the day-to-day
management of the Staff and the Ginza Store under the joint cooperative
guidance of the President of the Ginza Store and the EVP/COO and
designated to act as liaison between Mitsukoshi and Tiffany-Japan with
respect to the operation of the Ginza Store, as well as other
employee's of Tiffany-Japan who act as sales clerks and deal directly
with the customer.
"Staffing Agreement" means the agreement (Gyomu-Itaku-Keiyaku) in the form
attached as Exhibit SA by which Tiffany-Japan will provide Tiffany Staff to
Mitsukoshi for purposes of operating the Ginza Store in accordance with the
entrustment by Mitsukoshi.
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"Sublease" means the sublease for the Premises in the form attached as Exhibit
SL.
"Tiffany Merchandise" means TIFFANY & CO. brand merchandise.
"Uniforms" means uniforms to be worn by Staff conforming to Tiffany-Japan's
standards for design, color and quality.
"Utilities and Services" means any and all such utilities and services as may be
necessary to operate the Ginza Store as required under this Agreement,
including, but not limited to, electricity; gas; heating, ventilating, air
conditioning; water supply; telephone service (exclusive of the cost of
equipment (lease or purchase) and installation); data-line service charges
(including for the Inventory but exclusive of installation costs); inspections;
postage and courier services; real estate taxes payable under the Lease, if any;
garbage removal; sidewalk cleaning; neighborhood merchants' association
membership; and messenger fees.
"Trademarks" means the trademarks and tradenames TIFFANY & CO. or TIFFANY, the
trademark TIFFANY-SCHLUMBERGER and the trademarks of the designers ELSA PERETTI
and PALOMA PICASSO.
ARTICLE II
OTHER AGREEMENTS
2.1 As a condition to the effectiveness of this Agreement, Mitsukoshi and
Tiffany-Japan shall have executed and exchanged the Sublease.
2.2 As a condition to the effectiveness of this Agreement, Mitsukoshi and
Tiffany-Japan shall have executed and exchanged the Staffing Agreement.
2.3 Tiffany, Tiffany-Japan and Mitsukoshi hereby represent and agree that
the 93 Agreement remains in full force and effect except as modified
below in this Section 2.3.
2.3.1 The Ginza Store shall not be considered a Mitsukoshi
Boutique for purposes of calculating "Net Incremental
Sales" under the 93 Agreement or an "ODS Boutique"
for purposes of calculating the fee payable under
Section 14.1 of the 93 Agreement.
2.3.2 The Ginza Store will be considered the "Flagship
Store" for purposes of Article XI of the 93 Agreement
and sales of Tiffany Merchandise from the Ginza Store
will not be in violation of Section 7.6 of the 93
Agreement. All parties waive any further right to
establish a "Flagship Store" under the terms of the
93 Agreement, provided, however, that if this
Agreement shall terminate as provided in Sections
3.1.1. or 3.1.2 below, then this waiver shall not be
effective.
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2.3.3 Mitsukoshi agrees that "Consignable Inventory" will
be consigned to Tiffany-Japan for sale in the Ginza
Store as provided in Article XII of the 93 Agreement.
2.3.4 For the purposes of calculating the Incentive Fee
payable under the 93 Agreement, Net Incremental Sales
shall be computed for the Ginza Boutique (but not for
other Mitsukoshi Boutiques) as follows:
2.3.4.1 for the 12-month period ending
January 31 during which the Ginza
Store first opens for business (the
"Opening Year"), A = B - {(x) - (y)}
where:
A = Net Incremental Sales
of the Opening Year;
B = Net Sales in the
Opening Year
(x) = Net Sales for the
12-month period immediately
prior to the Opening Year
(the "Comparison Year") and
(y) = one-third (1/3) of
Net Sales in each calendar
month of the Comparison
Year that corresponds to a
calendar month in the
Opening Year in which the
Ginza Store was open for
business;
2.3.4.2 for the 12-month period following
the Opening Year (the "Second
Year"), A' = B' - {(x') - (y')}
where:
A' = Net Incremental Sales
in the Second Year
B' = Net Sales in the
Second Year
(x') = Net Sales for the
Opening Year and
(y') = one-third (1/3) of
Net Sales in each calendar
month of the Opening Year
in which the Ginza Store
was not open for business;
and
2.3.4.3 for any other periods, as provided
in the 93 Agreement.
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ARTICLE III
OPENING OF GINZA STORE
3.1 The parties' obligations under this Agreement will commence upon
execution of this Agreement, and each party shall use its best efforts
to cause the Ginza Store to be opened pursuant to this Agreement, the
Sublease and the Staffing Agreement, and after the opening shall
operate the Ginza Store pursuant to such agreements.
3.1.1 In the event that Tiffany-Japan is excused by conditions
beyond its control from turning possession of the Premises
over to Mitsukosi, then no party shall have any further
obligation to any other party under this Agreement and it will
terminate without liability to any party.
3.1.2 In no circumstance will Tiffany-Japan be required to turn over
possession of the Premises to Mitsukoshi if such act would
constitute a violation of the Lease or the Sublease. If
Tiffany-Japan may not turn possession of the Premises over to
Mitsukoshi without violating the terms of the Lease or the
Sublease, then no party shall have any further obligation to
any other party under this Agreement and it will terminate
without liability to any party.
3.2 Tiffany-Japan shall, at its own cost and expense, organize and make all
arrangements for the opening and opening ceremonies for the Ginza
Store, including all arrangements for publicity and media events
surrounding the grand opening of the Ginza Store. Mitsukoshi will not
take any action or make any statements or press releases that detract
from the primary marketing message which Tiffany-Japan will seek to
convey, to wit: that the Ginza Store will be the primary showcase
within Japan for Tiffany Merchandise.
3.2.1 At least three months prior to the projected grand opening
date for the Ginza Store, representatives from Tiffany's
public relations staff will travel to Tokyo to meet with
members of Mitsukoshi's public relations staff to plan for the
opening. Mitsukoshi will cooperate with such planning in good
faith.
3.2.2 Tiffany-Japan will keep Mitsukoshi fully informed and involved
in all planning for the grand opening, it being agreed that
the focus of the grand opening will be on the TIFFANY & CO.
brand and the Ginza Store as the symbol of the joint business
between Tiffany and Mitsukoshi.
3.3 No party shall issue a press release concerning plans for the Ginza
Store until all parties have had a chance to review and comment upon
such press release.
3.4 Tiffany-Japan shall, at its own cost and expense, arrange for the
initial stocking and display of the Ginza Store prior to the grand
opening, as well as pre-opening training for Staff.
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ARTICLE IV
INSURANCE AND INDEMNITY
4.1 Tiffany shall provide Liability Insurance; however, on the failure of
Tiffany to provide Liability Insurance, Tiffany-Japan shall do so.
4.2 To the extent not covered by the Liability Insurance, Mitsukoshi shall,
during and after the term of this Agreement, indemnify, defend and hold
Tiffany and Tiffany-Japan harmless from and against any and all claims,
demands, suits, actions, causes of action, loss, damage, liability and
attorney's fees, and other costs and expenses incurred by Tiffany or
Tiffany-Japan as the result of any violation of this Agreement by, or
any act of omission or commission on the part of Mitsukoshi, or any of
its agents, servants, or employees.
4.3 To the extent not covered by the Liability Insurance, Tiffany and
Tiffany-Japan shall during and after the term of this Agreement,
indemnify, defend and hold Mitsukoshi harmless from and against any and
all claims, demands, suits, actions, causes of action, loss, damage,
liability and attorney's fees, and other costs and expenses incurred by
Mitsukoshi as a result of any violation of this Agreement by, or any
act of omission or commission on the part of Tiffany or Tiffany-Japan,
or any of their respective agents, servants, or employees, and from all
claims, damages, causes in action, tax liabilities, fines, or suits
arising from the sale of defective merchandise (provided, however, that
in the case of claims, damages, etc. based upon a product liability
case, i.e. a case in which it is claimed that bodily injury or property
damage (other than to the product itself) has been incurred as result
of a defect (including a defect, non-statement or misstatement in
labeling etc.) or a claimed defect in Tiffany Merchandise, any and all
the claims, damages, etc. arising from the sale of such merchandise,
regardless of whether such merchandise is defective or not, shall be
included in this indemnity) or as a result of use of the Trademarks as
permitted in this Agreement.
ARTICLE V
RESPONSIBILITIES FOR TIFFANY MERCHANDISE
5.1 Tiffany-Japan shall place Tiffany Merchandise in the Ginza Store for
sale pursuant to the terms of this Agreement.
5.2 Neither Mitsukoshi nor Tiffany-Japan shall sell any items other than
Tiffany Merchandise in the Ginza Store unless otherwise agreed between
the parties.
5.3 It shall be Tiffany-Japan's responsibility to select and furnish a
sufficient quantity and assortment of Tiffany Merchandise for sale in
the Ginza Store, such assortment to be
02/23/96 Page 8
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entirely within the discretion of Tiffany-Japan.
5.4 While Tiffany Merchandise is kept in the Ginza Store the ownership of
and title to such Tiffany Merchandise (other than Consigned
Merchandise) shall remain with Tiffany-Japan until such time as the
Tiffany Merchandise is sold to a customer.
5.5 Tiffany-Japan shall be responsible for loss or damage to Tiffany
Merchandise kept in the Ginza Store other than loss or damage
attributable to the negligence or willful misconduct of Mitsukoshi
Staff.
5.6 It shall be the responsibility of Tiffany-Japan to affix its price tag
to the Tiffany Merchandise in the Ginza Store and to account for
inventory using the Inventory System.
ARTICLE VI
SALE OF TIFFANY MERCHANDISE
6.1 In consideration of the Selling Percentage, Mitsukoshi shall ACT FOR
Tiffany-Japan in the sale of the Tiffany Merchandise from the Ginza
Store, deliver the Tiffany Merchandise to the customer, accept receipt
of payment and hold the proceeds of sale.
6.2 Tiffany Merchandise shall be sold in the Ginza Store at the Current
Retail Price.
6.3 Mitsukoshi shall close its accounts for the sale and return of Tiffany
Merchandise in the Ginza Store at the end of each month and report Net
Sales to Tiffany-Japan by the 15th day of the following month.
Mitsukoshi shall, on the 20th day of each month, remit to a bank
account designated by Tiffany-Japan (a) Net Sales for the prior month
plus the applicable consumption tax reduced by (b) the associated
Selling Percentage and the applicable consumption tax with respect to
such Selling Percentage.
6.4 In consideration of the Selling Percentage, Mitsukosi shall make
available to customers in the Ginza Store credit terms generally
available to customers in its stores and shall bear the risk of credit
losses. Sales of Tiffany Merchandise made on credit shall be accounted
for to Tiffany-Japan as though they were made on a cash basis and
Tiffany-Japan shall not be charged for any credit losses that
Mitsukoshi may incur in connection with such sales.
6.5 When Tiffany Merchandise sold at a Mitsukoshi Boutique is offered for
return for credit at the Ginza Store or when Tiffany Merchandise sold
at the Ginza Store is offered for return for credit at a Mitsukoshi
Boutique, the following procedures shall apply:
6.5.1 The Ginza Store or the Mitsukoshi Boutique, as the case may be
(the "Accepting Store"), which is offered the return shall
examine the merchandise and documents
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in question and determine whether the offered return may
constitute a Qualified Return;
6.5.2 If the Accepting Store elects to accept a Qualified Return, it
shall: accept custody of the merchandise; issue a refund of
the purchase price to the customer; notify (a) Tiffany-Japan
and (b) the Mitsukoshi Boutique or the Ginza Store at which
the merchandise accepted as a Qualified Return was sold,
whichever the case may be (the "Selling Store") of the fact of
such return and the Merchandise and purchase price involved;
account for the amount refunded to the customer as an advance
to the Selling Store; and promptly arrange for delivery to
Tiffany-Japan in care of the Selling Store of the merchandise
accepted as a Qualified Return;
6.5.3 Upon receipt of the notice and delivery referred to in Section
6.5.2, the Selling Store shall settle the advance referred to
in Section 6.5.2 with the Accepting Store; and
6.5.4 The Selling Store will promptly return custody of the
merchandise to Tiffany-Japan at the Selling Store, deduct the
amount of the advance referred to in Section 6.5.2 from Net
Sales in the Selling Store.
6.6 Without prior approval from Tiffany-Japan, Mitsukoshi shall not sell
Tiffany Merchandise to customers who evidence an intention to re-sell
the Tiffany Merchandise or to use the Tiffany Merchandise for
promotional purposes as premiums or novelty gifts-with-purchase that
would, in the reasonable opinion of Tiffany-Japan, adversely affect the
marketing image of Tiffany Merchandise.
ARTICLE VII
CONSTRUCTION, OPERATION AND MAINTENANCE OF GINZA STORE
7.1 Tiffany-Japan will renovate, fixture, fit-out and decorate the
Premises, including provision of a suitable voice telephone system and
the Security System.
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7.2 In consideration of the Selling Percentage, Mitsukoshi agrees to
provide the following at Mitsukoshi's cost and expense until the
termination of this Agreement in connection with the operation of the
Ginza Store:
7.2.1 the POS System and all associated data communication expenses;
7.2.2 Staff (Mitsukoshi Staff and employees of Tiffany-Japan to be
provided through the Staffing Agreement); and
7.2.3 receipts to customers and related revenue stamps required
under Japanese law or regulation.
7.3 Tiffany-Japan agrees to provide the following at Tiffany's cost and
expense until the termination of this Agreement in connection with the
operation and maintenance of the Ginza Store:
7.3.1 Maintenance;
7.3.2 Flowers;
7.3.3 Inventory System;
7.3.4 Office Equipment;
7.3.5 Security;
7.3.6 Security Systems;
7.3.7 Uniforms;
7.3.8 Utilities and Services;
7.3.9 Shipping, Packing and Receiving;
7.3.10 Packaging Materials; and
7.3.11 Furniture and Equipment.
7.4 Mitsukoshi will operate, as its sole responsibility, the POS System in
such fashion as to accurately record all sales of Tiffany Merchandise
at the Ginza Store.
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7.4.1 Mitsukoshi will keep records of all sales of Tiffany
Merchandise at the Ginza Store for a minimum period of three
(3) years and allow access to such records on Mitsukoshi's
premises by independent auditors engaged by Tiffany-Japan
and/or by Tiffany's internal audit staff for the purpose of
reconciliation and audit, all at the expense of Tiffany or
Tiffany-Japan, as the case may be.
7.4.2 In the event that such a reconciliation or audit reveals an
underpayment or an overpayment of amounts paid or payable
under this Agreement, the parties hereto shall make prompt
payments necessary to rectify such underpayment or
overpayment.
7.5 Mitsukoshi shall compile customer data in the form of a customer
purchase history card, which will be from time to time updated with the
information contained in the customer card to be prepared for each
purchase by a customer. These customer purchase history cards and
customer cards shall be prepared by the Staff under the POS Manager's
management. The data included on the customer purchase history cards
and customer cards shall include names, mailing addresses and purchase
history of all customers at the Ginza Store, and such data shall be the
joint property of Tiffany-Japan and Mitsukoshi. Mitsukoshi shall
provide Tiffany-Japan with a complete and accurate copy of such data on
a monthly basis. When it becomes possible to do so, such data shall be
provided in computer-readable form.
ARTICLE VIII
MANAGEMENT OF GINZA STORE
8.1 Subject to the provisions of the Staffing Agreement, Tiffany-Japan
shall manage, under the joint cooperative guidance of the President of
the Ginza Store and the EVP/COO, all aspects of the Ginza Store with
the exception of the POS System.
8.2 The operating hours and days of operation for the Ginza Store shall be
as set forth in Schedule OH attached hereto. In the event that
Mitsukoshi is prevented, by reason of its agreements with a labor union
or unions, from sending Mitsukoshi Staff (except for cashiers) to work
in the Ginza Store at times when the Ginza Store is operated,
TiffanyJapan may elect to provide Tiffany Staff under the Staffing
Agreement to temporarily replace Mitsukoshi Staff (except for cashiers)
in order to keep the Ginza Store in operation.
8.3 The Ginza Store shall be managed in accordance with the Operating
Manual to the extent that the Operating Manual is not inconsistent with
the express terms of this Agreement and overall operating principles of
Mitsukoshi.
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8.4 In the event an issue arises which is not dealt with in this Agreement,
the respective leaders of the Tiffany Staff and the Mitsukoshi Staff
shall discuss such issue and attempt to resolve it to the satisfaction
of both. If such issue cannot be resolved despite such a consultation,
it shall be resolved by consultation between the President of
Tiffany-Japan and the President of Mitsukoshi's Ginza store.
8.5 Tiffany-Japan shall provide training to the Staff with respect to the
Tiffany Merchandise, the history and traditions of Tiffany & Co., the
treatment of customers and merchandise management systems.
8.6 Tiffany-Japan and Mitsukoshi shall discuss with each other the work
performance of the Mitsukoshi Staff and the Tiffany Staff.
8.7 Subject to the express provisions of this Agreement, the President of
Mitsukoshi's Ginza store will serve in the position of President of the
Ginza Store and an Executive Vice President/Chief Operating Officer
("EVP/COO") will report to such President. The President of
Tiffany-Japan or his designate will serve in the position of EVP/COO of
the Ginza Store. Service in the positions of President and EVP/COO of
the Ginza Store shall be gratis.
ARTICLE IX
DISPLAY AND PACKAGING OF TIFFANY MERCHANDISE
9.1 Tiffany-Japan shall determine the manner in which the Tiffany
Merchandise is displayed within the Ginza Store.
9.2 Tiffany-Japan shall determine the manner in which store windows,
vitrines and other showcases are decorated and the selection of Tiffany
Merchandise to be displayed in such windows, vitrines and other
showcases.
9.3 Tiffany-Japan shall determine the manner in which Tiffany Merchandise
is packaged on sale to customers.
9.4 All signs used in connection with the Ginza Store shall conform to the
standards established by Tiffany-Japan.
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ARTICLE X
ADVERTISING AND PROMOTION
10.1 Tiffany-Japan shall be responsible for advertising and promotional
activity in Japan in connection with the Ginza Store and shall arrange
for such advertising and promotion at its own cost. The amount of such
advertising undertaken by Tiffany shall be entirely at the discretion
of Tiffany, it being understood that Tiffany will not typically sponsor
advertising directed solely to the Ginza Store but will advertise
TIFFANY & CO. brand merchandise on a general basis.
10.2 Mitsukoshi will not undertake any advertising or promotional activity
with respect to the Ginza Store unless expressly approved by
Tiffany-Japan in advance. Mitsukoshi will not undertake any advertising
or promotional activity with respect to Tiffany Merchandise except as
provided in the 93 Agreement.
ARTICLE XI
EXPIRATION AND TERMINATION OF AGREEMENT
11.1 On the Expiration Date, this Agreement shall terminate unless
previously terminated for default as provided below. Prior to the
Expiration Date, Mitsukoshi and Tiffany-Japan shall meet for the
discussions anticipated under Section 13.1 of the 93 Agreement, such
discussions to include arrangements which will permit Mitsukoshi to
continue to act for Tiffany-Japan in the sale of Tiffany Merchandise
from the Ginza Store on terms which are mutually acceptable to the
parties and consistent with Landlord's requirements as to the Premises
and which terms reflect the anticipated relationship between the
parties with respect to the Mitsukoshi Boutiques.
11.2 The occurrence of any one or more of the following events (regardless
of the reason therefor) shall constitute a default allowing the
non-defaulting party to terminate this Agreement on written notice
and/or to pursue other remedies available at law or otherwise under
this Agreement (provided, however, that Tiffany may not assert a
default against Tiffany-Japan or any of its other Affiliates or vice
versa, and that Mitsukoshi may not assert a default against any of its
Affiliates or vice versa):
11.2.1 Any party shall fail to pay any monies due under this
Agreement other than amounts disputed for bona fide reasons
and the same shall not be paid within thirty (30) days after
written notice from the party to whom such monies shall be
due;
11.2.2 Any party shall fail or neglect to perform, keep, or observe
any term, provision, condition, covenant, warranty or
representation contained in this Agreement, the 93 Agreement,
the Sublease or the Staffing Agreement, or in any other
agreement, contract or undertaking contemplated under this
Agreement and the same shall not be cured to the
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other party's satisfaction within thirty (30) days after
written notice identifying such event or condition or, in the
event such failure or neglect is not reasonably susceptible to
cure within thirty (30) days, the party charged with such
failure or neglect shall have further failed to commence cure
and diligently proceed to completion of such cure;
11.2.3 The insolvency of any party (for this purpose, "insolvency"
shall mean the inability to satisfy its debts as they come
due);
11.2.4 The institution of any proceeding or arrangement by or against
any party relating to or in the nature of bankruptcy,
insolvency, or an assignment for the benefit of creditors,
which proceeding or arrangement is consented to by the party
against whom it is instituted or is not dismissed or
discontinued within sixty (60) days after the institution of
such proceeding or arrangement;
11.2.5 The making of any assignment for the benefit of creditors or
the appointment of a receiver of or for any party or of or for
all or substantially all of the business, assets or properties
of any party;
11.2.6 The transfer or attempted transfer (or any transaction the
effect of which is to transfer) of any license, right or
privilege granted under this Agreement except as expressly
permitted under this Agreement;
11.2.7 Any conduct by Mitsukoshi or its Affiliates which is
materially injurious to the value of the Trademarks or to
Tiffany's name and/orreputation or to the name and/or
reputation of any other owner of one of the Trademarks; or
11.2.8 Any conduct by Tiffany or Tiffany-Japan which is materially
injurious to the value of the trademarks, name and/or
reputation of Mitsukoshi or Mitsukoshi's Affiliates.
11.3 Termination or expiration of this Agreement shall not discharge the
obligation of any party to pay monies or other obligation due under
this Agreement as of the date of termination or discharge any
obligations under this Agreement stated to come into being on
termination or expiration and the following provisions of this
Agreement shall survive its termination or expiration: Sections 2.3,
3.1.1, 3.1.2, 4.2 and 4.3.
11.4 Upon the termination of this Agreement, Mitsukoshi shall immediately
vacate the Premises, as provided in the Sublease.
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11.5 Upon the termination of this Agreement Mitsukoshi will not have any
right to use the tradename TIFFANY & CO. or any of the trademarks in
connection with the operation of the Ginza Store, and, in the event
that for any reason Mitsukoshi fails to release sole possession of the
Premises on the termination of this Agreement to Tiffany-Japan,
Mitsukoshi will remove all Trademarks from the Premises and cease to
operate the Ginza Store as a TIFFANY & CO. store.
ARTICLE XII
MISCELLANEOUS
12.1 No party will make any press release announcing the signing of this
Agreement until the other parties shall have had an opportunity to
review and comment upon the proposed press release.
12.2 Nothing in this Agreement shall be interpreted to be inconsistent with
Mitsukoshi's obligation to return sole possession of the Premises to
Tiffany-Japan at the expiry of the Sublease term. Throughout the
effective period of this Agreement Tiffany-Japan shall have free and
unencumbered access to the entire Premises at all hours of the day and
night and shall be entitled to maintain a full set of keys and security
codes to obtain access to all areas within the Premises, provided,
however, that Tiffany-Japan shall not be entitled to have any access to
the POS System except as provided in Section 7.4.1 above so that
Mitsukoshi may assume all the responsibilities related to the POS
System pursuant to this Agreement.
12.3 This Agreement may not be modified, altered or amended except by an
agreement in writing signed by all parties.
12.4 Except as expressly provided in this Agreement, no party may sell,
delegate, assign or transfer this Agreement, or any part hereof,
without the consent of the other parties. It is expressly agreed that
Mitsukoshi may delegate its obligations under this Agreement to one of
its Affiliates but will remain fully liable under the terms of this
Agreement for the performance of such Affiliate and that Tiffany-Japan
may delegate its obligations under the Staffing Agreement to one of its
Affiliates but will remain fully liable under the terms of the Staffing
Agreement.
12.5 The failure by any party, at any time or times, to require strict
performance by any other party of any provision of this Agreement shall
not waive, affect or diminish any right thereafter to demand strict
compliance and performance therewith. Any suspension or waiver (which
must be in writing) by any party of a default under this Agreement by
any other party shall not suspend, waive or affect any other default
under this Agreement, whether the same is prior or subsequent thereto
and whether the same or of a different type.
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12.6 Wherever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining
provisions of this Agreement; provided that if any provision which has
been a material consideration to either party entering into this
Agreement is so prohibited or invalid the party to which such provision
was material may terminate this Agreement if the other party is
unwilling or unable, after negotiation in good faith, to modify this
Agreement to replace such material provision with a valid substitute
provision which is reasonably acceptable.
12.7 Subject to the provisions of Section 12.4, this Agreement shall be
binding upon and inure to the benefit of the successors and assigns of
Tiffany, Tiffany-Japan and Mitsukoshi.
12.8 This Agreement shall in all respects be governed by and construed in
accordance with the laws of Japan applicable to agreements executed,
delivered and performed within Japan, without regard to Japan's
conflict of laws rules, including all matters of construction, validity
and performance.
12.9 Except as otherwise provided herein, any notice necessary or desirable
hereunder shall be in writing, and shall be deemed to have been validly
served, given or delivered (i) effective upon hand delivery to an
officer of the recipient or (ii) effective ten (10) days following
posting in the United States or Japan by registered airmail, with
proper postage prepaid, and addressed to the party to be notified as
follows, provided that a copy of such notice shall be sent, within
twenty-four hours of such mailing, by facsimile transmission and
addressed to party to be notified at the facsimile numbers provided
below:
If to Tiffany-Japan, at: 3-1-31, Minami-Aoyama, Minato- Ku,
Tokyo 107 Japan, Facsimile Number: 81-3-3746-0335; Attn:
President, with a copy to Tiffany;
If to Tiffany, at: 727 Fifth Avenue, New York, NY 10022 United
States of America, Facsimile Number: 212-605-4177, Attn: Legal
Department; and
If to Mitsukoshi, at: 4-1, Nihombashi Muromachi 1-chome,
Chuo-Ku, Tokyo 103, Japan, Facsimile Number: 81-3-3274- 6100,
Attn: General Manager, Central Merchandising Division.
12.10 The Article titles contained in and throughout this Agreement are and
shall be without substantial meaning or content of any kind whatsoever
and are not a part of this Agreement.
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12.11 The parties shall discuss and attempt to solve in good faith all
disputes, controversies or differences that arise between them. All
disputes, controversies, or differences which may arise between the
parties, out of or in relation to or in connection with this Agreement,
or the breach hereof, which cannot be resolved by discussion between
the parties shall be finally decided by court proceedings. The parties
hereto agree that the Tokyo District Court sitting in Tokyo, Japan
shall have jurisdiction over such proceedings.
12.12 Nothing stated in this Agreement shall serve to make any director,
officer, employee or agent of Tiffany-Japan (or of one or more of its
Affiliates) the director, officer, employee or agent of Mitsukoshi (or
of any of its Affiliates) or serve to make any director, officer,
employee or agent of Mitsukoshi (or of one or more of its Affiliates)
the director, officer, employee or agent of Tiffany-Japan (or of any of
its Affiliates).
12.13 This Agreement shall be entered into in triplicate in both English and
Japanese; however, in the event that any conflict in meaning arises
when the Japanese version of this Agreement is compared to the English
version of this Agreement, it is hereby agreed that the English version
will supersede the Japanese, it being acknowledged that this Agreement
was negotiated in the English language.
12.14 This is the entire agreement between the parties with respect to the
subject matter hereof. It supersedes all prior agreements, memoranda,
oral agreements or understandings between the parties.
IN WITNESS WHEREOF THE PARTIES HAVE EXECUTED THIS AGREEMENT AS OF THE DATE FIRST
WRITTEN ABOVE.
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Schedule MS
FUNCTIONS TO BE PERFORMED BY MITSUKOSHI STAFF
(1) Sales Manager, High End Jewelry. Supervises a sales staff
selling higher-priced jewelry on the first floor of the Ginza
Store. Does direct selling when required, particularly for
important customers. Takes direction from First Floor Manager.
One of two Sales Managers for higher- priced jewelry on the
first floor, each to supervise a sales staff. The other Sales
Manager will be a member of Tiffany Staff.
(1) Sales Manager, Designer-Collections Jewelry. Supervises a
sales staff selling designer and collections jewelry on the
first floor of the Ginza Store. Does direct selling when
required, particularly for important customers. Takes
direction from First Floor Manager.
(1) Sales Manager, Silver Jewelry. Supervises a sales staff
selling silver jewelry (exclusive of Peretti/Picasso) on the
second floor of the Ginza Store. Does direct selling when
required. Takes direction from Second Floor Manager.
(1) POS Manager. Takes direction from the President and General
Manager of the Ginza Store. Has responsibility for POS System
and Cashiers.
(3) Cashiers, First Floor. Take direction from POS Manager.
(3) Cashiers, Second Floor. Take direction from POS Manager.
SEE ORGANIZATIONAL CHART. MEMBERS OF MITSUKOSHI STAFF ARE
INDICATED WITH SHADING.
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SCHEDULE OH
OPERATING HOURS AND DAYS OF OPERATION FOR THE GINZA STORE
Days of Operation: 365 days a year or, if less, the maximum
number of days which the Ginza Store is
permitted to be open by applicable law or
regulation, regulation by the Tokyo
Metropolitan Office.
Hours of Operation: 10:00 a.m. to 8:00 p.m.
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EXHIBIT SA
[TRANSLATION FROM THE JAPANESE]
STAFFING AGREEMENT
This Agreement has been entered into on February 23, 1996 by and between Tiffany
& Co. Japan Inc. (hereinafter referred to as "Tiffany") and Mitsukoshi Ltd.
(hereinafter referred to as "Mitsukoshi").
Article 1. (Definition)
The capitalized terms used herein shall have the same meanings as defined in the
FSS Agreement dated February 23, 1996 between Tiffany and Mitsukoshi
(hereinafter referred to as the "FSS Agreement").
Article 2. (Entrustment of Services and Dispatch of Tiffany
Staff)
1. Mitsukoshi shall entrust Tiffany with the product sales, product management
and marketing at the Ginza Store (hereinafter referred to as the "Services") in
accordance with the terms of this Agreement and Tiffany shall agree to accept
the Services.
2. Tiffany shall dispatch Tiffany Staff to Mitsukoshi to fulfill
the Services.
3. Tiffany shall execute the Services with the care of a good manager, and
Tiffany shall cause the Tiffany Staff to comply with the rules and regulations
prepared from time to time by Tiffany Japan and/or the lessor of the Ginza Store
that are applicable to the Ginza Store and the Premises.
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Article 3. (Status of Tiffany Staff)
1. When Tiffany wishes to dispatch its employee to Mitsukoshi as Tiffany Staff,
Tiffany shall write the name, sex, age and brief personal history of such
employee on the form prescribed by Mitsukoshi in advance, submit the same to
Mitsukoshi, and obtain Mitsukoshi's prior consent to the dispatch.
2. The salary and welfare expenses of Tiffany Staff shall be borne by Tiffany
3. The working conditions for Tiffany Staff shall be the same as those for the
other employees of Tiffany. The working hours and holidays for Tiffany Staff
shall be controlled by the store general manager stationed by Tiffany at the
Ginza Store.
4. Tiffany Staff shall be subject to the directions and administration of the
EVP/COO stationed by Tiffany at the Ginza Store; provided, however, that to the
extent that it is necessary for the management of the Ginza Store, Tiffany Staff
shall also be subject to the directions and administration of Mitsukoshi.
5. If Mitsukoshi, on reasonable grounds, considers that certain Tiffany Staff
are inappropriate, Mitsukoshi may request Tiffany to immediately stop such
staff's work and exchange him/her for another.
6. Tiffany shall, by the end of each month, submit a monthly work schedule for
Tiffany Staff for the following month to Mitsukoshi.
Article 4. (Burden of Expenses for the Services)
Unless otherwise provided herein, the provisions of the FSS Agreement shall
apply to the burden of expenses for the Services pursuant to this Agreement.
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Article 5. (Payment of Service Fees)
1. Mitsukoshi shall pay Tiffany, in consideration of the execution of the
Services, a service fee in an amount equal to 8.70% of the Net Sales of the
Ginza Store every month.
2. Tiffany shall issue an invoice for the Services fee by the sixteenth day of
the month following the month for which the sales are calculated, and Mitsukoshi
shall pay Tiffany the service fee stated in the invoice by the twentieth day of
the same month.
Article 6. (Damage)
If Tiffany Staff, in relation to their duties and due to reasons attributable to
them, cause, directly or indirectly, damage to Mitsukoshi, Tiffany shall
compensate Mitsukoshi for such damage.
Article 7. (Termination of Agreement)
1. The effective term of this Agreement shall be until September 30, 2001.
2. This Agreement shall automatically cease to have effect immediately upon the
termination of cancellation of the FSS
Agreement.
3. Notwithstanding the provisions of the preceding two paragraphs, if there is a
material default of the terms of this Agreement by either party hereto, the
other party may terminate this Agreement by notifying the defaulting party in
writing and stating the reasons thereof; provided, however, that this shall not
preclude any claim for damages against the defaulting party.
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Article 8. (Responsibility after the Termination of Agreement)
Even when this Agreement is terminated, the pecuniary obligations under Article
5 and 6 hereof which have accrued on or before such termination shall remain
until the payment is completed.
Article 9. (Agreement on Competent Court)
Should any dispute arise between the parties hereto in connection with this
Agreement, the Tokyo District Court shall be the competent court having
jurisdiction.
Article 10. (Language and Governing Law)
This Agreement shall be prepared in Japanese and shall be construed in
accordance with the laws of Japan.
Article 11. (Interpretation)
Should any doubt arise with respect to any of the provisions of this Agreement,
or should there be any matter not provided under this Agreement, the parties
hereto shall consult with each other in good faith so as to resolve the matter.
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IN WITNESS WHEREOF, both parties hereto have prepared this Agreement in
duplicate by affixing their names and signatures hereon, each retaining one copy
hereof.
February 23, 1996
Tiffany: Kikuo Fukui [seal]
Representative in Japan/President
Tiffany & Co. Japan Inc.
(Address in Japan)
1-31 Minami-Aoyama 3-chome, Minato-ku, Tokyo 107
Mitsukoshi: Shigeo Takeuchi [seal]
Senior Managing Director, General Manager
Central Merchandise Division
Mitsukoshi Ltd.
4-1 Nihonbashi-Muromachi 1-chome, Chuo-ku, Tokyo 103
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EXHIBIT SL
[TRANSLATION FROM THE JAPANESE]
SUBLEASE AGREEMENT
Tiffany & Co. Japan Inc., as a sublessor, (hereinafter referred to as the
"Sublessor") and Mitsukoshi Ltd., as a sublessee, (hereinafter referred to as
the "Sublessee") have entered into this Agreement concerning the sublease of
premises for rent, as follows:
Article 1. (Definition)
The capitalized terms used herein shall have the same meanings as defined in the
FSS Agreement dated February 23, 1996 between the Sublessor and the Sublessee
(hereinafter referred to as the "FSS Agreement").
Article 2. (Leased Premises)
1. The Sublessor shall grant a sublease of the premises described at the end of
this Agreement (hereinafter referred to as the "Leased Premises") to the
Sublessee, and the Sublessee shall take the sublease of the same.
2. Prior to the delivery of the Leased Premises, the Sublessor shall conduct
appropriate interior and facing finish work necessary for the use of the Leased
Premises as the Ginza Store in accordance with the FSS Agreement and shall
install all the fixtures and other equipment (including the proper telephone
system and Security System); provided, however, that the POS System shall be
installed by the Sublessee at its responsibility.
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Article 3. (Term of Agreement)
1. The Sublessor shall deliver the Leased Premises for the sublease to the
Sublessee on the date which both parties shall separately agree to in the future
as the day early enough for the Sublessee's preparation of the opening of the
Ginza Store on the scheduled opening date (hereinafter referred to as the
"Delivery Date").
2. The term of the sublease shall be from the Delivery Date through September
30, 2001.
3. The Sublessor shall obtain in advance the consent of Mitsui Real Estate
Development Co., Ltd., the party that has leased the Leased Premises to the
Sublessor (hereinafter referred to as the "Lessor"), to the sublease of the
Leased Premises to the Sublessee for the period set forth in Paragraph 2 hereof.
4. The Sublessee shall vacate the Leased Premises to the Sublessor immediately
upon the expiration of the term set forth in Paragraph 2 hereof; provided,
however, this shall not apply to the case where the FSS Agreement has been
extended in accordance with Article 11.1 of the FSS Agreement on the condition
that the Lessor consents to the extension or renewal of the sublease. In such
case, this Agreement shall be extended or renewed for the same period as the FSS
Agreement, and the Sublessor shall make its best efforts to obtain consent from
the Lessor concerning the extension or renewal of the sublease.
Article 4. (Rent, etc.)
1. The Sublessee shall pay the Sublessor as rent an amount equal to 12% of the
Net Sales at the Ginza Store every month.
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2. The Sublessor shall issue an invoice of rent for each month by the sixteenth
day of the month following the month for which the sales are calculated, and the
Sublessee shall pay, as the rent, the amount stated in the invoice by the
twentieth day of the same month.
3. Rent shall begin to accrue on the Delivery Date.
4. No deposit shall be required.
Article 5. (Consumption Tax)
The Sublessee shall separately bear the amount of consumption tax on the fees or
expenses shown in each of the following items, and the time and method of
payment of such tax amount shall correspond to those for payment of such fees or
expenses:
(1) Rent set forth in Article 4 hereof; and
(2) Other fees or expenses on which consumption tax is payable in accordance
with the Consumption Tax Law.
Article 6. (Payment of Expenses)
1. Whether charges are for the exclusive-use portions of the Leased Premises or
whether charges are for the common use portions of the building, all the Utility
and Service charges including the fees for air-conditioning, extended hour
air-conditioning, fuel, lighting (including electricity), cleaning and so forth
shall be borne by the Sublessor.
2. The payment of expenses concerning this Agreement other than those set forth
in the preceding paragraph of in other parts of this Agreement shall be in
accordance with the FSS Agreement.
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Article 7. (Purpose of Use)
The Sublessee shall use the Leased Premises for the operation of the Ginza
Store, and shall not change the purpose of use without obtaining the Sublessor's
consent.
Article 8. (Prohibited Acts)
The Sublessee shall not engage in any of the following acts without obtaining
the Sublessor's consent:
(1) The transfer or mortgage of the lease right; or
(2) The display of a signboard or the putting up of an advertising sign or
billboard, etc. within or outside the Leased Premises.
Article 9. (Remodelling, Alteration and Fixtures)
The Sublessor shall, at its own responsibility and expense, remodel or alter the
Leased Premises, add facilities and fixtures thereto thereby changing the
original condition of the Leased Premises, or make repairs to the Leased
Premises.
Article 10. (Sublessee's Management Responsibility)
1. The Sublessee shall use the Leased Premises together with the common use
portions of the building with the care of a good manager.
2. The Sublessee shall not engage in any of the following acts within the
building:
(1) To bring in an excessively heavy article, extremely inflammable goods or
other dangerous goods, or to do any act which is detrimental to the preservation
of the building;
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(2) To stay overnight in the Leased Premises or to keep animals within the
Leased Premises, or to do any act which is detrimental to the management of the
building; or
(3) To do any other act which may cause annoyance to the Sublessor or other
tenants.
3. If the Sublessee or its employee or contractor causes damage to the
Sublessor, other tenants, etc., the Sublessee shall immediately notify the
Sublessor of such occurrence and shall fully compensate the suffering party for
such damage.
Article 11. (Compensation for Damage)
If the Sublessee or its agent, employee or contractor has caused damage to the
building facilities and items appurtenant thereto either wilfully or by
negligence in the conduct of the Sublessee's business, the Sublessee shall make
repairs to and restore the building facilities or appurtenant items at its own
responsibility, or shall pay appropriate compensation for the damage.
Article 12. (Exemption)
The Sublessor shall not be held responsible for any damage sustained by the
Sublessee for flood, fire or theft; or for any accident arising in connection
with the gas, electricity, water or air-conditioning equipment, elevators and
other facilities; or for any damage caused by other tenants, or due to acts of
God; so long as the Sublessor has exercised the care normally expected of an
owner of a building in the maintenance and management of such building.
02/23/96 Page 30
<PAGE> 31
Article 13. (Advance Notice for Termination of Agreement)
If either the Sublessor or the Sublessee intends to terminate this Agreement
during the effective term of the sublease, such party shall give the other party
a written notice at least six (6) months prior to the expiration of the term;
provided, however, that the Sublessee may immediately terminate this Agreement
by paying the Sublessor an amount equal to six (6) months' rent, in lieu of
giving said advance notice.
Article 14. (Termination of Agreement)
1. If any of the following events occur, the Sublessor or the Sublessee may
immediately terminate this Agreement by giving notice to the other party:
(1) The FSS Agreement is terminated or cancelled;
(2) Either party breaches this Agreement or any other agreement executed in
connection herewith and does not remedy such breach within two (2) months of the
notice thereof;
(3) A provisional attachment, attachment or provisional disposition is executed
against either party, an application is filed against either party for company
arrangement, corporate reorganization, composition with creditors or bankruptcy
or either party is suspended from making transactions with any bank; or
(4) Either party damages the other party's honor or credibility.
2. The Sublessor may immediately terminate this Agreement without giving any
notice or advice if any of the following events occur:
(1) The Sublessee delays paying the rent or other charges for two
(2) consecutive months or more; or
02/23/96 Page 31
<PAGE> 32
(3) The Sublessee leaves the Leased Premises without notice or leaves the Leased
Premises unused for one (1) month or more.
Article 15. (Vacating Provisions)
The Sublessee shall observe the following rules when it vacates the Leased
Premises irrespective of the cause therefor:
(1) Any work to restore the Leased Premises to its original condition (which
means the condition where the fixtures, etc. set forth in Article 2, Paragraph 2
hereof where established; provided, however, that were and tear as a result of
normal business and natural wear and tear due to the lapse of time shall be
permitted, and the same shall apply hereafter in this Article) shall be
performed by a contractor designated by the Sublessor;
(2) When the Sublessee returns the Leased Premises to the Sublessor due to the
expiration of the term, cancellation or termination of this Agreement, the
Sublessee shall inspect the entire portion of the Leased Premises in the
presence of the Sublessor or its agent, and the Sublessee shall completely
restore the Leased Premises to its original condition upon the Sublessor's
demand if there is any portion which has been remodelled or to which an addition
has been made. If the Sublessee fails to perform this obligation, the Sublessee
shall not object to the Sublessor's performing the required restoration work, at
its discretion, on behalf of the Sublessee at the Sublessee's expense, and shall
also immediately repay to the Sublessor the amount of expenses incurred
therefor. Furthermore, the Sublessee shall make no objection whatsoever if the
Sublessor, at its discretion, disposes of any article left behind.
(3) At the time of evacuation, the Sublessee shall not make any demand for
payment of the moving expenses or any other expenses, regardless of the reason
or pretext therefor, except if the
02/23/96 Page 32
<PAGE> 33
Sublessee terminates this Agreement due to the Sublessor's default.
(4) If the Sublessee fails to completely vacate the Leased Premises by the
expiration date of this Agreement, the Sublessee shall continue to pay rent for
the period until the Sublessee vacates the Leased Premises, and shall also
compensate the Sublessor for the any damage it incurs because of such delay in
vacating the Leased Premises.
Article 16. (Entry Right)
The Sublessor or anyone it designates shall be able to enter the Leased Premises
at any time, by giving the Sublessee prior notice, in a manner which will not
interfere with the Sublessee's conduct of business, for the purposes of building
maintenance, equipment inspection and maintenance, etc., and to take any
appropriate measures, if necessary; provided, however, that if the Sublessor is
unable to give the Sublessee prior notice in the case of crime and disaster
prevention, rescue activities or other emergencies, the Sublessor may give the
Sublessee such notice promptly after the fact.
Article 17. (House Rules)
The House Rules, which have been established for the purpose of management and
use of the Leased Premises, and which have been presented to and approved by the
Sublessee, are fully integrated with this Agreement and shall be observed by the
Sublessee together with this Agreement.
Article 18. (Duty to Notify)
The Sublessor or the Sublessee shall immediately notify the other party in
writing when any change occurs with respect to its name, trade name, address,
head office location or representative.
02/23/96 Page 33
<PAGE> 34
Article 19. (Competent Court)
Should any dispute arise between the parties hereto in connection with this
Agreement, the Tokyo District Court shall be the competent court having
jurisdiction.
Article 20. (Language and Governing Law)
This Agreement shall be prepared in Japanese and shall be construed in
accordance with the laws of Japan.
Article 21. (Matters for Consultation)
Should any doubt arise with respect to any of the provisions of this Agreement,
or should there be any matter not provided in this Agreement, the Sublessor and
Sublessee shall consult each other in good faith so as to resolve the matter.
IN WITNESS WHEREOF, both parties hereto have prepared this Agreement in
duplicate by affixing their name and signatures hereon, each retaining one copy
hereof.
02/23/96 Page 34
<PAGE> 35
February 23, 1996
Sublessor: Kikuo Fukui [seal]
Representative in Japan/President
Tiffany & Co. Japan Inc.
(Address in Japan)
1-31 Minami-Aoyama 3-chome, Minato-ku, Tokyo 107
Sublessee: Shigeo Takeuchi [seal]
Senior Managing Director, General Manager
Central Merchandise Division
Mitsukoshi Ltd.
4-1 Nihonbashi Muromachi 1-chome, Chuo-ku, Tokyo 103
Description of Leased Premises
Name of Building: Ginza Iwasaki Building
Location: 7-17 Ginza 2-chome, Chuo-ku
Structure of Building: Steel-framed and reinforced concrete
building with 9 above-ground floors, 1
basement floor and 1-story penthouse
Floor and Room No. Purposes Contracted Area (m2)
to be Used of Use (calculated from the
center line of the
walls)
- ---------------------- ------------------ ----------------------
2F, Room No. 201 Shop 400.61
1F, Room No. 101 Shop 301.18
Area indicated in the attached floor plan.
02/23/96 Page 35
<PAGE> 1
Item 6. TIFFANY & CO. AND SUBSIDIARIES
EXHIBIT 11 STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
- ---------- ----------------------------------------------
(in thousands, except per share data)
<TABLE>
<CAPTION>
Years Ended
-------------------------------------------------
January 31, January 31, January 31,
1996 1995 1994
----------- ----------- -----------
PRIMARY EARNINGS PER SHARE:
<S> <C> <C> <C>
Net income/(loss) on which primary
earnings per share are based $39,215 $29,341 $(10,242)
======= ======= ========
Weighted average number of shares on
which primary earnings are based 16,117 15,898 15,781
======= ======= ========
Primary net income/(loss) per
common share $ 2.43 $ 1.85 $ (0.65)
======= ======= ========
FULLY DILUTED EARNINGS PER SHARE:
Net income/(loss) on which primary
earnings per share are based $39,215 $29,341 $(10,242)
Add:
Interest and fees on convertible
subordinated debt, net of
applicable income taxes 1,811 1,712 1,844
------- ------- --------
Net income/(loss) on which fully
diluted earnings per share are based 41,026 31,053 $ (8,398)
======= ======= ========
Weighted average number of common
shares used in calculating
fully diluted earnings per share 16,380 15,898 15,781
Shares assumed upon conversion
of convertible debt, using the
"if converted" method 893 893 893
------- ------- --------
Weighted average number of shares
used in calculating fully diluted
earnings per share 17,273 16,791 16,674
======= ======= ========
Fully diluted net income/(loss) per
common share $ 2.38 $ 1.85 $ (0.65)
======= ======= ========
</TABLE>
NOTE: As a result of the 6 3/8% Convertible Subordinated Debenture's dilutive
effect in future periods, fully diluted earnings per share reflects the
weighted average number of common shares outstanding under the "if
converted" method which assumes conversion as of the bond issuance date
of the Debentures. Since the "if converted" method had no effect on
fully diluted earnings per share (anti-dilutive) for the years ended
January 31, 1995 and 1994 primary earnings per share was used for
financial statement presentation purposes.
<PAGE> 1
SELECTED FINANCIAL DATA
The following table sets forth selected financial data with respect to the
Company for Fiscal 1987-Fiscal 1995. All share and per share data have been
retroactively adjusted to reflect the three-for-two split of the Company's
Common Stock effected in the form of a share distribution ("stock dividend") in
Fiscal 1989.
<TABLE>
<CAPTION>
(in thousands, except per share Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal
amounts and employees) 1995 1994 1993 1992 1991 1990 1989 1988 1987
- ------------------------------------------------------------------------------------------------------------------------------------
EARNINGS DATA
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $ 803,292 $ 682,831 $ 566,501 $ 486,396 $ 491,906 $ 455,712 $ 383,964 $ 290,344 $ 230,488
Gross profit 427,370 358,202 232,882 237,033 243,009 223,600 191,683 144,511 112,140
Income/(loss) from
operations 80,013 64,655 (10,029) 26,741 61,028 67,806 60,977 44,193 33,691
Income/(loss) before
accounting change and
extraordinary item 39,215 29,341 (10,242) 15,712 31,805 36,661 33,305 24,901 16,820
Income/(loss) per share before
accounting change and
extraordinary item:
Primary 2.43 1.85 (0.65) 1.00 2.01 2.34 2.13 1.62 1.17
Fully diluted 2.38 1.85 (0.65) 1.00 2.01 2.34 2.13 1.62 1.17
Weighted average number of
common shares (primary) 16,117 15,898 15,781 15,786 15,835 15,694 15,606 15,332 14,300
BALANCE SHEET DATA
Total assets $ 654,257 $ 556,672 $ 504,409 $ 419,355 $ 394,882 $ 307,268 $ 237,061 $ 162,648 $ 126,669
Inventories 311,252 270,075 262,282 224,151 213,435 173,964 142,545 103,771 70,778
Working capital 283,424 242,779 212,266 199,334 159,466 131,219 112,735 81,829 66,772
Capital expenditures 26,455 19,227 18,103 22,754 41,385 24,835 14,040 9,680 1,895
Short-term borrowings 78,967 60,696 59,289 22,458 43,566 31,046 14,339 7,253 --
Long-term debt 101,500 101,500 101,500 101,500 50,000 18,226 18,226 -- --
Stockholders' equity 264,378 221,697 189,081 204,806 200,039 176,183 135,568 99,193 71,621
Book value per share 16.54 14.12 12.07 13.11 12.61 11.24 8.71 6.46 5.56
Cash dividends per share 0.28 0.28 0.28 0.28 0.28 0.26 0.18 0.10 --
Number of employees 3,656 3,306 3,133 2,865 2,735 2,379 2,085 1,741 1,324
</TABLE>
8 Tiffany & Co. and Subsidiaries
<PAGE> 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company operates three channels of distribution: U.S. Retail includes retail
sales in Company-operated stores in the U.S. and wholesale sales to independent
retailers in the Americas; Direct Marketing includes corporate
(business-to-business) and catalog sales in the U.S.; and International Retail
includes retail sales through Company-operated stores and boutiques, corporate
sales, and wholesale sales to independent retailers and distributors in the
Asia-Pacific region, Europe, Canada and the Middle East.
Net sales increased 18% in Fiscal 1995 and 21% in Fiscal 1994. Net sales by
channel of distribution were as follows:
<TABLE>
<CAPTION>
Fiscal Fiscal Fiscal
(in thousands) 1995 1994 1993
- --------------------------------------------------
<S> <C> <C> <C>
U.S. Retail $364,158 $308,290 $268,706
Direct Marketing 93,281 92,684 87,429
International Retail 345,853 281,857 210,366
-------- -------- --------
$803,292 $682,831 $566,501
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Fiscal Fiscal Fiscal
1995 1994 1993
- --------------------------------------------------
<S> <C> <C> <C>
Percentage of
Net Sales
U.S. Retail 45% 45% 47%
Direct Marketing 12 14 16
International Retail 43 41 37
</TABLE>
U.S. Retail sales increased 18% in Fiscal 1995 and 15% in Fiscal 1994.
Comparable store sales increased 12% in both Fiscal 1995 and 1994. Sales in the
New York flagship store increased 7% in Fiscal 1995 and 11% in Fiscal 1994, and
represented 17%, 19% and 21% of net sales in Fiscal 1995, 1994 and 1993.
Comparable U.S. branch store sales increased 16% in Fiscal 1995 and 14% in
Fiscal 1994. Sales growth in Fiscal 1995 was due to an increased number of
retail transactions and a higher average transaction amount, while Fiscal 1994's
increase was generated primarily by a higher number of transactions. In recent
years, retail sales to local-resident consumers have increased and the Company
has become less dependent on U.S. Retail sales to international tourists.
Contributing to U.S. Retail sales growth were the opening and strong sales
performance of three new stores in Fiscal 1995 and two new stores in Fiscal
1994. These new stores employ a smaller format with reduced nonselling space to
generate improved productivity. The Company plans to open three new U.S. stores
in Fiscal 1996. Wholesale sales to independent retailers in the Americas
represented 7% of U.S. Retail sales in Fiscal 1995 and 8% in Fiscal 1994 and
1993.
Direct Marketing sales increased 1% in Fiscal 1995 and 6% in Fiscal 1994.
Corporate sales, representing slightly less than two-thirds of Direct Marketing
sales, declined 5% in Fiscal 1995 following a 2% increase in Fiscal 1994.
Management believes sales have been affected primarily by cautious
spending by the Company's Corporate Division customers, as reflected by a
decline in the number of corporate orders processed in Fiscal 1995. Catalog
sales increased 12% in Fiscal 1995 following a 16% increase in Fiscal 1994. The
Company increased its catalog mailings by 17% to 17.5
million in Fiscal 1995, compared with 15.0 million in Fiscal 1994 and 14.1
million in Fiscal 1993. Catalog sales growth in Fiscal 1995 and 1994 was
primarily due to an increased number of orders.
International Retail sales increased 23% in Fiscal 1995 and 34% in Fiscal 1994.
In both years, the Company achieved sales growth in most markets in which it
operates. Reported sales growth was enhanced by the effect of translating sales
made in foreign currencies into U.S. dollars. Sales in Fiscal 1994 and 1993 were
not directly comparable due to the Company's realignment of its Japan business
in July 1993.
Tiffany & Co. and Subsidiaries 9
<PAGE> 3
The Company achieved sales growth in all of its key Asia-Pacific markets. In
Japan, the Company's largest international market, net sales represented 28% of
the Company's total sales in Fiscal 1995 and 1994 and 23% in Fiscal 1993.
Comparable store sales growth, as measured in yen, increased 13% in Fiscal 1995
and 3% in Fiscal 1994. Management attributes improved sales results subsequent
to the 1993 Japan realignment primarily to the Company's merchandising and
marketing initiatives, and to strategic price reductions made in Fiscal 1994 and
1993. These improved results were achieved despite continued adverse economic
and retail conditions in Japan. The Company continues to monitor its retail and
wholesale pricing in response to changes in foreign currency and local economic
and competitive conditions.
In Europe, total sales (retail, wholesale and corporate) increased 12% in Fiscal
1995 and 15% in Fiscal 1994. Comparable European retail store sales in local
currencies increased 18% in Fiscal 1995 and were unchanged in Fiscal 1994.
In Fiscal 1995, nine new Tiffany & Co. international retail locations were
opened and in Fiscal 1994 three new locations were opened. The Company's
international expansion plans in Fiscal 1996 include opening a flagship store in
Tokyo, Japan, as well as several additional Asia-Pacific boutiques.
In July 1993, the Company effected a realignment of its business in Japan by
assuming merchandising and marketing responsibility for each of 29 Tiffany & Co.
boutiques previously operated by Mitsukoshi Limited, an operator of department
stores. Under the new structure, Mitsukoshi acts for the Company in the sale of
merchandise owned by the Company and the Company recognizes as revenues the
retail price charged to the ultimate consumer in Japan. Prior to the
realignment, the Company recognized the wholesale price it charged to
Mitsukoshi. Mitsukoshi is now paid fees based on a percentage of net retail
sales in compensation for providing boutique facilities and sales and clerical
staff, as well as for the collection of receivables and security of store
inventories. The Company incurs higher expenses in Japan under the new
arrangement, but also records higher revenues at the retail level. The Company's
increased revenues and corresponding gross profit more than offset the increased
expenses.
As a result of the realignment, the Company's reported sales and earnings
results benefit from a strengthening Japanese yen and are adversely affected by
a strengthening U.S. dollar. The Company maintains a foreign currency hedging
program for merchandise purchase transactions initiated from Japan in order to
reduce the potentially negative impact on the Company's financial results of a
significant strengthening of the U.S. dollar against the yen. The Company's
pretax expense related to its hedging program was $1,127,000 in Fiscal 1995 and
$991,000 in Fiscal 1994.
Gross margin (Gross profit as a percentage of net sales) was 53.2% in Fiscal
1995, compared with 52.5% in Fiscal 1994 and 51.3% (excluding the effect of a
nonrecurring charge related to the Japan business realignment) in Fiscal 1993.
The increase in Fiscal 1995 reflected favorable shifts in sales mix toward the
Company's retail businesses, particularly in Japan, that achieve gross margins
above the Company's average. The increase in Fiscal 1994 was primarily due to
the effect of recording higher retail sales subsequent to the Japan realignment.
The Company's ongoing gross margin and pricing strategy is to offset increased
product-costs with higher retail selling prices; therefore, the Company's
objective is to maintain gross margin at approximately current levels.
Operating expenses (Selling, general and administrative expenses and the
Provision for uncollectible accounts) in Fiscal 1995 increased 18% over Fiscal
1994; operating expenses in Fiscal 1994 increased 21% over Fiscal 1993. The
increases in both years were largely due to: incremental occupancy, staffing and
marketing expenses related to the Company's worldwide expansion program;
sales-related variable expenses (including fees paid to department stores in
Japan); and the effect of a weakened U.S. dollar on the translation of overseas
operating expenses into U.S. dollars. As a percentage of net sales, operating
expenses were 43.2% in Fiscal 1995, compared with 43.0% and 42.9% in Fiscal 1994
and 1993. On the basis of current plans and foreign currency exchange rates,
management expects a moderation in operating expense growth and a reduction in
the ratio of operating expenses as a percentage of net sales in Fiscal 1996.
10 Tiffany & Co. and Subsidiaries
<PAGE> 4
Interest expense decreased in Fiscal 1995 primarily due to lower interest rates
on short-term borrowings in Japan, partially offset by higher average short-term
borrowings. Interest expense in Fiscal 1994 increased primarily due to higher
average short-term borrowings to support the Company's worldwide expansion
program and the effect of the Japan realignment. A significant portion of the
Company's short-term borrowings at January 31, 1996 and 1995 was denominated in
yen and was used to support the local working capital requirements of the
Company's Japanese operations. On the basis of current plans, interest rates and
foreign currency exchange rates, management expects a similar level of interest
expense in Fiscal 1996.
Other income/(deductions) in Fiscal 1995 included the recognition of a pretax
gain of $2,300,000 that resulted from the sale of the Company's watch assembly
operations in Switzerland (see Note B to consolidated financial statements).
The provision/(benefit) for income taxes resulted in an effective income tax
rate of 43.2% in Fiscal 1995, 43.1% in Fiscal 1994 and (43.1)% in Fiscal 1993.
Accounting standards: In October 1995, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("SFAS No. 123"), which establishes a fair value-based
method of accounting for stock-based compensation plans, including stock options
and stock purchase plans. SFAS No. 123 allows companies to adopt a fair
value-based method of accounting for stock-based compensation plans or, at their
option, to retain the intrinsic value-based method of Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB No. 25"),
and supplement it with proforma disclosures of net income and earnings per share
data as if the fair value-based method had been applied. The adoption of this
standard, required for the fiscal year ending January 31, 1997, will not impact
consolidated results of operations or financial condition as the Company has
elected to continue to account for stock-based compensation plans under APB No.
25.
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of" ("SFAS No. 121")
to establish accounting standards for the impairment of long-lived assets,
certain identifiable intangibles and goodwill related to those assets to be held
and used. The Company adopted SFAS No. 121 in Fiscal 1995 and recorded a pretax
charge of $2,500,000 (see Note E to consolidated financial statements).
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES: Management believes that the Company's
financial condition at January 31, 1996 provides sufficient liquidity and
resources to support current business activity and planned expansion. Working
capital and the corresponding current ratio were $283,424,000 and 2.3:1 at
January 31, 1996, compared with $242,779,000 and 2.5:1 at January 31, 1995.
Accounts receivable were $80,084,000 and $61,622,000 at January 31, 1996 and
1995. The increase primarily reflected higher sales levels; however, improved
receivables turnover was achieved.
Inventories (representing the largest component of working capital and assets)
were $311,252,000 and $270,075,000 at January 31, 1996 and 1995. The increase
was primarily attributable to merchandise purchases to support sales growth, new
stores and expanded product offerings. Inventory turnover was 1.0 times at
January 31, 1996 and 0.9 times at January 31, 1995. The Company's objective is
to improve inventory performance through: refinement of worldwide replenishment
systems; focus on the specialized disciplines of product development, assortment
planning and inventory management; improved presentation and management of
display inventories in each store; assortment editing by product category; and a
time-phased program of improvements in warehouse management and supply chain
logistics.
Tiffany & Co. and Subsidiaries 11
<PAGE> 5
Capital expenditures were $26,455,000 in Fiscal 1995, $19,227,000 in Fiscal 1994
and $18,103,000 in Fiscal 1993. In all three years, expenditures were required
primarily for the opening and/or renovation of retail stores, the relocation
and/or renovation of certain administrative and manufacturing facilities and
enhanced computer operations and distribution capabilities. On the basis of
current plans, the Company expects capital expenditures in Fiscal 1996 to be
approximately $41,000,000, with the increase largely due to the Company's
flagship store in Tokyo as well as the purchase of equipment, furniture and
systems for the new customer service/distribution center.
Cash dividends of $0.28 per share of Common Stock were paid in Fiscal 1995, 1994
and 1993. The Company expects to retain the majority of its earnings to support
its business and future expansion.
The Company generated a net cash inflow from operating activities of $33,594,000
in Fiscal 1995. This contrasted with $65,574,000 in Fiscal 1994, which benefited
from management's decision to reallocate inventories among various stores and
the consequent effect upon Fiscal 1994 inventory purchases. A net cash outflow
of $19,502,000 in Fiscal 1993 was primarily the result of cash required to
effect the Japan realignment. Net-debt (short-term borrowings and long-term
debt, less cash and short-term investments) and the ratio of net-debt to total
capital (net-debt and stockholders' equity) was $98,501,000 and 27% at January
31, 1996, compared with $117,878,000 and 35% at January 31, 1995. It is
management's goal to generate cash flow that is sufficient to finance the
Company's worldwide business activities and planned expansion.
On February 15, 1996, the Company prepaid its long-term trade payable to
Mitsukoshi which amounted to yen 2,750,000,000 ($25,807,000) and was due on or
before February 28, 1998. On March 6, 1996, the Company received a lending
commitment for yen 5,000,000,000 ($47,500,000) in a private placement
transaction from a lender in Japan. The Company will be obligated under a loan
agreement with a 15-year term at a rate of 4.50%. The proceeds from this loan
will be used to reduce indebtedness in Japan, as well as for working capital and
construction costs associated with the Company's flagship store in Tokyo.
The Company's sources of working capital are internally generated cash flows and
funds available under a five-year, $130,000,000 multicurrency, noncollateralized
revolving credit facility established in June 1995. This facility replaced a
$100,000,000 revolving credit facility and a yen 2,500,000,000 noncollateralized
line of credit, both of which expired in July 1995. Management anticipates that
internally generated cash flows and funds available under the new facility will
be sufficient to support the Company's planned worldwide business expansion, as
well as seasonal working capital increases typically required during the third
and fourth quarters of each year.
SEASONALITY: The Company's business is seasonal in nature, with the fourth
quarter typically representing a proportionally greater percentage of annual
sales, income from operations and cash flow. Management expects such seasonality
to continue in the future.
12 Tiffany & Co. and Subsidiaries
<PAGE> 6
REPORT OF MANAGEMENT
The Company's consolidated financial statements were prepared by management, who
are responsible for their integrity and objectivity. The financial statements
have been prepared in accordance with generally accepted accounting principles
and, as such, include amounts based on management's best estimates and
judgments.
Management is further responsible for maintaining a system of internal
accounting control designed to provide reasonable assurance that the Company's
assets are adequately safeguarded and that the accounting records reflect
transactions executed in accordance with management's authorization. The system
of internal control is continually reviewed and is augmented by written policies
and procedures, the careful selection and training of qualified personnel and a
program of internal audit.
The consolidated financial statements have been audited by Coopers & Lybrand
L.L.P., Independent Accountants. Their report is shown on this page.
The Audit Committee of the Board of Directors, which is composed solely of
independent directors, meets regularly to discuss specific accounting, financial
reporting and internal control matters. Both the independent accountants and the
internal auditors have full and free access to the Audit Committee. Each year
the Audit Committee selects the firm that is to perform audit services for the
Company.
/s/ William R. Chaney
William R. Chaney
Chairman of the Board
and Chief Executive Officer
/s/ James N. Fernandez
James N. Fernandez
Senior Vice President - Finance
and Chief Financial Officer
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and
Board of Directors of Tiffany & Co.
We have audited the accompanying consolidated balance sheets of Tiffany & Co.
and Subsidiaries as of January 31, 1996 and 1995, and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
three years in the period ended January 31, 1996. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Tiffany & Co. and
Subsidiaries as of January 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
January 31, 1996, in conformity with generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
New York, New York
March 6, 1996
Tiffany & Co. and Subsidiaries 13
<PAGE> 7
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended January 31,
-----------------------
(in thousands, except per share amounts) 1996 1995 1994
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $ 803,292 $ 682,831 $ 566,501
Product return for Japan realignment -- -- (115,000)
--------------------------------
803,292 682,831 451,501
Cost of goods sold 375,922 324,629 276,119
Cost related to product return for Japan realignment -- -- (57,500)
--------------------------------
Gross profit 427,370 358,202 232,882
Selling, general and administrative expenses 345,612 291,722 240,283
Provision for uncollectible accounts 1,745 1,825 2,628
--------------------------------
Income/(loss) from operations 80,013 64,655 (10,029)
Interest expense and financing costs 12,338 12,942 9,562
Other income/(deductions) 1,360 (147) 1,591
--------------------------------
Income/(loss) before income taxes 69,035 51,566 (18,000)
Provision/(benefit) for income taxes 29,820 22,225 (7,758)
--------------------------------
NET INCOME/(LOSS) $ 39,215 $ 29,341 $ (10,242)
================================
Net income/(loss) per share:
Primary $ 2.43 $ 1.85 $ (0.65)
================================
Fully diluted $ 2.38 $ 1.85 $ (0.65)
================================
Weighted average number of common shares:
Primary 16,117 15,898 15,781
Fully diluted 17,273 16,791 16,674
</TABLE>
See notes to consolidated financial statements.
14 Tiffany & Co. and Subsidiaries
<PAGE> 8
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
January 31,
-----------------------
(in thousands) 1996 1995
- ------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and short-term investments $ 81,966 $ 44,318
Accounts receivable, less allowances of $5,698 and $5,721 80,084 61,622
Income tax receivable -- 7,925
Inventories 311,252 270,075
Deferred income taxes 8,060 5,443
Prepaid expenses 20,584 17,868
-----------------------
Total current assets 501,946 407,251
Property and equipment, net 115,214 112,076
Deferred income taxes 10,033 5,353
Other assets, net 27,064 31,992
-----------------------
$ 654,257 $ 556,672
=======================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 78,967 $ 60,696
Accounts payable and accrued liabilities 108,829 81,640
Income taxes payable 19,672 13,607
Merchandise and other customer credits 11,054 8,529
-----------------------
Total current liabilities 218,522 164,472
Long-term trade payable 25,688 27,591
Reserve for product return 11,238 13,103
Long-term debt 101,500 101,500
Postretirement/employment benefit obligation 18,031 16,581
Other long-term liabilities 14,900 11,728
Commitments and contingencies
Stockholders' equity:
Common Stock, $.01 par value; authorized
30,000 shares, issued 15,988 and 15,703 160 157
Additional paid-in capital 82,620 71,821
Retained earnings 185,823 151,032
Foreign currency translation adjustments (4,225) (1,313)
-----------------------
Total stockholders' equity 264,378 221,697
-----------------------
$ 654,257 $ 556,672
=======================
</TABLE>
See notes to consolidated financial statements.
Tiffany & Co. and Subsidiaries 15
<PAGE> 9
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended January 31,
----------------------------------
(in thousands) 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net income/(loss) $ 39,215 $29,341 $(10,242)
Adjustments to reconcile net income/(loss) to net cash
provided by/(used in) operating activities:
Depreciation and amortization 18,790 16,501 13,587
Provision for uncollectible accounts 1,745 1,825 2,628
Provision for product return -- -- 57,500
Reduction in reserve for product return (1,865) (560) (43,837)
Provision for inventories 3,044 1,788 3,833
Deferred income taxes (7,528) (2,039) (7,181)
Income tax receivable 7,925 4,592 (12,517)
Gain on sale of subsidiary (2,330) -- --
Impairment loss on certain assets 2,419 -- --
Loss on disposal of fixed assets 2,956 -- --
Provision for postretirement/employment benefits 1,450 2,261 1,550
(Increase)/decrease in assets and increase/(decrease) in liabilities:
Accounts receivable (15,830) 5,839 (18,264)
Inventories (54,746) 2,630 (16,015)
Prepaid expenses (2,674) 393 (7,193)
Other assets, net 2,203 (7,863) (1,850)
Accounts payable 12,883 (3,055) 11,384
Accrued liabilities 15,811 5,227 3,516
Income taxes payable 6,893 6,700 3,044
Merchandise and other customer credits 2,525 1,582 1,629
Other long-term liabilities 708 412 (1,074)
----------------------------------
Net cash provided by/(used in) operating activities 33,594 65,574 (19,502)
----------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (26,455) (19,227) (18,103)
Proceeds from lease incentives 1,729 250 2,450
Other 174 (133) --
----------------------------------
Net cash used in investing activities (24,552) (19,110) (15,653)
----------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase/(decrease) in short-term borrowings 22,826 (4,072) 36,912
Proceeds from exercise of stock options 7,971 967 569
Tax benefit from exercise of stock options 2,233 356 377
Cash dividends on Common Stock (4,424) (4,391) (4,381)
----------------------------------
Net cash provided by/(used in) financing activities 28,606 (7,140) 33,477
----------------------------------
Net increase/(decrease) in cash and short-term investments 37,648 39,324 (1,678)
Cash and short-term investments at beginning of year 44,318 4,994 6,672
----------------------------------
Cash and short-term investments at end of year $ 81,966 $ 44,318 $ 4,994
==================================
</TABLE>
See notes to consolidated financial statements.
16 Tiffany & Co. and Subsidiaries
<PAGE> 10
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Foreign
Total Additional Currency
Stockholders' Common Stock Paid-in Retained Translation
(in thousands) Equity Shares Amount Capital Earnings Adjustments
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balances, January 31, 1993 $204,806 15,620 $ 156 $ 69,553 $140,705 $ (5,608)
Exercise of stock options 569 40 1 568 -- --
Tax benefit from exercise of stock options 377 -- -- 377 -- --
Cash dividends on Common Stock (4,381) -- -- -- (4,381) --
Foreign currency translation adjustments (2,048) -- -- -- -- (2,048)
Net loss (10,242) -- -- -- (10,242) --
--------------------------------------------------------------------------------
Balances, January 31, 1994 189,081 15,660 157 70,498 126,082 (7,656)
Exercise of stock options 967 43 -- 967 -- --
Tax benefit from exercise of stock options 356 -- -- 356 -- --
Cash dividends on Common Stock (4,391) -- -- -- (4,391) --
Foreign currency translation adjustments 6,343 -- -- -- -- 6,343
Net income 29,341 -- -- -- 29,341 --
--------------------------------------------------------------------------------
Balances, January 31, 1995 221,697 15,703 157 71,821 151,032 (1,313)
Exercise of stock options 7,971 266 3 7,968 -- --
Tax benefit from exercise of stock options 2,233 -- -- 2,233 -- --
Issuance of Common Stock 598 19 -- 598 -- --
Cash dividends on Common Stock (4,424) -- -- -- (4,424) --
Foreign currency translation adjustments (2,912) -- -- -- -- (2,912)
Net income 39,215 -- -- -- 39,215 --
--------------------------------------------------------------------------------
Balances, January 31, 1996 $264,378 15,988 $ 160 $ 82,620 $185,823 $ (4,225)
================================================================================
</TABLE>
See notes to consolidated financial statements.
Tiffany & Co. and Subsidiaries 17
<PAGE> 11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS AND CONSOLIDATION
Tiffany & Co. is the internationally-renowned jeweler and specialty retailer.
Sales are made through Tiffany & Co. stores and boutiques and to select
retailers and distributors in the Americas, the Asia-Pacific region, Europe and
the Middle East. Direct Marketing sales are made through Tiffany's corporate and
catalog divisions. The consolidated financial statements include the accounts of
Tiffany & Co. and all majority-owned domestic and foreign subsidiaries (the
"Company") after elimination of all material intercompany balances and
transactions.
USE OF ESTIMATES IN PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the dates of the financial statements and
the reported amounts of revenues and expenses during the reporting periods.
Actual results could differ from those estimates.
CASH AND SHORT-TERM INVESTMENTS AND SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Short-term investments with a maturity of 90 days or less when purchased are
considered cash equivalents.
Supplemental cash flow information for the years ended January 31, 1996, 1995
and 1994 is as follows:
<TABLE>
<CAPTION>
(in thousands) 1996 1995 1994
- ------------------------------------------------------
Cash paid during
the year for:
<S> <C> <C> <C>
Interest $11,372 $12,445 $8,714
-----------------------------
Income taxes $15,188* $13,326 $5,535
-----------------------------
</TABLE>
*Net of $7,925 Federal income tax refund.
RECEIVABLES AND FINANCE CHARGES
Accounts receivable finance charge income on retail revolving charge accounts
was not material and has been included as a reduction of Selling, general and
administrative expenses.
The Company's domestic and international presence and large, diversified
customer base serve to limit overall credit risk. The Company maintains reserves
for potential credit losses, and such losses, in the aggregate, have not
exceeded expectations.
INVENTORIES
Inventories are valued at the lower of cost or market with cost being determined
by the LIFO (last-in, first-out) method for domestic and foreign branch
inventories and the FIFO (first-in, first-out) method for inventories held by
foreign subsidiaries.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost less accumulated depreciation and is
depreciated on a straight-line basis over the estimated useful lives of the
assets. Leasehold improvements are amortized over the shorter of the estimated
useful lives of the improvements or the terms of the related leases.
Expenditures for repairs and maintenance are expensed as incurred, and
expenditures for major renewals and improvements are capitalized.
PREOPENING COSTS
Costs associated with the opening of new retail stores are expensed in the
period incurred.
ADVERTISING
Advertising costs are expensed as incurred and aggregated $24,600,000,
$21,800,000 and $18,100,000 for the years ended January 31, 1996, 1995 and 1994.
INCOME TAXES
The Company provides for income taxes based upon the tax rate at which the items
of income and expense are expected to be settled in the Company's tax return.
The Company, its domestic subsidiaries and its foreign branches, files a
consolidated Federal income tax return. Certain items of revenue and expense are
reported for Federal income tax purposes in different periods than for financial
reporting purposes, thereby resulting in deferred income tax items.
FOREIGN CURRENCY TRANSLATION
Assets and liabilities of foreign operations are translated into U.S. dollars
using current exchange rates in effect at the balance sheet date, while revenue
and expense accounts
18 Tiffany & Co. and Subsidiaries
<PAGE> 12
are translated at average rates of exchange prevailing during the period.
Adjustments resulting from such translation are included as a separate component
of stockholders' equity.
The Company recognized $(67,000), $924,000 and $1,534,000 of net foreign
currency transaction (losses)/gains, included in Other income/(deductions),
related to its foreign operations for the years ended January 31, 1996, 1995 and
1994.
REVENUE RECOGNITION
The Company recognizes revenue at the "point of sale," which occurs when
merchandise is taken in an "over-the-counter" transaction or upon shipment to a
customer. For the years ended January 31, 1996, 1995 and 1994, the largest
portion of the Company's sales were denominated in U.S. dollars.
GOODWILL
Goodwill represents the excess of cost over fair value of net assets acquired
and is being amortized over 20 years using the straight-line method. At
January 31, 1996 and 1995, the remaining unamortized amounts of $5,937,000 and
$6,511,000 are included in Other assets, net.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company provides certain health care and life insurance benefits for retired
employees and accrues the cost of providing these benefits throughout the
employees' active service periods until they attain full eligibility for those
benefits. Substantially all of the Company's employees may become eligible for
these benefits if they reach normal or early retirement age while working for
the Company. The Company's employee and retiree health care benefits are
administered by an insurance company, and premiums on life insurance are based
on benefits paid during the year.
POSTEMPLOYMENT BENEFITS
The Company provides certain postemployment benefits for former employees after
employment but before retirement and accrues the cost of these benefits as they
are earned rather than expensing the costs when paid. These benefits include
salary continuation, severance benefits, disability benefits and continuation of
health care benefits and life insurance coverage.
EARNINGS PER SHARE
Primary earnings per common share is computed by dividing net income by the
weighted average number of shares outstanding during the period, including
dilutive stock options. Fully diluted earnings per common share is computed by
dividing net income, after giving effect to the elimination of interest expense
and bond amortization fees, net of income tax effect, applicable to the
convertible subordinated debentures, by the weighted average number of shares
outstanding including dilutive stock options and the assumed conversion of the
subordinated debentures using the "if converted" method.
RECLASSIFICATIONS
To conform to 1996 presentation, certain reclassifications were made to prior
years' consolidated financial statements.
B. BUSINESS RESTRUCTURING
During the year ended January 31, 1996, the Company restructured its watch
operations in Switzerland by divesting its assembly operations and outsourcing
these activities to a third-party watch manufacturer. In conjunction with this
transaction, the Company repatriated $15,700,000 in cash dividends from its
Swiss subsidiary, sold its Swiss subsidiary for $3,500,000 and recorded a pretax
gain of $2,300,000 which is included as a component of Other
income/(deductions). This gain was primarily due to the recognition of
previously deferred foreign currency translation adjustments relating to the
Swiss subsidiary's equity.
During the year ended January 31, 1994, the Company realigned its business with
Mitsukoshi Limited in Japan (see Note K).
C. INVENTORIES
<TABLE>
<CAPTION>
(in thousands) 1996 1995
- ----------------------------------------
<S> <C> <C>
Finished goods $257,344 $227,412
Raw materials 48,366 38,262
Work-in-process 7,217 6,869
---------------------
312,927 272,543
Reserves (1,675) (2,468)
---------------------
$311,252 $270,075
=====================
</TABLE>
At January 31, 1996 and 1995, $229,300,000 and $189,943,000 of inventories were
valued using the LIFO method. The excess of current cost over the LIFO inventory
value was $11,870,000 and $9,770,000 at January 31, 1996 and 1995. The LIFO
valuation method had the effect of decreasing net income by $0.07 and $0.05 per
share for the years ended January 31, 1996 and 1995, and increasing net loss by
$0.06 per share for the year ended January 31, 1994.
Tiffany & Co. and Subsidiaries 19
<PAGE> 13
D. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
(in thousands) 1996 1995
- ----------------------------------------------------------
<S> <C> <C>
Leasehold improvements $110,551 $100,127
Office equipment 34,247 31,815
Machinery and equipment 31,929 29,001
--------------------
176,727 160,943
Accumulated depreciation
and amortization (61,513) (48,867)
--------------------
$115,214 $112,076
====================
</TABLE>
For the years ended January 31, 1996, 1995 and 1994, the provision for
depreciation and amortization amounted to $17,117,000, $14,057,000 and
$11,947,000.
E. IMPAIRMENT OF LONG-LIVED ASSETS
In March 1995, the Financial Accounting Standards Board issued SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of," to establish accounting standards for the impairment of
long-lived assets, certain identifiable intangibles and goodwill related to
those assets to be held and used. The statement requires that long-lived assets
be reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. It establishes
guidelines for determining recoverability based on future net cash flows from
the use of these assets and for the measurement of the impairment loss. An
impairment loss under SFAS No. 121 is calculated as the difference between an
asset's carrying value and its estimated fair value. Any impairment loss is
recorded in the current period in which the recognition criteria are first
applied and met.
During the year ended January 31, 1996, the Company adopted SFAS No. 121 and, as
a result of evaluating cash flows generated by its long-lived assets at the
retail store level and continued difficult operating conditions in certain of
its European markets, recorded an impairment loss on certain assets. A pretax
charge of $2,500,000 was included in Selling, general and administrative
expenses. The impairment loss was calculated as the difference between the asset
carrying values and the present value of projected net cash flows, giving
consideration to recent operating performance and pricing trends and applying a
15% discount rate. These projections represent the Company's best estimate of
fair value based on current information available.
F. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
<TABLE>
<CAPTION>
(in thousands) 1996 1995
- -------------------------------------------------------
<S> <C> <C>
Accounts payable - trade $ 49,346 $36,997
Accrued rent payable 8,781 7,931
Accrued compensation and
commissions 9,112 8,943
Other 41,590 27,769
-----------------------
$108,829 $81,640
=======================
</TABLE>
G. DEBT
During the year ended January 31, 1996, the Company entered into an agreement
for a new, five-year $130,000,000 multicurrency revolving credit facility (the
"Credit Facility") which replaced a $100,000,000 revolving credit facility and a
yen 2,500,000,000 noncollateralized line of credit, both of which expired in
July 1995. At January 31, 1996 and 1995, the amounts outstanding under the
Company's new Credit Facility and its previous credit facility amounted to
$78,967,000 and $35,596,000. The new syndicated, noncollateralized Credit
Facility entitles the Company to borrow up to $25,000,000 on a pro-rata basis
from each of four banks and up to $30,000,000 from the agent bank at interest
rates based upon a prime rate or a reserve-adjusted LIBOR. During the years
ended January 31, 1996 and 1995, interest rates ranged from 0.75% to 11.31% and
2.57% to 9.78%. The weighted average interest rate for the years ended January
31, 1996 and 1995 was 2.59% and 3.40%.
The Credit Facility provides for the payment of an annual fee based on the total
amount of availability and letters of credit issued and contains covenants that
require maintenance of certain debt-equity and interest coverage ratios, as well
as other requirements customary to loan facilities of this nature. In addition,
such agreement contains a cross-default provision relating to an event of
default under any debt of the Company or its subsidiaries which exceeds
$5,000,000.
On March 6, 1996, the Company received a lending commitment for yen
5,000,000,000 ($47,500,000) in a private placement transaction from a lender in
Japan. The Company will be obligated under a loan agreement with a 15-year term
20 Tiffany & Co. and Subsidiaries
<PAGE> 14
at a rate of 4.50%. The proceeds from this loan will be used to reduce
indebtedness in Japan, as well as for working capital and construction costs
associated with the Company's flagship store in Tokyo.
On January 29, 1993, the Company entered into an agreement with a group of
lenders to issue, at par, $51,500,000 of 7.52% Senior Notes Due 2003. The Note
Purchase Agreements (the "Note Agreements") require lump sum repayment upon
maturity, maintenance of specific financial covenants and ratios, and limit
certain payments, investments and indebtedness, in addition to other
requirements customary in such circumstances. The Note Agreements also provide
that, in the event a default has occurred under any debt of the Company in
excess of $1,000,000, the unpaid principal amount of these Senior Notes may
become immediately due and payable.
On March 19, 1991, the Company completed a Euro-offering of $50,000,000, at par,
of 6 3/8% Convertible Subordinated Debentures Due 2001 (the "Debentures") issued
pursuant to an Indenture (the "Indenture"), which are convertible into shares of
the Company's Common Stock at a conversion price of $56.00, subject to certain
adjustments, and are subordinated in right of payment to all existing and future
senior indebtedness of the Company. The Debentures are redeemable at the option
of either the Company or the holder under certain circumstances and require lump
sum repayment upon maturity. The Indenture contains a cross-default provision
relating to an event of default under any of the Company's debt agreements
whereby outstanding debt in excess of $3,000,000 has been accelerated and such
acceleration has not been rescinded within 10 days after notification. In
addition, the Indenture requires the Debentures to be collateralized equally
and ratably with any collateralized subordinated debt of the Company.
During the year ended January 31, 1994, the Company established a yen
2,500,000,000 noncollateralized line of credit which expired in July 1995.
Interest on this line of credit was based on a Euro-yen rate plus 55 basis
points. At January 31, 1995, the Company had yen 2,500,000,000 outstanding
($25,100,000) at an average rate of 2.86% under this line.
H. FINANCIAL HEDGING INSTRUMENTS
The Company maintains a foreign currency hedging program intended to reduce the
Company's risk on foreign currency-denominated (primarily yen) transactions in
order to reduce the potentially negative impact on the Company's financial
statements of a significant strengthening of the U.S. dollar against the yen. In
connection with this program, the Company will, from time to time, enter into
foreign currency-purchased put options and forward-exchange contracts that are
designated as hedges of commitments to purchase merchandise and settle
liabilities in foreign currencies. The market value gains and losses on these
foreign exchange contracts are initially deferred and then recognized in income
or as adjustments of carrying amounts of inventories and liabilities when the
related transactions are settled. At January 31, 1996, the Company had
outstanding purchased put options maturing at various dates through January 23,
1997, giving it the right, but not the obligation, to sell yen 5,975,000,000
($55,815,000) at predetermined contract-exchange rates. The deferred unrealized
gain of the Company's purchased put options amounted to $4,185,000 at January
31, 1996. If the market yen-exchange rates at maturity are below the contract
rates, the Company will allow the options to expire. The Company's pretax
expense related to its hedging program was $1,127,000 and $991,000 for the years
ended January 31, 1996 and 1995. There were no material outstanding
forward-exchange contracts at January 31, 1996.
On January 31, 1993, the Company entered into a three-year $50,000,000 interest
rate swap agreement to modify the interest characteristics of its outstanding
Senior Notes from a fixed-rate to a floating-rate basis. In addition to the
interest on the 7.52% Senior Notes, the Company paid the six-month LIBOR rate,
adjusted every six months, and received a fixed rate of 5.30%. The six-month
LIBOR rates at January 31, 1996, 1995 and 1994 were 5.93%, 6.69% and 3.56% and
at July 31, 1995, 1994 and 1993 were 6.69%, 5.25% and 3.38%. At January 31,
1996, 1995 and 1994, there were no amounts outstanding as the terms of the
underlying agreement mandated semi-annual settlements of outstanding net
positions each July 31 and January 31. The interest rate swap agreement had the
effect of increasing interest expense by $547,000 and $375,000 for the years
ended January 31, 1996 and 1995, and decreasing interest expense by $891,000 for
the year ended January 31, 1994.
Tiffany & Co. and Subsidiaries 21
<PAGE> 15
I. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table sets forth the carrying amounts and related fair values of
the Company's financial instruments at January 31, 1996 and 1995:
<TABLE>
<CAPTION>
(in thousands) 1996 1995
----------------------- ------------------------
Carrying Fair Carrying Fair
Asset/(liability) Amount Value Amount Value
-----------------------------------------------------
<S> <C> <C> <C> <C>
Cash and
short-term
investments $ 81,966 $ 81,966 $ 44,318 $ 44,318
Senior notes (51,500) (53,650) (51,500) (48,100)
Convertible
subordinated
debentures (50,000) (52,000) (50,000) (45,750)
Interest rate swap -- -- -- 1,300
</TABLE>
The carrying amounts of the Company's Senior Notes and Debentures in the above
table are included in Long-term debt in the consolidated balance sheets at
January 31, 1996 and 1995. No carrying amount was recognized in the financial
statements for the interest rate swap agreement, which expired on January 31,
1996.
The fair values of these financial instruments at January 31, 1996 and 1995 were
estimated as follows: the Cash and short-term investments approximate fair value
due to their short-term maturity; the Senior Notes were based upon the quoted
market prices of comparable instruments; the Debentures were based upon their
quoted market price; and the interest rate swap agreement was valued at January
31, 1995 at the amount the Company would have expected to pay to terminate the
agreement.
J. COMMITMENTS AND CONTINGENCIES
The Company leases certain office, distribution, retail and manufacturing
facilities. The leases, which expire at various dates through 2011, also provide
for the payment of taxes, insurance and maintenance, and certain leases contain
escalation clauses resulting from the pass-through of increases in operating
costs, property taxes, consumer price indices and renewal options.
During the year ended January 31, 1996, the Company entered into a
special-purpose lease agreement for a 269,000-square-foot distribution, office
and manufacturing facility that will consolidate its existing New Jersey
facilities. Under the terms of the agreement, the Company's operating lease
commitment will be $3,600,000 annually and is expected to commence in late 1996.
The lease consists of an initial term of three years followed by nine
consecutive one-year renewal terms up to a maximum of 12 years.
Rent-free periods and other incentives granted under certain leases, and
scheduled rent increases, are charged to rent expense on a straight-line basis
over the related terms of such leases. Rent expense under leases, including
escalations, for the years ended January 31, 1996, 1995 and 1994 amounted to
$32,686,000, $29,046,000 and $26,552,000.
Future minimum annual rental payments under noncancelable operating leases are
as follows:
<TABLE>
<CAPTION>
Minimum Annual
Fiscal Year Ending Rental Payments
January 31, (in thousands)
- ----------------------------------------
<S> <C>
1997 $ 34,160
1998 31,700
1999 30,215
2000 27,993
2001 20,719
2002 and thereafter 129,196
</TABLE>
The Company is, from time to time, involved in routine litigation incidental to
the conduct of its business including proceedings to protect its trademark
rights, litigation instituted by persons injured upon premises within the
Company's control and litigation with present and former employees. Management
believes that such pending litigation will not have a material adverse effect on
the Company's consolidated results of operations or financial condition.
K. RELATED PARTY TRANSACTIONS
Mitsukoshi Limited ("Mitsukoshi"), a leading Japanese department store group,
owns approximately 13% of the Company's outstanding Common Stock. Until July
1993, Mitsukoshi served as the Company's principal distributor in Japan.
Pursuant to a written agreement, the Company now operates Tiffany & Co.
boutiques in Mitsukoshi's stores and, in exchange, pays Mitsukoshi fees based on
a
22 Tiffany & Co. and Subsidiaries
<PAGE> 16
percentage of net retail sales; such fees amounted to $46,500,000, $39,400,000
and $19,900,000 for the years ended January 31, 1996, 1995 and 1994. Mitsukoshi
continues to operate certain boutiques, primarily outside of Japan. Wholesale
sales to Mitsukoshi amounted to $17,000,000, $19,000,000 and $42,000,000 for the
years ended January 31, 1996, 1995 and 1994. Trade receivables due from
Mitsukoshi were $1,746,000 and $1,729,000 at January 31, 1996 and 1995.
During the year ended January 31, 1994, the Company realigned its primary
Japanese distribution arrangement and assumed full merchandising and marketing
responsibility for 29 Tiffany & Co. boutiques previously operated by Mitsukoshi
in Japan. As part of the transaction, the Company agreed to repurchase over the
following four years approximately $115,000,000 of Tiffany & Co. merchandise
previously sold to Mitsukoshi. Accordingly, in the second quarter of 1993, the
Company established a reserve for product return of $57,500,000, which had the
effect of reducing net income by $32,700,000 (net of income tax benefit of
$24,800,000), or $2.07 per share. Under this agreement, $24,985,000 of
merchandise remains to be repurchased throughout the period ending February 28,
1998. On February 15, 1996, the Company prepaid its long-term trade payable to
Mitsukoshi which amounted to yen 2,750,000,000 ($25,807,000) and was due on or
before February 28, 1998.
L. STOCKHOLDERS' EQUITY
PREFERRED STOCK
The Board of Directors is authorized to issue, without further action by the
stockholders, shares of Preferred Stock, and to fix and alter the rights related
to such stock. In March 1987, the stockholders authorized 2,000,000 shares of
Preferred Stock, par value $0.01 per share. In November 1988, the Board of
Directors designated certain shares of such Preferred Stock as Series A Junior
Participating Cumulative Preferred Stock, par value $0.01 per share, to be
issued in connection with the exercise of certain stock purchase rights under
the Stockholder Rights Plan. At January 31, 1996 and 1995, there were no shares
of Preferred Stock issued or outstanding.
STOCKHOLDER RIGHTS PLAN
Under the Company's Stockholder Rights Plan, each outstanding share of Common
Stock has a stock purchase right which will become exercisable should certain
take-over-related events occur. The rights expire on November 17, 1998, and are
subject to redemption at $.01 per right. Following such events, but before any
person has acquired beneficial ownership of 20% of the common shares, each right
may be used to purchase one one-hundredth of a share of Series A Junior
Participating Cumulative Preferred Stock at an exercise price of $140 (subject
to adjustment); after such an acquisition, each right may be used to purchase
for the exercise price common shares having a market value equal to two times
such exercise price. If, after such an acquisition, a merger of the Company
occurs (or 50% of the Company's assets are sold), each right may be exercised to
purchase, for the exercise price, common shares of the acquiring corporation
having a market value equal to two times the exercise price. Rights held by such
a 20% owner may not be exercised.
CASH DIVIDENDS
Cash dividends declared and paid during the years ended January 31, 1996, 1995
and 1994 amounted to $4,424,000, $4,391,000 and $4,381,000. On February 15,
1996, the Company's Board of Directors declared a regular quarterly dividend of
$0.07 per common share, for stockholders of record on March 20, 1996, to be paid
on April 10, 1996.
STOCK OPTIONS
Under the 1985 Stock Option Plan, options to acquire up to 360,000 shares of
Common Stock could have been granted to key employees of the Company at no less
than 100% of fair market value on the date of grant. Certain options granted
under the 1985 Plan are intended to qualify as "incentive stock options"
pursuant to Section 422A of the Internal Revenue Code. Of the options granted,
options for 180,000 shares became exercisable in full two years following the
date of grant. The balance became exercisable in part one year following the
date of grant. Options under the 1985 Plan have maximum terms of 10 or 11 years.
No future options may be granted under this Plan.
Tiffany & Co. and Subsidiaries 23
<PAGE> 17
Under the 1986 Stock Option Plan, nonqualified stock options to acquire
2,709,000 shares of Common Stock may be granted to key employees of the Company
at no less than 100% of the fair market value on the date of the grant. The
stockholders of the Company will be asked to approve an amendment to the 1986
Plan increasing by 500,000 the number of shares of Common Stock available for
issuance under the 1986 Plan. Options granted under the 1986 Plan have a maximum
term of 11 years and are exercisable in four equal installments with the first
installment becoming exercisable on the first anniversary of the grant date.
Under the 1988 Director Option Plan, options to acquire 150,000 shares of Common
Stock may be granted to non-employee directors of the Company at a price equal
to 50% of the fair market value on the date of grant. Each director may elect to
receive options in lieu of all or 50% of an annual retainer fee. Options granted
under this plan have a maximum term of 15 years and are exercisable in full one
year following the date of grant.
Changes in options under these Plans during the years ended January 31, 1994,
1995 and 1996 were as follows:
<TABLE>
<CAPTION>
Number of Option Price
Shares Per Share
- -----------------------------------------------------
<S> <C> <C>
Outstanding -
January 31, 1993 1,397,195 $ 1.81-$52.88
Granted 321,270 $15.88-$31.88
Exercised (39,826) $ 1.81-$26.71
Canceled (108,888) $25.21-$52.88
---------
Outstanding -
January 31, 1994 1,569,751 $ 1.81-$52.88
Granted 353,260 $19.56-$42.56
Exercised (42,501) $ 1.81-$36.38
Canceled (115,385) $23.17-$52.88
---------
Outstanding -
January 31, 1995 1,765,125 $ 1.81-$52.88
Granted 377,055 $27.00-$55.00
Exercised (265,951) $ 1.81-$50.94
Canceled (94,961) $25.44-$50.94
---------
Outstanding -
January 31, 1996 1,781,268 $ 1.81-$55.00
=========
Exercisable -
January 31, 1996 948,388
=========
</TABLE>
M. POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS
The following table sets forth the Company's cumulative postretirement benefit
obligation and the amount recognized in the Company's consolidated balance
sheets at January 31, 1996 and 1995:
<TABLE>
<CAPTION>
(in thousands, except percentages) 1996 1995
- ------------------------------------------------------------
<S> <C> <C>
Retirees $ 6,679 $ 8,074
Fully eligible plan participants 2,943 2,345
Other active plan participants 7,468 5,070
---------------------
Total accumulated postretirement
benefit obligation 17,090 15,489
Unrecognized gain 919 1,232
---------------------
Postretirement benefit obligation $18,009 $16,721
=====================
Discount rate 7.00% 8.50%
Rate of increase in compensation 4.50% 5.50%
Health care cost trend* 9.50% 9.50%
</TABLE>
*Gradually declining to 5.50% to be achieved in the year 2011.
Postretirement benefit cost included the following components:
<TABLE>
<CAPTION>
(in thousands) 1996 1995 1994
- ---------------------------------------------------------------
<S> <C> <C> <C>
Service cost $1,016 $1,132 $1,042
Interest cost on projected
benefit obligation 717 1,137 1,298
------------------------------
Total postretirement
benefit cost $1,733 $2,269 $2,340
==============================
</TABLE>
Based on current estimates, increasing the health-care-cost trend rate by one
percentage point would increase the Company's accumulated postretirement benefit
obligation by $1,800,000 and the aggregate service and interest cost components
of net periodic postretirement benefit for the year ended January 31, 1996 by
$250,000.
N. EMPLOYEE BENEFIT PLANS
The Company has a noncontributory defined benefit pension plan (the "Plan")
covering substantially all domestic salaried and full-time hourly employees. The
Company accounts for pension expense using the projected unit credit actuarial
method for financial reporting purposes. Plan benefits are based on the highest
five consecutive years of compensation or as a percentage of actual
compensation, as applicable in the circumstances, and the number of years of
service. The actuarial present value of the vested benefit
24 Tiffany & Co. and Subsidiaries
<PAGE> 18
obligation is calculated based on the expected date of separation or retirement
of the Company's eligible employees.
Net periodic pension expense included the following components:
<TABLE>
<CAPTION>
(in thousands, except percentages) 1996 1995 1994
- -----------------------------------------------------------------
<S> <C> <C> <C>
Service cost-benefits
earned during period $ 2,272 $ 2,343 $ 2,076
Interest cost on projected
benefit obligation 3,026 2,625 2,493
Actual return on assets (7,852) 877 (3,073)
Net amortization
and deferrals 5,532 (2,703) 1,411
-------------------------------
Net periodic
pension expense $ 2,978 $ 3,142 $ 2,907
===============================
Discount rate 8.50% 7.50% 8.25%
Rate of increase
in compensation 5.50% 5.00% 5.50%
Long-term rate of
return on assets 9.00% 9.00% 9.00%
</TABLE>
The following table sets forth the funded status of the Plan and amounts
recognized in the Company's consolidated balance sheets at January 31, 1996 and
1995:
<TABLE>
<CAPTION>
(in thousands) 1996 1995
- ---------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of benefit
obligation:
Vested $ 35,124 $ 25,840
Nonvested 5,650 3,251
--------------------
Accumulated benefit obligation $ 40,774 $ 29,091
====================
Projected benefit obligation $ 47,489 $ 34,571
Plan assets at fair value,
primarily stocks and fixed-
income securities 38,198 30,749
--------------------
Projected benefit obligation
in excess of Plan assets 9,291 3,822
Unrecognized net loss (7,156) (2,968)
Unrecognized net obligation (548) (651)
Recognition of minimum liability 990 --
--------------------
Pension liability recognized in
the consolidated balance sheets $2,577 $ 203
====================
</TABLE>
The assumptions used in the calculation of the projected benefit obligation are
as follows:
<TABLE>
<CAPTION>
1996 1995
- ----------------------------------------------------
<S> <C> <C>
Discount rate 7.00% 8.50%
Rate of increase in compensation 4.50% 5.50%
</TABLE>
The Company has an Employee Profit Sharing and Retirement Savings Plan that
covers substantially all U.S.-based employees of the Company and provides for
employee contributions and performance-based Company contributions. The
Company's contribution for the years ended January 31, 1996 and 1995 amounted to
$1,000,000 and $600,000 in the form of newly issued Company Common Stock. There
was no contribution for the year ended January 31, 1994.
O. INCOME TAXES
Income/(loss) before income taxes consisted of the following:
<TABLE>
<CAPTION>
(in thousands) 1996 1995 1994
- ---------------------------------------------------
<S> <C> <C> <C>
United States $48,702 $41,894 $(31,808)
Foreign 20,333 9,672 13,808
------------------------------
$69,035 $51,566 $(18,000)
==============================
</TABLE>
Components of the provision/(benefit) for income taxes are as follows:
<TABLE>
<CAPTION>
(in thousands) 1996 1995 1994
- ---------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $17,444 $12,672 $(9,184)
State 4,649 6,689 7,974
Foreign 14,605 5,013 (102)
------------------------------
36,698 24,374 (1,312)
------------------------------
Deferred:
Federal (4,087) (2,738) (2,612)
State (686) (717) (3,834)
Foreign (2,105) 1,306 -
------------------------------
(6,878) (2,149) (6,446)
------------------------------
$29,820 $22,225 $(7,758)
=============================
</TABLE>
During the year ended January 31, 1996, the Company received an income tax
refund amounting to $7,925,000, primarily due to the recognition of a tax
benefit from its year ended January 31, 1994, for domestic net operating losses
and foreign tax credits that were carried back to prior tax years.
During the year ended January 31, 1995, an audit of the Company's Federal income
tax returns for the 1989-1992 fiscal years was completed and no material
adjustments were proposed.
Tiffany & Co. and Subsidiaries 25
<PAGE> 19
Deferred tax assets/(liabilities) as of January 31,
1996 and 1995 consisted of the following:
<TABLE>
<CAPTION>
(in thousands) 1996 1995
- --------------------------------------------------------
<S> <C> <C>
Postretirement/employment benefits $ 8,537 $ 7,905
Product return reserve 5,113 5,962
Inventory reserves 6,262 5,624
Accrued expenses 1,537 2,310
Depreciation (599) (3,601)
Pension contribution (1,958) (1,439)
Undistributed earnings
of foreign subsidiaries (1,979) (3,701)
Other 1,180 (2,264)
-----------------
$18,093 $10,796
=================
</TABLE>
The income tax effects of items comprising the deferred income tax benefit are
as follows:
<TABLE>
<CAPTION>
(in thousands) 1996 1995 1994
- ------------------------------------------------------------
<S> <C> <C> <C>
Postretirement/employment
benefit obligation $ (634) $(1,029) $ (711)
Lease buy-out provision - - 510
Product return reserve 849 255 (6,267)
Undistributed earnings of
foreign subsidiaries (1,722) (167) 1,028
State net operating loss
carry-forward - 2,703 (2,703)
Book/tax depreciation (1,475) (1,068) 137
Inventory reserves (1,764) (1,033) (1,946)
Other (2,132) (1,810) 3,506
-----------------------------
$(6,878) $(2,149) $(6,446)
=============================
</TABLE>
A reconciliation of the provision/(benefit) for income taxes at the statutory
Federal income tax rate to the Company's effective income tax rate as reported
is as follows:
<TABLE>
<CAPTION>
(in thousands) 1996 1995 1994
- ------------------------------------------------------------
<S> <C> <C> <C>
Statutory Federal income
tax rate 35.0% 35.0% (35.0)%
State income taxes, net of
Federal benefit 6.4 5.4 (14.2)
Foreign losses with
no tax benefit 1.2 1.1 2.6
Foreign tax rates in excess
of foreign tax credits - - 4.8
Other 0.6 1.6 (1.3)
---------------------------
Effective income tax rate 43.2% 43.1% (43.1)%
===========================
</TABLE>
During the year ended January 31, 1995, the Company utilized a state income tax
benefit of $2,703,000 attributable to net operating loss carry-forwards. The
Company has fully utilized all available foreign tax credits.
P. QUARTERLY FINANCIAL DATA
(UNAUDITED)
<TABLE>
<CAPTION>
(in thousands, Fiscal 1995 Quarter Ended
except per share -------------------------------------------
amounts) April 30 July 31 October 31* January 31
- -------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $150,144 $188,682 $187,766 $280,700
Gross profit 77,363 96,418 100,704 152,885
Income from
operations 6,757 12,567 11,818 48,871
Net income 2,160 5,308 6,274 25,473
Net income
per share:
Primary $ 0.14 $ 0.33 $ 0.39 $ 1.55
=========================================
Fully diluted $ 0.14 $ 0.33 $ 0.39 $ 1.49
=========================================
</TABLE>
<TABLE>
<CAPTION>
(in thousands, Fiscal 1994 Quarter Ended
except per share -------------------------------------------
amounts) April 30 July 31 October 31 January 31
- -------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $131,207 $152,257 $160,091 $239,276
Gross profit 67,200 78,921 84,417 127,664
Income from
operations 6,114 9,018 11,827 37,696
Net income 1,876 3,450 4,720 19,295
Net income
per share:
Primary $ 0.12 $ 0.22 $ 0.30 $ 1.21
=========================================
Fully diluted $ 0.12 $ 0.22 $ 0.30 $ 1.17
=========================================
</TABLE>
* A nonrecurring pretax charge of $2,500 resulting from the adoption of SFAS
No. 121 is included in Income from operations and a nonrecurring pretax gain of
$2,300 resulting from the Company's restructuring of its watch operations in
Switzerland is included in Other income/(deductions).
The sum of the quarterly net income per share amounts may not equal the
full-year amount since the compensations of the weighted average number of
common and common equivalent shares outstanding for each quarter and the full
year are made independently.
26 Tiffany & Co. and Subsidiaries
<PAGE> 20
Q. FOREIGN OPERATIONS
Certain information relating to the Company's foreign operations is set forth
below:
<TABLE>
<CAPTION>
International
-----------------
(in thousands) U.S. Japan Other Unallocated Total
- ------------------------------------------------------------------------------------------------------
YEAR ENDED JANUARY 31, 1996
<S> <C> <C> <C> <C> <C>
Sales $ 639,840 $226,076 $ 92,826 $ -- $ 958,742
Eliminations (145,204) -- (10,246) -- (155,450)
-------------------------------------------------------
Net sales $ 494,636 $226,076 $ 82,580 $ -- $ 803,292
=======================================================
Operating profit* $ 60,004 $ 68,006 $ (497) $ -- $ 127,513
Eliminations 8,312 -- (978) -- 7,334
Corporate expenses -- -- -- (54,834) (54,834)
Interest and other expenses, net -- -- -- (10,978) (10,978)
-------------------------------------------------------
Income/(loss) before income taxes $ 68,316 $ 68,006 $ (1,475) $ (65,812) $ 69,035
=======================================================
Identifiable assets $ 462,616 $119,218 $115,364 $ -- $ 697,198
Eliminations -- (43,405) 464 -- (42,941)
-------------------------------------------------------
Identifiable assets $ 462,616 $ 75,813 $115,828 $ -- $ 654,257
=======================================================
YEAR ENDED JANUARY 31, 1995
Sales $ 524,892 $189,445 $ 76,373 $ -- $ 790,710
Eliminations (96,037) -- (11,842) -- (107,879)
-------------------------------------------------------
Net sales $ 428,855 $189,445 $ 64,531 $ -- $ 682,831
=======================================================
Operating profit* $ 69,721 $ 54,158 $ 1,818 $ -- $ 125,697
Eliminations (10,158) -- (1,706) -- (11,864)
Corporate expenses -- -- -- (49,178) (49,178)
Interest and other expenses, net -- -- -- (13,089) (13,089)
-------------------------------------------------------
Income before income taxes $ 59,563 $ 54,158 $ 112 $(62,267) $ 51,566
=======================================================
Identifiable assets $ 370,413 $108,463 $109,581 $ -- $588,457
Eliminations -- (33,227) 1,442 -- (31,785)
-------------------------------------------------------
Identifiable assets $ 370,413 $ 75,236 $111,023 $ -- $ 556,672
=======================================================
YEAR ENDED JANUARY 31, 1994
Sales $ 459,231 $104,963 $ 56,577 $ -- $ 620,771
Eliminations (49,534) -- (4,736) -- (54,270)
-------------------------------------------------------
Net sales $ 409,697 $104,963 $ 51,841 $ -- $ 566,501
=======================================================
Operating profit* $ 69,132 $ 31,070 $ 1,587 $ -- $ 98,615
Eliminations (4,405) -- 1,773 -- (6,178)
Corporate expenses -- -- -- (44,966) (44,966)
Japan realignment -- -- -- (57,500) (57,500)
Interest and other expenses, net -- -- -- (7,971) (7,971)
-------------------------------------------------------
Income/(loss) before income taxes $ 64,727 $ 31,070 $ 3,360 $(110,437) $ (18,000)
=======================================================
Identifiable assets $ 327,181 $115,432 $102,577 $ -- $ 545,190
Eliminations -- (42,824) 2,043 -- (40,781)
-------------------------------------------------------
Identifiable assets $ 327,181 $ 72,608 $104,620 $ -- $ 504,409
=======================================================
</TABLE>
*Represents income from operations before corporate expenses, realignments and
interest and other expenses, net.
Tiffany & Co. and Subsidiaries 27
<PAGE> 1
Exhibit 21.1
Tiffany & Co.
and Subsidaries
March 25, 1996
<TABLE>
<CAPTION>
---------------------------
TIFFANY & CO.
Delaware
August 16, 1984
---------------------------
--------------------------- ---------------------------
TIFFANY AND COMPANY TIFFANY & CO.
INTERNATIONAL
New York Delaware
May 30, 1868 October 11, 1984
--------------------------- ---------------------------
<S> <C> <C> <C>
Domestic Subsidiaries International Subsidiaries Domestic Subsidiaries International Subsidiaries
- --------------------------- --------------------------- --------------------------- ---------------------------
TIFFANY & CO. TIFFANY & CO. TIFFANY & CO. TIFFANY & CO.
ICT, INC. (NEW YORK) PTY. LTD. JAPAN INC. OF NEW YORK LIMITED
Delaware Australia Delaware Hong Kong
July 1, 1992 October 26, 1986 June 11, 1992 March 18, 1988
- --------------------------- --------------------------- --------------------------- ---------------------------
- --------------------------- --------------------------- ---------------------------
HOWARD H. SWEET & SON, INC. SOCIETE FRANCAISE POUR LE TIFFANY-FARAONE
(Formerly Tiffco Jewelry DEVELOPPEMENT DE LA S.p.A.
and Chain Crafts, Inc.) PORCELAINE D'ART
Delaware France Italy
November 22, 1989 December 31, 1991 October 4, 1985
- --------------------------- --------------------------- ---------------------------
- --------------------------- --------------------------- ---------------------------
JUDEL PRODUCTS CORP. TIFFANY & CO. TIFFANY & CO.
(Formerly Glassware (Unlimited Liability) OVERSEAS FINANCE B.V.
Acquisition Inc.)
West Virginia United Kingdom Netherlands
September 16, 1992 March 7, 1986 September 27, 1991
- --------------------------- --------------------------- ---------------------------
--------------------------- ---------------------------
TIFFANY & CO. K.K. TIFFANY & CO.
[Tiffany and Company 51% PTE. LTD.
Mitsukoshi, Ltd. 49%]
Japan Singapore
October 26, 1993 September 1, 1989
--------------------------- ---------------------------
---------------------------
TIFFANY & CO.
A.G.
Switzerland-Canton Zurich
December 7, 1972
---------------------------
---------------------------
TIFFANY & CO.
WATCH CENTER S.A.
Switzerland-Canton Vaud
October 11, 1995
---------------------------
</TABLE>
<PAGE> 1
[COOPERS & LYBRAND LETTERHEAD]
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
Tiffany & Co. and Subsidiaries on Form S-8 of our report dated March 6, 1996,
on our audits of the consolidated financial statements and financial statement
schedule of Tiffany & Co. and Subsidiaries as of January 31, 1996 and 1995 and
for each of the three years in the period ended January 31, 1996, which report
is incorporated by reference in the Company's Annual Report on Form 10-K.
Coopers & Lybrand LLP
New York, New York
April 8, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-START> FEB-01-1995
<PERIOD-END> JAN-31-1996
<CASH> 81,966,000
<SECURITIES> 0
<RECEIVABLES> 85,782,000
<ALLOWANCES> (2,751,000)
<INVENTORY> 311,252,000
<CURRENT-ASSETS> 501,946,000
<PP&E> 176,727,000
<DEPRECIATION> (61,513,000)
<TOTAL-ASSETS> 654,257,000
<CURRENT-LIABILITIES> 218,522,000
<BONDS> 0
0
0
<COMMON> 160,000
<OTHER-SE> 264,218,000
<TOTAL-LIABILITY-AND-EQUITY> 654,257,000
<SALES> 803,292,000
<TOTAL-REVENUES> 803,292,000
<CGS> 375,922,000
<TOTAL-COSTS> 375,922,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,745,000
<INTEREST-EXPENSE> 12,338,000
<INCOME-PRETAX> 69,035,000
<INCOME-TAX> 29,820,000
<INCOME-CONTINUING> 39,215,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 39,215,000
<EPS-PRIMARY> 2.43
<EPS-DILUTED> 2.38
</TABLE>
