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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, 1999 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 OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
727 FIFTH AVENUE, NEW YORK, NY 10022
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 755-8000
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS 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 [ ]
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, 1999 the aggregate market value of voting stock held by
non-affiliates was $2,408,691,914.70. 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: 35,115,421 shares of
Common Stock outstanding as of March 25, 1999.
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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, 1999 (Parts I, II and IV) and Registrant's Proxy
Statement Dated April 8, 1999 (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"). Charles Lewis Tiffany founded
the business in 1837. He incorporated Tiffany in New York in 1868. Registrant
acquired Tiffany in 1984 and completed the initial public offering of
Registrant's Common Stock in 1987.
(b) Financial information about industry segments.
Effective January 31, 1999, the Company adopted SFAS No. 131,
"Disclosures About Segments of an Enterprise and Related Information," which
establishes revised standards for the reporting of operating segments and the
related descriptive information, as well as new standards for related
disclosures about products, services and geographic areas. Incorporated by
reference from Registrant's Annual Report to Stockholders for the Fiscal year
ended January 31, 1999 (Footnote P. "Operating Segments") is the Registrant's
operating segment information for the Fiscal years ended January 31, 1999, 1998
and 1997. Executive Officers of the Company evaluate the performance of the
Company's assets on a consolidated basis. Therefore, separate financial
information for the Company's assets on a segment basis is not available.
(c) Narrative description of business.
As used below, the terms "Fiscal 1996", "Fiscal 1997" and "Fiscal 1998"
refer to the Fiscal years ended on January 31, 1997, 1998 and 1999,
respectively.
Registrant is a holding company, and conducts all business through its
subsidiary corporations.
Products
Registrant's principal product categories are fine jewelry, timepieces,
sterling silver goods, china, crystal, stationery, writing instruments,
fragrances, and personal accessories.
Registrant offers an extensive selection of TIFFANY & CO. brand jewelry
at a wide range of prices. In Fiscal 1996, 1997 and 1998, approximately 70%, 73%
and 74%, 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. REPORT ON FORM 10-K FY 1998 - PAGE 2 -
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In addition to jewelry, the Company sells TIFFANY & CO. brand
merchandise in the following categories: timepieces and clocks; sterling silver
merchandise, including flatware, hollowware (tea and coffee services, bowls,
cups and trays), trophies, key holders, picture frames and desk accessories;
crystal, glassware, china and other tableware; custom engraved stationery;
writing instruments; and fashion accessories, including handbags, wallets,
scarves and men's ties. Fragrance products are sold under the trademarks
TIFFANY, TRUESTE and TIFFANY FOR MEN. Tiffany also sells other brands of
timepieces and tableware in its U.S. stores, and FARAONE brand jewelry in its
European stores. Registrant also offers a line of commercial glassware under the
JUDEL trademark.
Distribution and Marketing
Channels of Distribution
For financial reporting purposes, Registrant categorizes its sales as
follows:
U.S. Retail consists of retail sales transacted in stores in
the United States and wholesale sales to independent retailers
in the United States. Wholesale sales of fragrance products to
independent retailers in the Americas are also included (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 United States (see
International Retail below).
U.S. Retail
Fifth Avenue Store
The Fifth Avenue store in New York accounts for a significant portion
of the Company's sales and is the focal point for marketing and public relations
efforts. Approximately 16%, 16% and 14% of total Company net sales for Fiscal
1996, 1997 and 1998, respectively, were attributable to the New York store's
retail sales. Approximately 32,450 gross square feet in the New York building
are devoted to retail selling.
- - PAGE 3 - TIFFANY & CO. REPORT ON FORM 10-K FY 1998
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U.S. Branch Stores
At January 31, 1999, Tiffany had 33 branch stores in the United States.
The following table identifies the location and year of opening of each U.S.
branch store:
U.S. BRANCH STORE OPENINGS
STORE LOCATION YEAR OPENED
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San Francisco, California 1963
Beverly Hills, California 1964
Houston, Texas 1964
Chicago, Illinois 1966
Atlanta, Georgia 1969
Dallas, Texas 1982
Boston, Massachusetts 1984
Costa Mesa, California 1988
Philadelphia, Pennsylvania 1990
Vienna, Virginia 1990
Palm Beach, Florida 1991
Honolulu, Hawaii (Ala Moana) 1992
San Diego, California 1992
Troy, Michigan 1992
Bal Harbour, Florida 1993
Maui, Hawaii 1994
Oak Brook, Illinois 1994
King of Prussia, Pennsylvania 1995
Short Hills, New Jersey 1995
White Plains, New York 1995
Bergen County, New Jersey 1996
Chevy Chase, Maryland 1996
Charlotte, North Carolina 1997
Chestnut Hill, Massachusetts 1997
Cincinnati, Ohio 1997
Honolulu, Hawaii (Hilton) 1997
Palo Alto, California 1997
Denver, Colorado 1998
Honolulu, Hawaii (Surfrider)* 1998
Las Vegas, Nevada 1998
Manhasset, New York 1998
Seattle, Washington 1998
Scottsdale, Arizona 1998
* Operated by Mitsukoshi (U.S.A.) Inc. from April 1989 until January 31, 1998.
Each of the 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 the
United States at the rate of approximately three to five per year. Tiffany has
entered into lease agreements to open additional branches in 1999 in Los
Angeles, California and Dallas, Texas. In Fiscal 1998, the San Diego store was
relocated to the Fashion Valley Shopping Center. See Item 2. Properties below
for further information concerning U.S. Retail store leases. United States
branch stores range in size from approximately 800 to 16,000 gross square feet
and total approximately 280,000 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 primarily range from
approximately 4,000 to 8,000 gross square feet and are designed to devote
approximately 60% of total floor space to retail selling.
TIFFANY & CO. REPORT ON FORM 10-K FY 1998 - PAGE 4 -
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U.S. Wholesale Distribution
Tiffany sells jewelry, timepieces, tableware and other products at
wholesale to approximately 260 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.
Direct Marketing
Corporate Division
Corporate Division sales executives call on business clients throughout
the United States, selling products drawn from the retail product line and items
specially developed or sourced for the business market, including trophies and
items designed for the particular customer. 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 164 persons, through advertising in
newspapers and business periodicals and through the publication of special
catalogs.
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 Year
1996 1997 1998
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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): 733,100 817,000 964,000
Total catalog mailings during fiscal year (in millions): 20.6 21.4 24.3
Total mail or telephone orders received during fiscal year: 288,133 285,992 337,760
</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.
- - PAGE 5 - TIFFANY & CO. REPORT ON FORM 10-K FY 1998
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International Locations
LOCATIONS OPERATED BY REGISTRANT'S SUBSIDIARIES
JAPAN
* Operated by Registrant's Subsidiaries with Mitsukoshi, Ltd.
Chiba, Mitsukoshi Department Store *
Fukuoka, Mitsukoshi *
Fukuoka, Mitsukoshi Department Store *
Ginza, Mitsukoshi Department Store *
Hamamatsu, Matsubishi Department Store
Hirakata, Mitsukoshi Department Store *
Hiroshima, Mitsukoshi Department Store *
Ikebukuro, Mitsukoshi Department Store *
Kagoshima, Mitsukoshi Department Store *
Kanazawa, Mitsukoshi *
Kawasaki , Saikaya Department Store
Kobe, Hotel Okura Kobe *
Kobe, Mitsukoshi Department Store *
Kochi, Daimaru Department Store
Kokura, Izutsuya Department Store
Kumamoto, Tsuruya Department Store
Kurashiki, Mitsukoshi Department Store *
Kyoto, Daimaru Department Store
Kyoto, Takashimaya Department Store
Matsuyama, Mitsukoshi Department Store *
Nagano, Mitsukoshi *
Nagoya Hoshigaoka, Mitsukoshi Dept. Store *
Nagoya Sakae, Mitsukoshi Department Store *
Nagoya, Hilton Hotel *
Nihonbashi, Mitsukoshi Department Store *
Niigata, Mitsukoshi Department Store *
Oita, Tokiwa Department Store
Okinawa, Mitsukoshi Department Store *
Osaka, Mitsukoshi Department Store *
Osaka, Righa Royal Hotel *
Osaka, Takashimaya Department Store
Sagamihara, Isetan Department Store
Sapporo, Mitsukoshi Department Store *
Sendai, Mitsukoshi Department Store *
Shinjuku Minamikan, Mitsukoshi Dept. Store *
Shinjuku, Mitsukoshi Department Store *
Shinsaibashi, Daimaru Department Store
Takamatsu, Mitsukoshi Department Store *
Tokyo Bay, Hotel Tokyu *
Tokyo, Ginza Flagship Store *
Tottori, Daimaru Department Store
Umeda, Daimaru Department Store
Yokohama, Landmark Plaza, Mitsukoshi *
Yokohama, Mitsukoshi Department Store *
ASIA-PACIFIC EXCLUDING JAPAN
Australia: Melbourne, Crown Casino
Australia: Melbourne, Daimaru Department Store
Australia: Sydney, Chifley Plaza
Hong Kong: Landmark Center
Hong Kong: Mitsukoshi Department Store
Hong Kong: Pacific Place
Hong Kong: Peninsula Hotel
Hong Kong: Sogo Department Store
Korea: Seoul, Grand Hyatt Hotel
Korea: Seoul, Hyundai Department Store
Korea: Seoul, Lotte Downtown Department Store
Singapore: Ngee Ann City
Singapore: Raffles Hotel
Taiwan: Kaohsiung, Hanshin Department Store
Taiwan: Tainan, Mitsukoshi Department Store
Taiwan: Taipei, Regent Hotel
Taiwan: Taipei, Sogo Department Store
EUROPE
England: London, Old Bond Street
England: London, Harrod's Department Store
Germany: Frankfurt
Germany: Munich
Italy: Florence, FARAONE Store
Italy: Milan FARAONE Store
Switzerland: Zurich
CANADA AND MEXICO
Canada: Toronto
Mexico: Mexico City, El Palacio de Hierro
TIFFANY & CO. REPORT ON FORM 10-K FY 1998 - PAGE 6 -
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LOCATIONS OPERATED BY THIRD PARTIES
CANADA
Calgary, Holt-Renfrew Department Store
Montreal, Holt-Renfrew Department Store
Ottawa, Holt-Renfrew Department Store
Quebec, Holt-Renfrew Department Store
Vancouver, Holt-Renfrew Department Store
ASIA-PACIFIC
Australia: Gold Coast, DFS Store
Guam: Tumon Sands Plaza (until 3/99) +
Hong Kong: DFS Store
India: Bombay, Group Beautiful
Indonesia: Bali, DFS Store
Japan: Tokyo (FARAONE) +
Korea: Pusan, Lotte Pusan Duty Free Shop ++
Korea: Pusan, Paradise Duty Free Shop, Paradise Duty Free
Korea: Seoul, Hotel Lotte Duty Free Shop (hotel lobby) ++
Korea: Seoul, Hotel Lotte Duty Free Shop ++
Korea: Seoul, Lotte World Duty Free Shop ++
New Zealand: Auckland, DFS Store
Philippines: Manilla, Rustan's Department Store (Edsa Plaza)
Philippines: Manilla, Rustan's Makati Department Store (Makati)
Saipan: DFS Store
Singapore: DFS Store
Taiwan: Taipei +
+ Operated by Mitsukoshi, Ltd. Tiffany assumed operation of Guam location in
March 1999.
++ Operated by Lotte Duty Free.
The preceding tables do not include international "trade accounts,"
i.e. non-U.S. retailers to which the Company sells TIFFANY & CO. or FARAONE
brand merchandise on a wholesale basis, but which do not operate a dedicated
TIFFANY & CO. boutique within their respective stores. See International
Wholesale Distribution below.
- - PAGE 7 - TIFFANY & CO. REPORT ON FORM 10-K FY 1998
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Business with Mitsukoshi
The Company has and expects to maintain an important commercial
relationship with Mitsukoshi Ltd. of Japan ("Mitsukoshi").
From 1972 until July 1993, selected TIFFANY & CO. products, principally
jewelry and timepieces, were purchased from Tiffany by Mitsukoshi for
distribution in Japan in TIFFANY & CO. boutiques located, for the most part, in
Mitsukoshi's department stores.
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 July 1993. 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. 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 1996, 1997 and 1998, total Japan sales represented 27% of
Registrant's net sales. In Fiscal 1996, 1997 and 1998, respectively, sales made
in TIFFANY & CO. boutiques located in Mitsukoshi's stores constituted 18%, 17%
and 16% of Registrant's net sales and Mitsukoshi's wholesale purchases from
Tiffany constituted, respectively, 2%, 1% and less than 1% of Registrant's net
sales.
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
TIFFANY & CO. REPORT ON FORM 10-K FY 1998 - PAGE 8 -
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annual rental and subleased by Tiffany-Japan to Mitsukoshi on a
percentage-of-sales basis (the "Sublease"). Tiffany-Japan completed, at its
cost, all necessary improvements to prepare the Premises and delivered the
Premises to Mitsukoshi in May 1996. Under the FSS Agreement, Tiffany-Japan bears
all costs of operating the Premises. 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 provided by
Mitsukoshi. After compensating Tiffany-Japan on a percentage-of-sales basis for
Sublease rent and staffing, Mitsukoshi retains 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.
Under separate agreements, Mitsukoshi operates a FARAONE boutique in
its Nihombashi store in Tokyo and a TIFFANY & CO. boutique in its department
store in Taipei. On February 2, 1998, Tiffany purchased, as a going concern, the
TIFFANY & CO. business operated on the island of Oahu, Hawaii, by an affiliate
of Mitsukoshi under agreement with Tiffany. The transaction was structured as a
purchase of assets. Tiffany paid a cash price of $8.1 million and agreed to make
contingent payments equal to 3.75% of certain sales made by Tiffany on the
island of Oahu after the date of the purchase and through January 31, 2003. On
March 19, 1999, Tiffany purchased, as a going concern, the TIFFANY & CO.
business operated in Guam by an affiliate of Mitsukoshi under agreement with
Tiffany. The transaction was structured as a cash-for-stock purchase of the
affiliate, under which Tiffany assumed all of the assets and liabilities of the
affiliate. Tiffany paid a total cash price of $6.9 million.
From 1989 through January 1999, Mitsukoshi Limited of Japan and its
affiliated companies held 4,270,000 shares of the Registrant's Common Stock,
which represented 12.3% of Registrant's outstanding shares as of January 31,
1999. Mitsukoshi sold all of its holdings of Registrant's Common Stock through a
public offering in February 1999.
Mr. Yoshiaki Sakakura, formerly Chairman and Chief Executive Officer of
Mitsukoshi, was appointed a director of the Registrant on November 15, 1989. Mr.
Sakakura plans to retire from the Board effective with the Company's Annual
Meeting on May 20, 1999.
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International Wholesale Distribution
Wholesale distribution of selected TIFFANY & CO. merchandise is also
made through independent distributors in the countries listed below. Multiple
doors are indicated in parentheses.
INTERNATIONAL WHOLESALE DISTRIBUTION
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EUROPE ASIA-PACIFIC AND MIDDLE EAST
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Austria (2) * Luxembourg Bahrain (2) Lebanon (3)
Belgium Malta Egypt Oman
Czech Republic Monaco India * Qatar (2)
England (3) Russia (4) Israel (2) Saudi Arabia (5) *
Germany (31) * Spain (24) Japan (7) * Syria
Greece/Cyprus (11) Switzerland (21) * Jordan United Arab Emirates (3)*
Italy (50) * Turkey Kuwait *
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CARIBBEAN CENTRAL/LATIN AMERICA
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Aruba Jamaica (3) Argentina (4) Mexico (4)
Bahamas (2) Puerto Rico (4) Brazil (2) Panama (2)
Bermuda St. Barthelemy Costa Rica Paraguay (2)
Dominican Republic St. Maarten Honduras (2) Uruguay
Grand Cayman (3) St. Thomas (3)
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* FARAONE merchandise also available in some locations.
Management anticipates continued expansion of international wholesale
distribution as markets are developed.
Expansion of Worldwide Retail Operations
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.
The Company's commercial relationship with Mitsukoshi and Mitsukoshi's
ability to continue as a leading department store operator have been and will
continue to be substantial factors in the Company's continued success in Japan.
TIFFANY & CO. boutiques are located in 30 Mitsukoshi department stores and other
retail locations operated by Mitsukoshi in Japan. The Company also operates 13
boutiques primarily in department stores other than Mitsukoshi, in locations
within Japan but outside of Tokyo, and plans to open more.
TIFFANY & CO. REPORT ON FORM 10-K FY 1998 - PAGE 10 -
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In recent years, the Japanese department store industry has, in
general, suffered declining sales. There is a risk that such financial
difficulties will force consolidations or store closings. Should one or more
Japanese department store operators, such as Mitsukoshi, elect or be required to
close one or more stores now housing a TIFFANY & CO. boutique, the Company's
sales and earnings would be reduced while alternate premises are being secured.
Mitsukoshi has informed the Company that in 1999 it will close the
annex to one of its stores in Tokyo which currently houses a TIFFANY & CO.
boutique. The Company's operations in the annex to be closed will be
consolidated with those of the existing boutique in the adjoining store
building.
Tiffany began its ongoing program of international expansion through
proprietary retail stores in 1986 with the establishment of the London store.
Company-operated international TIFFANY & CO. stores and boutiques range in size
from approximately 400 to 14,000 gross square feet and total approximately
159,000 gross square feet devoted to retail purposes. The following chart
details the growth in the Company's stores and boutiques since Fiscal 1987 on a
worldwide basis:
Worldwide Retail Locations
<TABLE>
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Registrant's Subsidiary Companies Independent
Americas and Europe Asia-Pacific, Middle East, Americas
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End of Canada,
Fiscal: U.S. Mexico 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 7 80
1994 18 1 6 37 7 8 8 85
1995 21 1 6 38 9 7 16 98
1996 23 1 6 39 12 4 19 104
1997 28 2 7 42 17 4 23 123
1998 34 2 7 44 17 3 19 126
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- - PAGE 11 - TIFFANY & CO. REPORT ON FORM 10-K FY 1998
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Advertising and Promotion
Tiffany regularly advertises its business, primarily in newspapers and
magazines. Prior to 1996, television advertising was used only on a limited
basis, and only in Japan. Beginning in 1996, prime-time television advertising
was tested in the New York market. Since that test, television advertising has
been used on a limited basis, including nationally, during the holiday selling
season. 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 1996, 1997 and 1998,
Tiffany spent approximately $43.9 million, $51.8 million and $52.5 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 and amounts expended to print and mail catalogs and
brochures.
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.
as well as the TIFFANY BLUE BOX and has applied for trademark registration of
the color TIFFANY BLUE 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 is not 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 where management concluded that Tiffany's foreseeable business
interests did not warrant the expense of litigation.
TIFFANY & CO. REPORT ON FORM 10-K FY 1998 - PAGE 12 -
<PAGE> 13
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, Canada, Japan, Singapore,
Australia, Italy, the United Kingdom, Switzerland and Germany.
The designs of Ms. Peretti accounted for 14%, 14% and 15% of the
Company's net sales in Fiscal 1996, 1997 and 1998, respectively. Merchandise
designed by Ms. Picasso accounted for 4%, 4% and 3% of the Company's net sales
in Fiscal 1996, 1997 and 1998, respectively.
Registrant's operating results could be adversely affected were it to
cease to be a licensee of either 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 the Company is supplied from Tiffany's
workshops in New York City and Pelham, New York; Parsippany, New Jersey; 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
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Produced by Tiffany 38% 31% 31%
Purchased from others 62 69 69
---- ---- ----
Total 100% 100% 100%
==== ==== ====
</TABLE>
The preceding figures include the cost of precious gems incorporated in such
merchandise. Included in the foregoing table is merchandise manufactured in
Fiscal 1996 for Tiffany by Howard H. Sweet & Son, Inc., a former affiliate of
the Registrant located in Attleboro, Massachusetts ("Sweet"). At the close of
Fiscal 1996, the manufacturing assets and business of Sweet were sold to a third
party. However, such third party has contracted, subject to certain conditions,
to continue
- - PAGE 13 - TIFFANY & CO. REPORT ON FORM 10-K FY 1998
<PAGE> 14
to provide the merchandise needed by Tiffany for a period of five years.
Approximately 37% of the merchandise purchased from others in Fiscal 1998 was
manufactured outside the United States.
Gems and precious metals used in making Tiffany's 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. However, Tiffany purchases cut
diamonds principally from three key vendors. Were trade relations between
Tiffany and one or more of these vendors to be disrupted, the Company's sales
would be adversely affected in the short term until alternative supply
arrangements could be established.
Diamond jewelry accounted for approximately 21% of Tiffany's net sales
in Fiscal 1996, 1997 and 1998, respectively.
The supply and price of rough (uncut and unpolished) diamonds in the
principal world markets have been and continue to be significantly influenced by
a single entity, the Central Selling Organization (the "CSO"), of De Beers
Centenary AG, a Swiss corporation. The CSO supplies approximately 70% of the
world market for rough, gem-quality diamonds, notwithstanding that its
historical ability to control supplies has been somewhat diminished due to
changing politics in diamond-producing countries and revised contractual
arrangements with independent mine operators. Through its affiliates, the CSO
continues to exert a significant influence on the demand for polished diamonds
through its advertising and marketing efforts throughout the world.
Tiffany does not purchase rough diamonds; in consequence, Tiffany does
not purchase directly from the CSO. Some, but not all, of Tiffany's suppliers do
purchase 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, the opening of new mines and the
continuance of the prevailing supply and marketing arrangements for rough
diamonds. Sustained interruption in the supply of rough diamonds, an
over-abundance of supply or a substantial change in the marketing arrangements
described above could adversely affect Tiffany and the retail jewelry industry
as a whole. The CSO has announced that it will, at some time in the future,
offer to brand cut and polished diamonds with a proprietary trademark. This
service will be offered to its direct purchasers. Such a change, coupled with a
change in the marketing and advertising policies of the CSO's affiliates, could
affect consumer demand for diamonds that do not bear the CSO's trademark.
Tiffany may or may not carry such branded diamonds in the future.
Finished jewelry is purchased from approximately 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 timepieces are
manufactured and assembled by third parties. Approximately 41% of net watch
sales during Fiscal 1998 were
TIFFANY & CO. REPORT ON FORM 10-K FY 1998 - PAGE 14 -
<PAGE> 15
attributable to a single manufacturer. Tiffany contracts with a single
manufacturer to produce its silver flatware patterns from Tiffany's proprietary
tools and dies by use of Tiffany's traditional manufacturing techniques.
Likewise, engraved stationery is purchased from a single manufacturer. Loss of
any of these manufacturers could result in the unavailability of timepieces,
silver flatware or engraved stationery, as the case may be, during the period
necessary for Tiffany to arrange for new production.
Competition
Registrant encounters significant competition in all of its product
lines from other third-party providers, some of which specialize in just one
area in which the Company is active. Many of the Company's competitors have
established reputations for style and expertise similar to that of the Company
and compete on the basis of value. Other jewelers and retailers compete
primarily through advertised price promotion. The Company competes on the basis
of quality and value and does not engage in price promotional advertising.
The international marketplace for the Company's products is highly
competitive. Although the Company believes that the name TIFFANY & CO. is known
internationally, and although Tiffany did operate retail stores in London and
Paris prior to World War II, the Company did not have a retail presence in
Europe in the post-war era until 1986. Accordingly, consumer awareness of
Tiffany & Co. and its products is not as strong in Europe as in the U.S. or in
Japan, where Tiffany has distributed its products for many years. The Company
expects that its overseas stores will continue to experience intense competition
from established retailers in international cities where TIFFANY & CO. stores
are or may eventually be located.
Registrant also faces increasing competition in the area of direct
marketing. A growing number of direct sellers compete for access to the same
mailing lists of known purchasers of luxury goods. In marketing service awards
and business gifts to corporations and other organizations, the Company faces
numerous competitors who sell a wide variety of products at a greater price
range than the Company, which has chosen to offer a more limited selection in
order to adhere to its established quality standards.
Employees
As of January 31, 1999, the Registrant's subsidiary corporations
employed an aggregate of approximately 4,845 full-time and part-time persons. Of
those employees, 4,084 are employed in the United States. Of Tiffany's total
employees, approximately 1,835 persons are salaried employees, 412 are engaged
in manufacturing and 2,215 are retail store personnel. None of the Company's
employees is represented by a union. Registrant believes that relations with its
employees are good.
- - PAGE 15 - TIFFANY & CO. REPORT ON FORM 10-K FY 1998
<PAGE> 16
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 for Tiffany 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, certain product
services, jewelry manufacturing 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 additional five year terms expiring on
October 31, 1999, and 2004, respectively. It may, subject to the terms of the
lease, be renewed for three more successive terms of five years each. Basic rent
for the building is $7.1 million per annum. That rate will remain effective
until October 31, 1999. Effective November 1, 1999 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.
Customer Service Center
In 1995, Tiffany entered into a lease of undeveloped property in
Parsippany, New Jersey, in order to construct and occupy a new distribution
facility. In April 1997, construction of the "Customer Service Center" ("CSC")
on that property was completed and Tiffany commenced operations there. The CSC
is a combined warehouse, distribution, light manufacturing, computing and office
center. It comprises approximately 269,000 square feet, of which approximately
96,000 square feet are devoted to office and computer operations use, with the
balance devoted to warehousing, shipping, receiving, light manufacturing,
merchandise processing and other distribution functions.
The basic lease term for the CSC 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 and Tiffany must also pay all expenses of operating and maintaining the
CSC, including property taxes. Subject to certain conditions stated in the lease
governing the end of the lease term and Tiffany's obligation to pay specified
costs and expenses, Tiffany has the
TIFFANY & CO. REPORT ON FORM 10-K FY 1998 - PAGE 16 -
<PAGE> 17
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 provided certain financial covenants to the landlord's
lenders in support of such guaranty consistent with financial covenants provided
to Registrant's bank lenders.
Registrant believes that the CSC has been properly designed to handle
worldwide distribution functions and that it is suitable for that purpose.
- - PAGE 17 - TIFFANY & CO. REPORT ON FORM 10-K FY 1998
<PAGE> 18
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):
U.S. BRANCH STORE LEASES
<TABLE>
<CAPTION>
CITY STATE/TERR. LOCATION EXPIRATION DATE RENEWAL OPTIONS
- ---- ----------- -------- --------------- ---------------
<S> <C> <C> <C> <C>
Atlanta GA Phipps Plaza Shopping Center July 31, 2000 Two five-year terms
Bal Harbour FL Bal Harbour Shops May 31, 2003
Bergen County NJ Riverside Square Mall September 30, 2006
Beverly Hills CA Two Rodeo Drive October 7, 2005 Two five-year terms
Boston MA Copley Place July 31, 2009 Two five-year terms
Charlotte NC SouthPark Mall December 31, 2007 One five-year term
Chestnut Hill MA The Atrium January 31, 2008 One five-year term
Chevy Chase MD 5500 Wisconsin Avenue January 31, 2006
Chicago IL 730 North Michigan Avenue October 1, 2012 Two five-year terms
Cincinnati OH Fountain Place November 30, 2012 Two five-year terms
Costa Mesa CA South Coast Plaza January 31, 2004 One five-year term
Dallas TX The Galleria October 31, 2007
Denver CO Cherry Creek Shopping Center August 30, 2008 One five-year term
Honolulu HI Ala Moana Center January 31, 2000
Honolulu HI Hilton Hawaiian Village December 31, 2002 One five-year term
Honolulu HI Moana Surfrider January 31, 2001
Houston TX Galleria Post Oak September 30, 2001 One five-year term
Las Vegas NV Bellagio August 31, 2008 One ten-year term
King of Prussia PA King of Prussia Plaza November 30, 2005 One five-year term
Manhasset NY Americana Shopping Center August 14, 2008
Maui HI Whalers Village July 31, 1999
Oak Brook IL Oakbrook Center April 30, 2009 Two five-year terms
Palm Beach FL 259 Worth Avenue May 31, 2007 Two five-year terms
Palo Alto CA Stanford Shopping Center May 31, 2007
Philadelphia PA The Bellevue November 16, 2005 One five-year term
San Diego CA Fashion Valley Shopping Center December 31, 2007 One five-year term
San Francisco CA Union Square October 29, 2006 One ten-year term
Scottsdale AZ Fashion Square December 31, 2008 One five-year term
Seattle WA Pacific Place October 1, 2008 Two five-year terms
Short Hills NJ The Mall at Short Hills August 31, 2005 One five-year term
Troy MI The Somerset Collection September 30, 2007
Tumon Guam Tumon Sands Plaza September 30, 2001 One five-year term
Vienna VA Fairfax Square March 31, 2000 Two five-year terms
White Plains NY The Westchester April 30, 2005 One five-year term
</TABLE>
TIFFANY & CO. REPORT ON FORM 10-K FY 1998 - PAGE 18 -
<PAGE> 19
INTERNATIONAL BRANCH STORE LEASES
<TABLE>
<CAPTION>
COUNTRY CITY LOCATION EXPIRATION DATE RENEWAL OPTIONS
- ------- ---- -------- --------------- ---------------
<S> <C> <C> <C> <C>
Australia Sydney Chifley Tower October 18, 1999 Two five-year terms
Australia Melbourne Crown Casino May 7, 2000 Two three-year terms
Canada Toronto 85 Bloor Street October 15, 2006 One seven-year term
England London 25 Old Bond Street March 27, 2016
Germany Frankfurt 20 Goethestrasse January 31, 2001 One 10-year term
Germany Munich Residenzstrasse 11 January 31, 2004 One five-year term
Hong Kong The Landmark October 31, 2000
Hong Kong Kowloon The Peninsula February 28, 1999
Hong Kong Pacific Place October 31, 2000
Italy Florence Via Tornabuoni December 31, 2001 One six-year term+
Italy Milan Via Montenapoleone June 30, 1999
Japan Tokyo Ginza October 24, 2002 One three-year term
Korea Seoul Grand Hyatt Hotel April 30, 2000 One two-year term
Mexico Mexico City El Palacio de Hierro January 31, 2000
Singapore Raffles Hotel September 15, 2000
Singapore Ngee Ann City September 14, 1999 One one-year term
Switzerland Zurich Bahnhofstrasse 14 September 30, 2000
Taiwan Taipei Regent Hotel October 3, 2000 One five-year term
</TABLE>
+ Renewal subject to conditions imposed by Italian law, including right of
landlord to occupy premises for its own use.
New Store Leases
In addition to the U.S. leases described above, Tiffany has entered
into the following new leases for domestic stores expected to open in 1999: a
10-year lease for a 3,900 square foot store at Century City Shopping Center, Los
Angeles, California and a 10-year lease for a 7,100 square foot store at
NorthPark Center, Dallas, Texas. The Company's affiliate has entered into a
lease for a 7,200 square foot store in Paris, France, which it anticipates
opening in November 1999.
- - PAGE 19 - TIFFANY & CO. REPORT ON FORM 10-K FY 1998
<PAGE> 20
ITEM 3. LEGAL AND ENVIRONMENTAL PROCEEDINGS
On March 24, 1999, Dallas Galleria Limited, Tiffany's landlord at the
existing Dallas Galleria branch store, commenced a lawsuit against Tiffany in
the United States District Court for the Southern District of Texas, Houston
Division. The lawsuit seeks to enforce a lease provision which, if enforceable,
would prohibit Tiffany from operating a similar or competing store within a
six-mile radius of the Galleria; the lawsuit claims that Tiffany's planned store
at Northpark Center in Dallas would violate this provision. The lawsuit seeks a
declaration that the radius provision is valid and enforceable, a court order
restraining Tiffany from operating a store in the Northpark Center, damages and
attorneys fees.
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 as well as for 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
financial position, results of operations or cash flows.
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, 1999.
TIFFANY & CO. REPORT ON FORM 10-K FY 1998 - PAGE 20 -
<PAGE> 21
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 66 Chairman of the Board of Directors 1980
Michael J. Kowalski 47 President and Chief Executive Officer 1983
James E. Quinn 47 Vice Chairman 1986
James N. Fernandez 43 Executive Vice President 1983
and Chief Financial Officer
Beth O. Canavan 44 Senior Vice President - U.S. Retail Sales 1987
Patrick B. Dorsey 48 Senior Vice President - General Counsel and 1985
Secretary
Linda A. Hanson 38 Senior Vice President - Merchandising 1990
Fernanda M. Kellogg 52 Senior Vice President - Public Relations 1984
Caroline D. Naggiar 41 Senior Vice President - Marketing 1997
John S. Petterson 40 Senior Vice President - Corporate Sales 1988
</TABLE>
William R. Chaney. Mr. Chaney, Chairman of Tiffany since August 1984, joined
Tiffany in January 1980 as a member of its Board. From August 1984 through
January 31, 1999, he also served as Chief Executive Officer of Registrant. 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 and the Atlantic Mutual
Companies.
Michael J. Kowalski. Mr. Kowalski was appointed President on January 18, 1996,
Chief Operating Officer on January 16, 1997, and Chief Executive Officer on
February 1, 1999, succeeding William R. Chaney. He has served on Registrant's
Board of Directors since January 1995. 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.
- - PAGE 21 - TIFFANY & CO. REPORT ON FORM 10-K FY 1998
<PAGE> 22
James E. Quinn. Mr. Quinn joined the Company in July 1986 as Vice President of
branch sales for the Company's corporate sales operations and has since had
various responsibilities for sales management and operations. He was promoted to
Executive Vice President on March 19, 1992 and assumed responsibility for retail
and corporate sales for the Americas in 1994. In January 1995 he became a member
of Registrant's Board of Directors. In January 1998, he was appointed Vice
Chairman. He has responsibility for worldwide sales. Mr. Quinn is a member of
the Board of Directors of the BNY Hamilton Funds, Inc. and Mutual of America
Capital Management.
James N. Fernandez. Mr. Fernandez joined Tiffany in October 1983 and has held
various positions in financial planning and management prior to his appointment
as Senior Vice President-Chief Financial Officer in April 1989. In January 1998,
he was promoted to Executive Vice President-Chief Financial Officer, at which
time his responsibilities were expanded to include distribution in addition to
his responsibilities for the accounting, treasury, investor relations,
information technology, financial planning and internal audit functions.
Beth O. Canavan. Ms. Canavan joined the Company in May 1987 as Director of New
Store Development. She assumed her current responsibilities for retail sales
throughout the United States in May 1997.
Patrick B. Dorsey. Mr. Dorsey joined the Company in July 1985 as General Counsel
and Secretary.
Linda A. Hanson Ms. Hanson joined Tiffany in April 1990 as a management
associate. She assumed her current responsibilities in July 1997.
Fernanda M. Kellogg. Ms. Kellogg joined Tiffany in October 1984 as Director of
Retail Marketing. She assumed her current responsibilities in January 1990.
Caroline D. Naggiar. Ms. Naggiar joined Tiffany in June 1997 as Vice President -
Marketing Communications. She assumed her current responsibilities in February
1998. Prior to joining Tiffany, she served as Vice President-Management
Representative of McCann-Erickson Advertising from January 1993, where she was
responsible for the Tiffany account.
John S. Petterson. Mr. Petterson joined Tiffany in 1988 as a management
associate. He assumed his current responsibilities in May 1995.
TIFFANY & CO. REPORT ON FORM 10-K FY 1998 - PAGE 22 -
<PAGE> 23
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 1997 were:
<TABLE>
<CAPTION>
Fiscal 1997 High Low
- ----------- ---- ---
<S> <C> <C>
First Fiscal Quarter $42.63 $34.25
Second Fiscal Quarter $48.63 $38.50
Third Fiscal Quarter $48.63 $36.81
Fourth Fiscal Quarter $41.50 $33.75
</TABLE>
In consolidated trading, the high and low selling prices per share for
shares of such Common Stock for Fiscal 1998 were:
<TABLE>
<CAPTION>
Fiscal 1998 High Low
- ----------- ---- ---
<S> <C> <C>
First Fiscal Quarter $52.00 $39.75
Second Fiscal Quarter $48.88 $40.19
Third Fiscal Quarter $45.50 $27.00
Fourth Fiscal Quarter $65.00 $33.50
</TABLE>
On March 25, 1999, the high and low selling prices quoted on such
exchange were $72.00 and $67.50 respectively. On March 25, 1999 there were 2,704
record holders of Registrant's Common Stock.
It is Registrant's policy to pay a quarterly dividend of $0.09 per share
of Common Stock, subject to declaration of such dividend by Registrant's Board
of Directors. In Fiscal 1997, a dividend of $0.05 per share was paid on April
10, 1997. On May 15, 1997, Registrant's Board of Directors declared an increase
in the regular quarterly dividend from $0.05 to $0.07 per share of Common Stock.
Thereafter, dividends of $0.07 per share were paid on July 10, 1997, October 10,
1997 and January 12, 1998. In Fiscal 1998, a dividend of $0.07 per share of
Common Stock was paid on April 10, 1998. On May 21, 1998, Registrant's Board of
Directors declared an increase in the regular quarterly dividend from $0.07 to
$0.09 per share of Common Stock. Thereafter, dividends of $0.09 per share of
Common Stock were paid on July 10, 1998, October 12, 1998, and January 11, 1999.
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, 582,204 shares of Registrant's Common Stock beneficially owned 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.
- - PAGE 23 - TIFFANY & CO. REPORT ON FORM 10-K FY 1998
<PAGE> 24
ITEM 6. SELECTED FINANCIAL DATA
Incorporated by reference from Registrant's Annual Report to Stockholders for
the Fiscal year ended January 31, 1999, pages 14-15.
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, 1999, pages 16-22.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Incorporated by reference from Registrant's Annual Report to Stockholders for
the Fiscal year ended January 31, 1999, pages 23-42.
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, 1999,
pages 7-8.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference from Registrant's Proxy Statement dated April 8, 1999,
pages 9-20.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated by reference from Registrant's Proxy Statement dated April 8, 1999,
pages 5-7.
TIFFANY & CO. REPORT ON FORM 10-K FY 1998 - PAGE 24 -
<PAGE> 25
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated by reference from Registrant's Proxy Statement dated April 8, 1999,
page 20.
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 1998 Annual Report to Stockholders
of Tiffany & Co. and Subsidiaries:
Report of Independent Accountants
(following this Form 10-K)
Consolidated statements of earnings
for the years ended January 31, 1999, 1998 and 1997
Consolidated balance sheets
as of January 31, 1999 and 1998
Consolidated statements of stockholders' equity
for the years ended January 31, 1999, 1998 and 1997
Consolidated statements of cash flows
for the years ended January 31, 1999, 1998 and 1997
Notes to consolidated financial statements
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.
- - PAGE 25 - TIFFANY & CO. REPORT ON FORM 10-K FY 1998
<PAGE> 26
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
May 16, 1996.
3.2 By-Laws of Registrant (as last amended January 21, 1999).
4.1 Amended and Restated Rights Agreement Dated as of September 22, 1998
by and between Registrant and ChaseMellon Shareholder Services
L.L.C., as Rights Agent. Incorporated by reference from Exhibit 4.1
to Registrant's Report on Form 8-A/A dated September 24, 1998.
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").
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.
10.101 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.
10.111 Agreement made June 12, 1993 by and between Tiffany-Japan (Delaware)
Inc., Tiffany and Mitsukoshi Limited as amended. Incorporated by
reference from Exhibit 10.111 filed with Registrant's Report on Form
8-K filed June 12, 1993 and Exhibit 10.111a filed with Registrant's
Report on Form 10-Q dated August 28, 1998.
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,
restated through Amendment No. 5 dated as of November 20, 1997.
Incorporated by reference from Exhibit 10.116 filed with
Registrant's Report on Form 10-Q for the Fiscal quarter ended
October 31, 1997 and dated December 10, 1997.
TIFFANY & CO. REPORT ON FORM 10-K FY 1998 - PAGE 26 -
<PAGE> 27
Exhibit Description
10.116a Amendments Nos. 6-8 to Credit Agreement referred to in Exhibit
10.116 above, dated, respectively October 6, 1998, November 30, 1998
and March 8, 1999.
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. Incorporated by reference from Exhibit 10.119 filed
with Registrant's Report on Form 10-K for the Fiscal year ended
January 31, 1996 and dated April 8, 1996.
10.119a Amendment No. 1 to the Agreement and Consent to Assignment dated as
of December 1, 1995 among Registrant, Tiffany and Fleet National
Bank of Connecticut, as Collateral Trustee referenced in Exhibit
10.119 above, dated November 3, 1998.
10.120 Watch Supplier Agreement as of October 30, 1995 by and among Tiffany
and Tiffany & Co. Watch Center S.A. and TWF SA. Incorporated by
reference from Exhibit 10.120 filed with Registrant's Report on Form
10-K for the Fiscal year ended January 31, 1996 and dated April 8,
1996.
10.121 Agreement as of February 23, 1996 among Mitsukoshi Limited,
Tiffany-Japan Inc. and Tiffany. Incorporated by reference from
Exhibit 10.121 filed with Registrant's Report on Form 10-K for the
Fiscal year ended January 31, 1996 and dated April 8, 1996.
10.122 Agreement dated as of April 3, 1996 among American Family Life
Assurance Company of Columbus, Japan Branch, Tiffany & Co. Japan,
Inc., Japan Branch, and Registrant, as Guarantor, for yen
5,000,000,000 Loan Due 2011. Incorporated by reference from Exhibit
10.122 filed with Registrant's Report on Form 10-Q for the Fiscal
quarter ended April 30, 1996 and dated June 13, 1996.
10.122a Amendment No. 1 to the Agreement referred to in Exhibit 10.122
above, dated November 18, 1998.
10.123 Agreement made effective as of February 1, 1997 by and between
Tiffany and Elsa Peretti. Incorporated by reference from Exhibit
10.123 to Registrant's Report on Form 10-K for the Fiscal year ended
January 31, 1997 and dated April 8, 1997.
- - PAGE 27 - TIFFANY & CO. REPORT ON FORM 10-K FY 1998
<PAGE> 28
Exhibit Description
10.126 Form of Note Purchase Agreement between Registrant and various
institutional note purchasers with Schedules B, 5.14 and 5.15 and
Exhibits 1A, 1B, and 4.7 thereto, dated as of December 30, 1998 in
respect of Registrant's $60 million principal amount 6.90% Series A
Senior Notes due December 30, 2008 and $40 million principal amount
7.05% Series B Senior Notes due December 30, 2010.
13.1 Annual Report to Stockholders for Fiscal Year Ended January 31, 1999
(pages 14-42 of such Annual Report have been filed in electronic
format).
21.1 Subsidiaries of Registrant.
23.1 Consent of PricewaterhouseCoopers LLP, independent accountants.
27 Financial Data Schedule (Exhibit 27 is submitted as an exhibit only
in the electronic format of this Annual Report on Form 10-K
submitted to the Securities and Exchange Commission).
Executive Compensation Plans and Arrangements
Exhibit Description
4.3 Registrant's 1998 Employee Incentive Plan and standard terms of
stock option award (transferable and non-transferable). Incorporated
by reference from Exhibit 4.3 to Registrant's Registration Statement
on Form S-8, file number 333-67723, filed November 23, 1998.
4.3a Standard terms of stock option award (transferable and
non-transferable) under Registrant's 1998 Employee Incentive Plan,
as revised January 21, 1999.
4.4 Registrant's 1998 Directors Option Plan. Incorporated by reference
from Exhibit 4.3 to Registrant's Registration Statement on Form S-8,
file number 333-67725, filed November 23, 1998.
4.4a Standard terms of stock option award (transferable non-qualified
option) under Registrant's 1998 Directors Option Plan, as revised
January 21, 1999.
10.3 Registrant's 1986 Stock Option Plan and terms of stock option
agreement, as last amended on July 16, 1998.
10.25 Amended and Restated Deferred Compensation Agreement originally made
effective December 31, 1989 by and between William R. Chaney and
Tiffany and Company, and subsequently amended February 8, 1999.
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.
TIFFANY & CO. REPORT ON FORM 10-K FY 1998 - PAGE 28 -
<PAGE> 29
Exhibit Description
10.60 Registrant's 1988 Director Stock Option Plan and form of Stock
Option agreement, as last amended on November 21, 1996. Incorporated
by reference from Exhibit 10.60 to Registrant's Report on Form 10-K
for the Fiscal year ended January 31, 1997 and dated April 8, 1997.
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 Amended and Restated Tiffany and Company Executive Deferral Plan
originally made effective October 1, 1989, as amended effective
October 1, 1998.
10.108 Registrant's Amended and Restated Retirement Plan for Non-Employee
Directors originally made effective January 1, 1989, as amended
through January 21, 1999.
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.
10.113 Tiffany and Company Pension Plan, as last amended effective December
21, 1998.
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.
10.115a Riders Nos. 2 and 3, dated October 18, 1998 and March 20, 1999,
respectively to Split Dollar Life Insurance Agreements between and
among William R. Chaney and Tiffany and Company, and respectively,
the 1994 Chaney Family Trust u/a 2/23/94 and the Babette C. Chaney
et al. Trust u/a 2/23/94.
10.127 Retention Agreements dated March 30, 1999 between and among
Registrant and Tiffany and, respectively, each of the following
executive officers: Michael J. Kowalski, James E. Quinn, James N.
Fernandez and Patrick B. Dorsey and Appendices I to III to each of
those Agreements.
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.
- - PAGE 29 - TIFFANY & CO. REPORT ON FORM 10-K FY 1998
<PAGE> 30
(b) Reports on Form 8-K.
On March 4, 1999, Registrant filed a Report on Form 8-K reporting that
it had issued a press release announcing its sales and earnings for the
three-month period and Fiscal year ended January 31, 1999.
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, 1999 By: /s/ Michael J. Kowalski
--------------------------------
Michael J. Kowalski
President and Chief Executive Officer
TIFFANY & CO. REPORT ON FORM 10-K FY 1998 - PAGE 30 -
<PAGE> 31
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 date indicated.
By: /s/ William R. Chaney By: /s/ Michael J. Kowalski
----------------------------- -----------------------------
William R. Chaney Michael J. Kowalski
Chairman of the Board President and Chief Executive Officer
(director) (principal executive officer) (director)
By: /s/ James N. Fernandez By: /s/ Warren S. Feld
----------------------------- -----------------------------
James N. Fernandez Warren S. Feld
Executive Vice President Vice President
(principal financial officer) (principal accounting officer)
By: /s/ Rose Marie Bravo By: /s/ James E. Quinn
----------------------------- -----------------------------
Rose Marie Bravo James E. Quinn
Director Vice Chairman
(director)
By: /s/ Samuel L. Hayes, III By: /s/ Yoshiaki Sakakura
----------------------------- -----------------------------
Samuel L. Hayes, III Yoshiaki Sakakura
Director Director
By: /s/ Charles K. Marquis By: /s/ William A. Shutzer
----------------------------- -----------------------------
Charles K. Marquis William A. Shutzer
Director Director
By: /s/ Geraldine Stutz
-----------------------------
Geraldine Stutz
Director
April 8, 1999
- - PAGE 31 - TIFFANY & CO. REPORT ON FORM 10-K FY 1998
<PAGE> 32
PRICEWATERHOUSECOOPERS LLP
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders 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 the 1998
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.
/s/ PricewaterhouseCoopers LLP
New York, New York
March 2, 1999
TIFFANY & CO. REPORT ON FORM 10-K FY 1998 - PAGE 32 -
<PAGE> 33
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, 1999:
Reserves deducted from
assets:
Accounts receivable
allowances principally
doubtful accounts $ 6,988,475 $ 2,579,284 $ -- $1,461,347 (a) $ 8,106,412
Allowance for inventory
liquidation and
obsolescence 16,112,265 5,727,108 -- 6,184,479 (b) 15,654,894
Allowance for inventory
shrinkage 1,726,535 4,156,366 -- 4,094,159 (c) 1,788,742
LIFO reserve 15,870,000 -- -- -- 15,870,000
</TABLE>
- ----------
(a) Uncollectible accounts written off.
(b) Liquidation of inventory previously written down to market.
(c) Physical inventory losses.
<PAGE> 34
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, 1998:
Reserves deducted from
assets:
Accounts receivable
allowances principally
doubtful accounts $ 6,864,385 $ 2,104,590 $ -- $1,980,500 (a) $ 6,988,475
Allowance for inventory
liquidation and
obsolescence 13,790,944 5,885,724 -- 3,564,403 (b) 16,112,265
Allowance for inventory
shrinkage 1,743,169 2,217,964 -- 2,234,598 (c) 1,726,535
LIFO reserve 14,870,000 1,000,000 -- -- 15,870,000
</TABLE>
- ----------
(a) Uncollectible accounts written off.
(b) Liquidation of inventory previously written down to market.
(c) Physical inventory losses.
<PAGE> 35
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, 1997:
Reserves deducted from
assets:
Accounts receivable
allowances principally
doubtful accounts $ 5,698,217 $ 3,128,653 $ -- $1,962,485 (a) $ 6,864,385
Allowance for inventory
liquidation and
obsolescence 10,947,815 5,219,817 -- 2,376,688 (b) 13,790,944
Allowance for inventory
shrinkage 1,674,536 2,799,295 -- 2,730,662 (c) 1,743,169
LIFO reserve 11,870,000 3,000,000 -- -- 14,870,000
</TABLE>
- ----------
(a) Uncollectible accounts written off.
(b) Liquidation of inventory previously written down to market.
(c) Physical inventory losses.
<PAGE> 36
EXHIBIT INDEX
SEE PAGES 26 THROUGH 29 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 21, 1999).
4.3a Standard terms of stock option award (transferable and
non-transferable) under Registrant's 1998 Employee Incentive Plan,
as revised January 21, 1999.
4.4a Standard terms of stock option award (transferable non-qualified
option) under Registrant's 1998 Directors Option Plan , as revised
January 21, 1999.
10.3 Registrant's 1986 Stock Option Plan and terms of stock option
agreement, as last amended on July 16, 1998.
10.25 Amended and Restated Deferred Compensation Agreement originally made
effective December 31, 1989 by and between William R. Chaney and
Tiffany and Company, and subsequently amended February 8, 1999.
10.106 Amended and Restated Tiffany and Company Executive Deferral Plan
originally made effective October 1, 1989, as amended effective
October 1, 1998.
10.108 Registrant's Amended and Restated Retirement Plan for Non-Employee
Directors originally made effective January 1, 1989, as amended
through January 21, 1999.
10.113 Tiffany and Company Pension Plan, as last amended effective December
21, 1998.
10.115a Riders Nos. 2 and 3, dated October 18, 1998 and March 20, 1999,
respectively to Split Dollar Life Insurance Agreements between and
among William R. Chaney and Tiffany and Company, and respectively,
the 1994 Chaney Family Trust u/a 2/23/94 and the Babette C. Chaney
et al. Trust u/a 2/23/94.
10.116a Amendments Nos. 6-8 to Credit Agreement referred to in Exhibit
10.116 above, dated, respectively October 6, 1998, November 30, 1998
and March 8, 1999.
10.119a Amendment No. 1 to the Agreement and Consent to Assignment dated as
of December 1, 1995 among Registrant, Tiffany and Fleet National
Bank of Connecticut, as Collateral Trustee referenced in Exhibit
10.119 above, dated November 3, 1998.
- - PAGE 33 - TIFFANY & CO. REPORT ON FORM 10-K FY 1998
<PAGE> 37
EXHIBIT DESCRIPTION
10.122a Amendment No. 1 to the Agreement referred to in Exhibit 10.122
above, dated November 18, 1998.
10.126 Form of Note Purchase Agreement between Registrant and various
institutional note purchasers with Schedules B, 5.14 and 5.15 and
Exhibits 1A, 1B, and 4.7 thereto, dated as of December 30, 1998 in
respect of Registrant's $60 million principal amount 6.90% Series A
Senior Notes due December 30, 2008 and $40 million principal amount
7.05% Series B Senior Notes due December 30, 2010.
10.127 Retention Agreements dated March 30, 1999 between and among
Registrant and Tiffany and, respectively, each of the following
executive officers: Michael J. Kowalski, James E. Quinn, James N.
Fernandez and Patrick B. Dorsey and Appendices I to III to each of
those Agreements.
13.1 Annual Report to Stockholders for Fiscal Year Ended January 31, 1999
(pages 14-42 of such Annual Report have been filed in electronic
format).
21.1 Subsidiaries of Registrant.
23.1 Consent of PricewaterhouseCoopers LLP, independent accountants.
27 Financial Data Schedule (Exhibit 27 is submitted as an exhibit only
in the electronic format of this Annual Report on Form 10-K
submitted to the Securities and Exchange Commission).
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 26 THROUGH 29 FOR REGISTRATION, FILE AND EXHIBIT
NUMBERS.
TIFFANY & CO. REPORT ON FORM 10-K FY 1998 - PAGE 34 -
<PAGE> 1
Exhibit 3.2
Tiffany & Co.
Report on Form 10-K
Fiscal Year 1998
RESTATED BY-LAWS
AS LAST AMENDED JANUARY 21, 1999
-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 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) 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.
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.
<PAGE> 2
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. Conduct of Meetings. Each meeting of the stockholders shall be
presided over by the Chairman of the Board of Directors or such other person as
the Board of Directors may designate as chairman of such meeting. 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.
SECTION 1.08. Notice of Business and Nominations.
A. Nominations of persons for election to the Board of Directors and the
proposal of business to be transacted by the stockholders at an annual meeting
of stockholders may be made (1) by or at the direction of the Board of Directors
(or any duly authorized committee thereof) pursuant to a notice of meeting or by
otherwise properly bringing the matter before an annual meeting of stockholders
or (2) by any stockholder of record of the Corporation who was a stockholder of
record at the time of the giving of the notice provided for in the following
paragraph, who is entitled to vote at the meeting and who has complied with the
notice procedures set forth in this Section 1.08.
B. For nominations or other business to be properly brought before an
annual meeting by a stockholder pursuant to clause (2) of the foregoing
paragraph A., the stockholder must comply with the following provisions (1)
through (4) of this paragraph B.
Restated By-Laws: Tiffany & Co. (DE) 01/21/99 Page 2
<PAGE> 3
(1) The stockholder must have given timely notice thereof in writing to
the Secretary of the Corporation, as hereinafter provided. To be timely, a
stockholder's notice shall be delivered to the Secretary at the principal
executive offices of the Corporation not less than 90 days prior to and
not more than 120 days prior to the first anniversary of the preceding
year's annual meeting of stockholders; provided, however, that if the date
of the annual meeting is advanced more than 30 days prior to or delayed by
more than 60 days after such anniversary date, notice by the stockholder
to be timely must be so delivered not later than the close of business on
the later of the 90th day prior to such annual meeting or the 10th day
following the day on which public announcement of the date of such meeting
is first made.
(2) Such business must be a proper matter for stockholder action under the
General Corporation Law of the State of Delaware.
(3) If the stockholder, or the beneficial owner on whose behalf any such
proposal or nomination is made, solicits or participates in the
solicitation of proxies in support of such proposal or nominees, the
stockholder must have timely indicated its, or such beneficial owner's,
intention to do so as provided in provision (4)(c)(iii) below. (4) Such
stockholder's notice shall set forth the following information: (a) as to
each person whom the stockholder proposes to nominate for election or
reelection as a director, all information relating to such person as would
be required to be disclosed in solicitations of proxies for the election
of such nominees as directors pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and such
person's written consent to serving as a director if elected; (b) as to
any other business that the stockholder proposes to bring before the
meeting, a brief description of such business, the reasons for conducting
such business at the meeting and any material interest in such business of
such stockholder and the beneficial owner, if any, on whose behalf the
proposal is made; and (c) as to the stockholder giving the notice and the
beneficial owner, if any, on whose behalf the nomination or proposal is
made, (i) the name and address of such stockholder, as they appear on the
Corporation's books, and of such beneficial owner, (ii) the class and
number of shares of the Corporation that are owned beneficially and of
record by such stockholder and such beneficial owner, and (iii) whether
either such stockholder or beneficial owner intends to solicit or
participate in the solicitation of proxies in favor of such proposal or
nominee or nominees.
C. Notwithstanding anything in paragraph B.(1) of this Section 1.08 to the
contrary, in the event that the number of directors to be elected to the Board
of Directors is increased above the number in effect at the preceding year's
annual meeting of stockholders and there is no public announcement naming all of
the nominees for director or specifying the size of the increased Board of
Directors made by the Corporation at least 100 days prior to the first
anniversary of the preceding year's annual meeting, a stockholder's notice
required by this By-law shall also be considered timely, but only with respect
to nominees for any new positions created by such increase, if it shall be
delivered to the Secretary at the principal executive offices of the Corporation
not later than the close of business
Restated By-Laws: Tiffany & Co. (DE) 01/21/99 Page 3
<PAGE> 4
on the 10th day following the day on which such public announcement is first
made by the Corporation.
D. Only such business shall be conducted at a special meeting of
stockholders as shall have been brought before the meeting pursuant to a notice
of meeting issued by or at the direction of a majority vote of the Board of
Directors. Nominations of persons for election to the Board of Directors may be
made at a special meeting of stockholders at which directors are to be elected
pursuant to such a notice of meeting (1) by or at the direction of the Board or
(2) by any stockholder of record of the Corporation who is a stockholder of
record at the time of giving of notice provided for in this paragraph D., who
shall be entitled to vote at the meeting and who complies with the notice
procedures set forth in the following sentence. The stockholder's notice must
include the information required in paragraphs B.(3) and B. (4) of this Section
1.08 and must be delivered to the Secretary at the principal executive offices
of the Corporation not later than the close of business on the later of the 90th
day prior to such special meeting or the 10th day following the day on which
public announcement is first made of the date of the special meeting and of the
nominees proposed by the Board of Directors to be elected at such meeting and
not earlier than the 120th day prior to such special meeting.
E. Only persons nominated in accordance with the procedures set forth in
this Section 1.08 shall be eligible to serve as directors and only such business
shall be conducted at a meeting of stockholders as shall have been brought
before the meeting in accordance with the procedures set forth in this Section
1.08. The chairman of the meeting shall have the power and the duty to determine
whether a nomination or any business proposed to be brought before the meeting
has been made in accordance with the procedures set forth in these By-laws and,
if any proposed nomination or business is not in compliance with these By-laws,
to declare that such defective proposed business or nomination shall not be
presented for stockholder action at the meeting and shall be disregarded.
F. For purposes of this Section 1.08, "public announcement " shall mean
disclosure in a press release reported by the Dow Jones New Service, Associated
Press or a comparable national news service or in a documents publicly filed by
the Corporation with the Securities and Exchange Commission pursuant to Section
13, 14 or 15(d) of the Exchange Act.
G. Notwithstanding the foregoing provisions of this Section 1.08, a
stockholder shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to matters set forth
in this Section 1.08. Nothing in this Section 1.08 shall be deemed to excuse any
stockholder from the obligation to comply with the requirements of Rule 14a-8
under the Exchange Act with respect to proposals offered for inclusion in the
Corporation's proxy statement.
H. Paragraphs A. through G. of this Section 1.08 shall not apply with
respect to the 1998 Annual Meeting of Stockholders which shall be governed by
the following special provisions:
At the 1998 annual 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
paragraph H. For business to be properly brought before
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<PAGE> 5
such meeting 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 such meeting of the stockholders except in
accordance with the procedures set forth in this paragraph H. The Chairman
of 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 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
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<PAGE> 6
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 eight (8), 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, provided that no decrease to such
number by action of the Board of Directors shall in itself effect the removal of
any sitting director. In order to qualify for election or appointment, directors
shall be younger than 72 years when elected or appointed, provided that the
Board of Directors may, by specific resolution, 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.
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 Section 2.05
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
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<PAGE> 7
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.
SECTION 2.09. Special Meetings. Special meetings of the Board of Directors may
be called at any time by the Chairman of the Board of Directors, the Chief
Executive Officer, the President, the Vice Chairman of the Board of Directors,
any Vice-President, 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 transmitted facsimile, by electronic mail,
by telegram or by personal communication either over the telephone or otherwise,
in each such case not later than 48 hours 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.
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. Committees. Whereas by resolution adopted by a majority of the
whole Board of Directors, the Corporation has elected to be governed by
paragraph (2) of Section 141(c) of the General Corporation Law of the State of
Delaware, the Board of Directors may, by resolution or resolutions, designate
one or more committees (and may discontinue any of same at any time) each to
consist of one or more of the directors of the Corporation. The members of each
committee shall be appointed by the Board and shall hold office during the
pleasure of the Board. Subject to any limitations on the delegation of power and
authority to such committee in the Corporation's Restated Certificate of
Incorporation or under applicable law, a committee may be delegated and may
exercise such powers of the Board of Directors 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
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<PAGE> 8
require it) as may be delegated to such committee by such a resolution of the
Board of Directors. Subject to a resolution of the Board of Directors to the
contrary, in the absence or disqualification of a member of a committee, the
member or members of the committee present at any meeting of the committee and
not disqualified from voting, whether or not such present member or members
constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at such meeting of the committee in the place of such absent or
disqualified member. Regular meetings of any such 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 such committee and no notice thereof shall be necessary.
Special meetings of any such committee may be called at any time by any officer
of the Corporation or any member of any such 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 any such 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 such committee. Notice of each
special meeting of a committee shall be given (or waived) in the same manner as
notice of a directors' meeting. Each committee shall keep written minutes of its
meetings and report such minutes to the Board of Directors at the next regular
meeting of the Board of Directors.
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 Chairman of the Board of Directors,
a Chief Executive Officer, a Chief Operating Officer, a President, a Vice
Chairman of the Board of Directors, a Secretary and a Treasurer, and such number
of Vice-Presidents (including Vice-Presidents designated by the Board of
Directors as Senior Vice President and Executive 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.
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 powers and duties of the officers of the
Corporation shall be determined by resolution of the Board, or by one of the
committees of the Board. The Secretary, or some other officer designated by
resolution of the Board or by one of the committees of the Board, shall record
all of the proceedings of the meetings of the stockholders and directors in a
book to be kept for that purpose.
SECTION 3.05. Voting Securities Owned by the Corporation. Powers of attorney,
proxies, waivers
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<PAGE> 9
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 Chairman of the Board of Directors, the Chief Executive
Officer, the President , the Vice Chairman of the Board of Directors, 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 of the Board of Directors, the President, the Vice Chairman of
the Board of Directors 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 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
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<PAGE> 10
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 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 purpose 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
By-laws. 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
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<PAGE> 11
persons with whom communication is unlawful.
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,
provided, however, that in the event of any action, suit or proceeding initiated
by and in the name of (or by and in the name of a nominee or agent for) a person
who would otherwise by entitled to indemnification under this Section 6.01, such
person shall be entitled to indemnification hereunder only in the event such
action, suit or proceeding was initiated on the authorization of the Board of
Directors. 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.
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
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<PAGE> 12
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
General Corporation Law of the State of Delaware 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
occurring 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.
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<PAGE> 1
Exhibit 4.3a
Tiffany & Co.
Report on Form 10-K
Fiscal Year 1998
TIFFANY & CO.
a Delaware Corporation
(the "Company")
TERMS OF STOCK OPTION AWARD
(Standard Non-Qualified Option )
under the
1998 EMPLOYEE INCENTIVE PLAN
(the "Plan")
Terms Adopted May 21, 1998, Revised January 21, 1999
1. Introduction and Terms of Option. Participant has been granted a
Non-Qualified Stock Option Award (the "Option") to purchase shares of the
Company's Common Stock under the Plan by the Stock Option Subcommittee of the
Company's Board of Directors (the "Committee"). The name of the "Participant",
the "Grant Date", the number of "Covered Shares" and the "Exercise Price" per
Share are stated in the attached "Notice of Grant". The other terms and
conditions of the Option are stated in this document and in the Plan. Certain
initially capitalized words and phrases used in this document are defined in
paragraph 10 below and elsewhere in this document.
2. Award and Exercise Price; Option Not An Incentive Stock Option. Subject to
the terms and conditions stated in this document, the Option gives Participant
the right to purchase the Covered Shares from the Company at the Exercise Price.
The Option is not intended to constitute an "incentive stock option" as that
term is used in the Code.
3. Earliest Dates for Exercise - Cumulative Installments. Unless otherwise
provided in paragraphs 4, 5 or 6 below, the Option shall become exercisable
("mature") in cumulative installments according to the following schedule:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
As of the following The Option shall mature with the respect to
anniversary of the Grant the following percentage ("installment") of
Date: the Covered Shares:
- --------------------------------------------------------------------------------
<S> <C>
One-year anniversary 25%
- --------------------------------------------------------------------------------
Two-year anniversary 25%
- --------------------------------------------------------------------------------
Three-year anniversary 25%
- --------------------------------------------------------------------------------
Four-year anniversary 25%
- --------------------------------------------------------------------------------
</TABLE>
Once an installment of the Option matures, as provided in the above schedule, it
shall continue to be exercisable with all prior installments on a cumulative
basis until the Option expires.
4. Effect of Termination of Employment. An installment of the Option shall not
mature if the Participant's Date of Termination occurs before the anniversary of
the Grant Date on which such installment was scheduled to mature. Installments
of the Option which mature prior to Participant's Date of Termination will
remain exercisable, subject to expiration as provided in paragraph 6 below.
<PAGE> 2
5. Effect of Change in Control. All installments of the Option shall mature upon
the date of a Change of Control unless the Participant's Date of Termination
occurs before the date of the Change of Control. The Committee reserves the
right to unilaterally amend the definition of "Change of Control" so as to
specify additional circumstances which shall be deemed to constitute a Change of
Control.
6. Expiration. The Option, including matured installments thereof, shall not be
exercisable in part or in whole on or after the Expiration Date. The "Expiration
Date" shall be the earliest to occur of:
a. the ten-year anniversary of the Grant Date;
b. if the Participant's Date of Termination occurs by reason of death,
Disability or Retirement, the two-year anniversary of such Date of
Termination;
c. if the Participant's Date of Termination occurs for reasons other than
death, Disability, Retirement or Termination for Cause, the three month
anniversary of such Date of Termination;
d. if the Participant's Date of Termination occurs by reason of Termination
for Cause, the Date of Termination.
7. Methods of Option Exercise. The Option may be exercised in whole or in part
as to any Shares that have matured by filing a written notice of exercise with
the Secretary of the Company at its corporate headquarters prior to the
Expiration Date. Such notice shall specify the number of Shares which the
Participant elects to purchase and shall be accompanied by either of the
following:
a. a bank-certified check payable to the Company (or other type of check or
draft payable to the Company and acceptable to the Secretary) in the
amount of the Exercise Price for the Shares being exercised plus any tax
withholding resulting from such exercise as computed by Tiffany and
Company's payroll department; or
b. a copy of directions to, or a written acknowledgment from, an Approved
Broker that the Approved Broker has been directed to sell, for the account
of the owner of the Option, Shares (or a sufficient portion of the Shares)
acquired upon exercise of the Option, together with an undertaking by the
Approved Broker to remit to the Company a sufficient portion of the sale
proceeds to pay the Exercise Price for the Shares exercised plus any tax
withholding resulting from such exercise as computed by Tiffany and
Company's payroll department.
In the case of exercise via method (a), the exercise shall be deemed complete on
the Company's receipt of such notice and said check or draft. In the case of
exercise via method (b), the exercise shall be deemed complete on the trade date
of the sale. The Committee may approve other methods of exercise, as provided
for in the Plan, before the Option is exercised.
8. Withholding. All distributions on the exercise of the Option are subject to
withholding of all applicable taxes. The method for withholding shall be as
provided in paragraph 7 above, unless the Committee approves other methods of
withholding, as provided for in the Plan, before the Option is exercised.
Tiffany & Co. 1998 Employee Incentive Plan 01/21/99
Standard Terms of Stock Option Award: Rev. II Page 2
<PAGE> 3
9. Transferability. The Option is not transferable otherwise than by will or the
laws of descent and distribution or pursuant to a "domestic relations order", as
defined in the Code or Title I of the Employee Retirement Income Security Act or
the rules thereunder, and shall not be otherwise transferred, assigned, pledged,
hypothecated or otherwise disposed of in any way, whether by operation of law or
otherwise, nor shall it be subject to execution, attachment or similar process.
Upon any attempt to transfer the Option otherwise than as permitted herein or to
assign, pledge, hypothecate or otherwise dispose of the Option otherwise than as
permitted herein, or upon the levy of any execution, attachment or similar
process upon the Option, the Option shall immediately terminate and become null
and void.
10. Definitions. For the purposes of the Option, the words and phrases listed
below shall be defined as follows:
a. Approved Broker. Means one or more securities brokerage firms
designated by the Secretary of the Company from time to time.
b. Change of Control. A "Change of Control" shall be deemed to have
occurred if :
(i) any person (as used herein, the word "person" shall mean an
individual or an entity) or group of persons acting in concert
has acquired thirty-five percent (35%) in voting power or
amount of the equity securities of the Company (including the
acquisition of any right, option warrant or other right to
obtain such voting power or amount, whether or not presently
exercisable) unless such acquisition is authorized or approved
of by the Board of Directors of the Company,
(ii) individuals who constituted the Board of Directors of the
Company on May 1, 1998 (the "Incumbent Board") cease for any
reason to constitute at least a majority of such Board of
Directors, provided that any individual becoming a director
subsequent to May 1, 1988 whose election, or nomination for
election by the Company's stockholders, was approved by a vote
of at least three-quarters of the directors comprising the
Incumbent Board (either by a specific vote or by approval of
the proxy statement of the Company in which such individual is
named as a nominee for director) shall be, for the purposes of
this paragraph 10(a), considered as though such individual
were a member of the Incumbent Board; or
(iii) any other circumstance with respect to a change in control of
the Company occurs which the Committee deems to be a Change in
Control of the Company.
A Change of Control will also be deemed to have occurred as of fourteen
days prior to the date scheduled for a Terminating Transaction if
provisions shall not have been made in writing in connection with such
Terminating Transaction for the assumption of the Option or the
substitution for the Option of a new option covering the stock of a
successor employer corporation, or a parent or subsidiary thereof or of
the Company, with appropriate adjustments as to the number and kind of
shares and prices.
c. Code. The Internal Revenue Code of 1986, as amended.
d. Date of Termination. The Participant's "Date of Termination" shall
be the first day occurring on or after the Grant Date on which
Participant's employment with the
Tiffany & Co. 1998 Employee Incentive Plan 01/21/99
Standard Terms of Stock Option Award: Rev. II Page 3
<PAGE> 4
Company and all Related Companies terminates for any reason;
provided that a termination of employment shall not be deemed to
occur by reason of a transfer of the Participant between the Company
and a Related Company or between two Related Companies; and further
provided that the Participant's employment shall not be considered
terminated while the Participant is on a leave of absence from the
Company or a Related Company approved by the Participant's employer
or required by applicable law. If, as a result of a sale or other
transaction, the Participant's employer ceases to be a Related
Company (and the Participant's employer is or becomes an entity that
is separate from the Company), the occurrence of such transaction
shall be treated as the Participant's Date of Termination caused by
the Participant being discharged by the employer.
e. Disability. Except as otherwise provided by the Committee, the
Participant shall be considered to have a "Disability" if he or she
is unable to engage in any substantial gainful activity by reason of
a medically determinable physical or mental impairment, which
impairment, in the opinion of a physician selected by the Secretary
of the Company, is expected to have a duration of not less than 120
days.
f. Plan Definitions. Except where the context clearly implies or
indicates the contrary, a word, term, or phrase used in the Plan
shall have the same meaning in this document.
g. Retirement. "Retirement" of the Participant shall mean the
occurrence of the Participant's Date of Termination after age 65
(other than a Termination for Cause) or the occurrence of the
Participant's Date of Termination after age 55 pursuant to the
retirement practices of the Participant's employer.
h. Terminating Transaction. As used herein, the phrase "Terminating
Transaction" shall mean any one of the following:
(i) the dissolution or liquidation of the Company;
(ii) a reorganization, merger or consolidation of the Company; or
(iii) a reorganization, merger or consolidation of the Company with
one or more corporations as a result of which the Company goes
out of existence or becomes a subsidiary of another
corporation, or upon the acquisition of substantially all of
the property or more than eighty percent (80%) of the then
outstanding stock of the Company by another corporation.
i. Termination for Cause. "Termination for Cause" means termination of
employment pursuant to the conduct-based provisions of the
employer's policy on involuntary termination of employment by reason
of a Participant's action or willful omission, including without
limitation, the commission of a crime, fraud, willful misconduct or
the unauthorized use or disclosure of confidential information which
has resulted or is likely to result in damage to the Company or any
of its subsidiaries.
11. Heirs and Successors. The terms of the Option shall be binding upon, and
inure to the benefit of, the Company and its successors and assigns, and upon
any person acquiring, whether by merger, consolidation, purchase of assets or
otherwise, all or substantially all of the Company's assets and business.
Participant may designate a beneficiary of his/her rights under the Option by
filing written notice with the Secretary of the Company. In the event of the
Participant's death prior to the full
Tiffany & Co. 1998 Employee Incentive Plan 01/21/99
Standard Terms of Stock Option Award: Rev. II Page 4
<PAGE> 5
exercise of the Option, the Option may be exercised by such Beneficiary to the
extent that it was exercisable on the Participant's Termination Date and up
until its Expiration Date. If the Participant fails to designate a Beneficiary,
or if the designated Beneficiary dies before the Participant or before full
exercise of the Option, the Option may be exercised by Participant's estate to
the extent that it was exercisable on the Participant's Termination Date and up
until its Expiration Date.
12. Administration. The authority to manage and control the operation and
administration of the Option shall be vested in the Committee, and the Committee
shall have all powers with respect to the Option as it has with respect to the
Plan. Any interpretation of the Option by the Committee and any decision made by
it with respect to the Option is final and binding.
13. Plan Governs. Notwithstanding anything in this Agreement to the contrary,
the terms of the Option shall be subject to the terms of the Plan, a copy of
which may be obtained by the Participant from the office of the Secretary of the
Company.
Tiffany & Co. 1998 Employee Incentive Plan 01/21/99
Standard Terms of Stock Option Award: Rev. II Page 5
<PAGE> 6
TIFFANY & CO.
A DELAWARE CORPORATION
(THE "COMPANY")
TERMS OF STOCK OPTION AWARD
(TRANSFERABLE NON-QUALIFIED OPTION)
UNDER THE
1998 EMPLOYEE INCENTIVE PLAN
(THE "PLAN")
TERMS ADOPTED MAY 21, 1998, REVISED JANUARY 21, 1999
1. Introduction and Terms of Option. Participant has been granted a
Non-Qualified Stock Option Award (the "Option") to purchase shares of the
Company's Common Stock under the Plan by the Stock Option Subcommittee of the
Company's Board of Directors (the "Committee"). The name of the "Participant",
the "Grant Date", the number of "Covered Shares" and the "Exercise Price" per
Share are stated in the attached "Notice of Grant". The other terms and
conditions of the Option are stated in this document and in the Plan. Certain
initially capitalized words and phrases used in this document are defined in
paragraph 10 below and elsewhere in this document.
2. Award and Exercise Price; Option Not An Incentive Stock Option. Subject to
the terms and conditions stated in this document, the Option gives Participant
the right to purchase the Covered Shares from the Company at the Exercise Price.
THE OPTION IS NOT INTENDED TO CONSTITUTE AN "INCENTIVE STOCK OPTION" AS THAT
TERM IS USED IN THE CODE.
3. Earliest Dates for Exercise - Cumulative Installments. Unless otherwise
provided in paragraphs 4, 5 or 6 below, the Option shall become exercisable
("mature") in cumulative installments according to the following schedule:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
AS OF THE FOLLOWING ANNIVERSARY OF THE THE OPTION SHALL MATURE WITH THE RESPECT TO THE FOLLOWING PERCENTAGE
GRANT DATE: ("INSTALLMENT") OF THE COVERED SHARES:
- ---------------------------------------------------------------------------------------------------------------
<S> <C>
One-year anniversary 25%
- ---------------------------------------------------------------------------------------------------------------
Two-year anniversary 25%
- ---------------------------------------------------------------------------------------------------------------
Three-year anniversary 25%
- ---------------------------------------------------------------------------------------------------------------
Four-year anniversary 25%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
Once an installment of the Option matures, as provided in the above schedule, it
shall continue to be exercisable with all prior installments on a cumulative
basis until the Option expires.
4. Effect of Termination of Employment. An installment of the Option shall not
mature if the Participant's Date of Termination occurs before the anniversary of
the Grant Date on which such installment was scheduled to mature. Installments
of the Option which mature prior to Participant's Date of Termination will
remain exercisable, subject to expiration as provided in paragraph 6 below.
5. Effect of Change in Control. All installments of the Option shall mature upon
the date of a Change of Control unless the Participant's Date of Termination
occurs before the date of the Change of Control. The Committee reserves the
right to unilaterally amend the definition of a "Change of Control" so as to
specify additional circumstances which shall be deemed to constitute a Change of
Control.
<PAGE> 7
6. Expiration. The Option, including matured installments thereof, shall not be
exercisable in part or in whole on or after the Expiration Date. The "Expiration
Date" shall be the earliest to occur of:
a. the ten-year anniversary of the Grant Date;
b. if the Participant's Date of Termination occurs by reason of death,
Disability or Retirement, the two-year anniversary of such Date of
Termination;
c. if the Participant's Date of Termination occurs for reasons other than
death, Disability, Retirement or Termination for Cause, the three month
anniversary of such Date of Termination;
d. if the Participant's Date of Termination occurs by reason of
Termination for Cause, the Date of Termination.
7. Methods of Option Exercise. The Option may be exercised in whole or in part
as to any Shares that have matured by filing a written notice of exercise with
the Secretary of the Company at its corporate headquarters prior to the
Expiration Date. Such notice shall specify the number of Shares which the
Participant elects to purchase and shall be accompanied by either of the
following:
a. a bank-certified check payable to the Company (or other type of check
or draft payable to the Company and acceptable to the Secretary) in the
amount of the Exercise Price for the Shares being exercised plus any
tax withholding resulting from such exercise as computed by Tiffany and
Company's payroll department; or
b. a copy of directions to, or a written acknowledgment from, an Approved
Broker that the Approved Broker has been directed to sell, for the
account of the owner of the Option, Shares (or a sufficient portion of
the Shares) acquired upon exercise of the Option, together with an
undertaking by the Approved Broker to remit to the Company a sufficient
portion of the sale proceeds to pay the Exercise Price for the Shares
exercised plus any tax withholding resulting from such exercise as
computed by Tiffany and Company's payroll department.
In the case of exercise via method (a), the exercise shall be deemed complete on
the Company's receipt of such notice and said check or draft. In the case of
exercise via method (b), the exercise shall be deemed complete on the trade date
of the sale. The Committee may approve other methods of exercise, as provided
for in the Plan, before the Option is exercised.
8. Withholding. All distributions on the exercise of the Option are subject to
withholding of all applicable taxes. The method for withholding shall be as
provided in paragraph 7 above, unless the Committee approves other methods of
withholding, as provided for in the Plan, before the Option is exercised.
9. Transferability. The Option is not transferable otherwise than by will or the
laws of descent and distribution or pursuant to a "domestic relations order", as
defined in the Code or Title I of the Employee Retirement Income Security Act or
the rules thereunder, and shall not be otherwise transferred, assigned, pledged,
hypothecated or otherwise disposed of in any way, whether by operation of law or
otherwise, nor shall it be subject to execution, attachment or similar process.
Notwithstanding the foregoing, the Option may be transferred by the Participant
to (i) the spouse, children or grandchildren of the Participant (each an
"Immediate Family Member"), (ii) a trust or trusts for the exclusive benefit of
any or all Immediate Family Members, or (iii) a partnership in which any or all
Immediate Family Members are the only partners, provided that (x) there may be
no consideration paid or otherwise given for any such transfer, and (y)
subsequent transfer of the Option is prohibited otherwise than by will, the laws
of descent and distribution or
Tiffany & Co. 1998 Employee Incentive Plan 1/21/99
Transferable Option: Terms of Stock Option Award -- Rev. II Page 2
<PAGE> 8
pursuant to a domestic relations order. Following transfer, the Option shall
continue to be subject to the same terms and conditions as were applicable
immediately prior to transfer. The provisions of paragraph 4 above shall
continue to be applied with respect to the original Participant following
transfer and the Option shall be exercisable by the transferee only to the
extent, and for the periods specified, herein. Upon any attempt to transfer the
Option otherwise than as permitted herein or to assign, pledge, hypothecate or
otherwise dispose of the Option otherwise than as permitted herein, or upon the
levy of any execution, attachment or similar process upon the Option, the Option
shall immediately terminate and become null and void.
10. Definitions. For the purposes of the Option, the words and phrases listed
below shall be defined as follows:
a. Approved Broker. Means one or more securities brokerage firms
designated by the Secretary of the Company from time to time.
b. Change of Control. A "Change of Control" shall be deemed to have
occurred if :
(i) any person (as used herein, the word "person" shall mean an
individual or an entity) or group of persons acting in concert
has acquired thirty-five percent (35%) in voting power or
amount of the equity securities of the Company (including the
acquisition of any right, option warrant or other right to
obtain such voting power or amount, whether or not presently
exercisable) unless such acquisition is authorized or approved
of by the Board of Directors of the Company,
(ii) individuals who constituted the Board of Directors of the
Company on May 1, 1998 (the "Incumbent Board") cease for any
reason to constitute at least a majority of such Board of
Directors, provided that any individual becoming a director
subsequent to May 1, 1988 whose election, or nomination for
election by the Company's stockholders, was approved by a vote
of at least three-quarters of the directors comprising the
Incumbent Board (either by a specific vote or by approval of
the proxy statement of the Company in which such individual is
named as a nominee for director) shall be, for the purposes of
this paragraph 10(a), considered as though such individual
were a member of the Incumbent Board; or
(iii) any other circumstance with respect to a change in control of
the Company occurs which the Committee deems to be a Change in
Control of the Company.
A Change of Control will also be deemed to have occurred as of fourteen
days prior to the date scheduled for a Terminating Transaction if
provisions shall not have been made in writing in connection with such
Terminating Transaction for the assumption of the Option or the
substitution for the Option of a new option covering the stock of a
successor employer corporation, or a parent or subsidiary thereof or of
the Company, with appropriate adjustments as to the number and kind of
shares and prices.
c. Code. The Internal Revenue Code of 1986, as amended.
d. Date of Termination. The Participant's "Date of Termination" shall be
the first day occurring on or after the Grant Date on which
Participant's employment with the Company and all Related Companies
terminates for any reason; provided that a termination of employment
shall not be deemed to occur by reason of a transfer of the Participant
between the Company and a Related Company or between two Related
Companies; and further provided that the Participant's employment shall
not be considered terminated while the Participant is on a leave of
absence from the Company or a Related Company approved by the
Participant's employer or required by
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Transferable Option: Terms of Stock Option Award -- Rev. II Page 3
<PAGE> 9
applicable law. If, as a result of a sale or other transaction, the
Participant's employer ceases to be a Related Company (and the
Participant's employer is or becomes an entity that is separate from
the Company), the occurrence of such transaction shall be treated as
the Participant's Date of Termination caused by the Participant being
discharged by the employer.
e. Disability. Except as otherwise provided by the Committee, the
Participant shall be considered to have a "Disability" if he or she is
unable to engage in any substantial gainful activity by reason of a
medically determinable physical or mental impairment, which impairment,
in the opinion of a physician selected by the Secretary of the Company,
is expected to have a duration of not less than 120 days.
f. Plan Definitions. Except where the context clearly implies or indicates
the contrary, a word, term, or phrase used in the Plan shall have the
same meaning in this document.
g. Retirement. "Retirement" of the Participant shall mean the occurrence
of the Participant's Date of Termination after age 65 or the occurrence
of the Participant's Date of Termination after age 55 pursuant to the
retirement practices of the Participant's employer.
h. Terminating Transaction. As used herein, the phrase "Terminating
Transaction" shall mean any one of the following:
(i) the dissolution or liquidation of the Company;
(ii) a reorganization, merger or consolidation of the Company; or
(iii) a reorganization, merger or consolidation of the Company with
one or more corporations as a result of which the Company goes
out of existence or becomes a subsidiary of another
corporation, or upon the acquisition of substantially all of
the property or more than eighty percent (80%) of the then
outstanding stock of the Company by another corporation.
i. Termination for Cause. "Termination for Cause" means termination of
employment pursuant to the conduct-based provisions of the employer's
policy on involuntary termination of employment by reason of a
Participant's action or willful omission, including without limitation,
the commission of a crime, fraud, willful misconduct or the
unauthorized use or disclosure of confidential information which has
resulted or is likely to result in damage to the Company or any of its
subsidiaries.
11. Heirs and Successors. The terms of the Option shall be binding upon, and
inure to the benefit of, the Company and its successors and assigns, and upon
any person acquiring, whether by merger, consolidation, purchase of assets or
otherwise, all or substantially all of the Company's assets and business.
Participant may designate a beneficiary of his/her rights under the Option by
filing written notice with the Secretary of the Company. In the event of the
Participant's death prior to the full exercise of the Option, the Option may be
exercised by such Beneficiary to the extent that it was exercisable on the
Participant's Termination Date and up until its Expiration Date. If the
Participant fails to designate a Beneficiary, or if the designated Beneficiary
dies before the Participant or before full exercise of the Option, the Option
may be exercised by Participant's estate to the extent that it was exercisable
on the Participant's Termination Date and up until its Expiration Date.
12. Administration. The authority to manage and control the operation and
administration of the Option shall be vested in the Committee, and the Committee
shall have all powers with respect to the Option as it has with respect to the
Plan. Any interpretation of the Option by the Committee and any decision made by
it with respect to the Option is final and binding.
Tiffany & Co. 1998 Employee Incentive Plan 1/21/99
Transferable Option: Terms of Stock Option Award -- Rev. II Page 4
<PAGE> 10
13. Plan Governs. Notwithstanding anything in this Agreement to the contrary,
the terms of the Option shall be subject to the terms of the Plan, a copy of
which may be obtained by the Participant from the office of the Secretary of the
Company.
Tiffany & Co. 1998 Employee Incentive Plan 1/21/99
Transferable Option: Terms of Stock Option Award -- Rev. II Page 5
<PAGE> 1
Exhibit 4.4a
Tiffany & Co.
Report on Form 10-K
Fiscal Year 1998
TIFFANY & CO.
a Delaware Corporation
(the "Company")
TERMS OF STOCK OPTION AWARD
(Transferable Non-Qualified Option)
under the
1998 DIRECTORS OPTION PLAN
(the "Plan")
Terms Adopted January 21, 1999
1. Introduction and Terms of Option. Participant has been granted a
Non-Qualified Stock Option Award (the "Option") to purchase shares of the
Company's Common Stock under the Plan by the Compensation Subcommittee of the
Board of Directors (the "Committee"). The name of the "Participant", the "Grant
Date", the number of "Covered Shares" and the "Exercise Price" per Share are
stated in the attached "Notice of Grant". The other terms and conditions of the
Option are stated in this document and in the Plan. Certain initially
capitalized words and phrases used in this document are defined in paragraph 10
below and elsewhere in this document.
2. Award and Exercise Price. Subject to the terms and conditions stated in this
document, the Option gives Participant the right to purchase the Covered Shares
from the Company at the Exercise Price.
3. Earliest Dates for Exercise - Cumulative Installments. Unless otherwise
provided in paragraphs 4, 5 or 6 below, the Option shall become exercisable
("mature") in cumulative installments according to the following schedule:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
As of the following The Option shall mature with the respect to
anniversary of the Grant the following percentage ("installment") of
Date: the Covered Shares:
- --------------------------------------------------------------------------------
<S> <C>
One-year anniversary 50%
- --------------------------------------------------------------------------------
Two-year anniversary 50%
- --------------------------------------------------------------------------------
</TABLE>
Once an installment of the Option matures, as provided in the above schedule, it
shall continue to be exercisable with all prior installments on a cumulative
basis until the Option expires.
4. Effect of Termination of Service as a Director. An installment of the Option
shall not mature if the Participant's Date of Termination occurs before the
anniversary of the Grant Date on which such installment was scheduled to mature.
Installments of the Option which mature prior to Participant's Date of
Termination will remain exercisable, subject to expiration as provided in
paragraph 6 below.
5. Effect of Change in Control. All installments of the Option shall mature upon
the date of a Change of Control unless the Participant's Date of Termination
occurs before the date of the Change of Control. The Committee reserves the
right to unilaterally amend the definition of "Change of Control" so as to
specify additional circumstances which shall be deemed to constitute a Change of
Control.
Tiffany & Co. 1998 Directors Option Plan: 1/21/99 Page 1
<PAGE> 2
6. Expiration. The Option, including matured installments thereof, shall not be
exercisable in part or in whole on or after the Expiration Date. The "Expiration
Date" shall be the earliest to occur of:
a. the ten-year anniversary of the Grant Date;
b. if the Participant's Date of Termination occurs by reason of
death, Disability or Retirement, the two-year anniversary of such
Date of Termination;
c. if the Participant's Date of Termination occurs for reasons other
than death, Disability or Retirement, the three month anniversary of
such Date of Termination.
7. Methods of Option Exercise. The Option may be exercised in whole or in part
as to any Shares that have matured by filing a written notice of exercise with
the Secretary of the Company at its corporate headquarters prior to the
Expiration Date. Such notice shall specify the number of Shares which the
Participant elects to purchase and shall be accompanied by either of the
following:
a. a bank-certified check payable to the Company (or other type of
check or draft payable to the Company and acceptable to the
Secretary) in the amount of the Exercise Price for the Shares being
exercised; or
b. a copy of directions to, or a written acknowledgment from, an
Approved Broker that the Approved Broker has been directed to sell,
for the account of the owner of the Option, Shares (or a sufficient
portion of the Shares) acquired upon exercise of the Option,
together with an undertaking by the Approved Broker to remit to the
Company a sufficient portion of the sale proceeds to pay the
Exercise Price for the Shares exercised.
In the case of exercise via method (a), the exercise shall be deemed complete on
the Company's receipt of such notice and said check or draft. In the case of
exercise via method (b), the exercise shall be deemed complete on the trade date
of the sale. The Committee may approve other methods of exercise, as provided
for in the Plan, before the Option is exercised.
8. Withholding. Distributions on the exercise of the Option by Non-Employee
Directors are not subject to withholding of applicable taxes. The Participant
shall be responsible for payment of all applicable taxes. In the event that such
distributions become subject to withholding of applicable taxes, Participant
will be required to make such payment to Company at the time of exercise, in
addition to the payment set forth in Section 7 above.
9. Transferability. The Option is not transferable otherwise than by will or the
laws of descent and distribution or pursuant to a "domestic relations order", as
defined in the Code or Title I of the Employee Retirement Income Security Act or
the rules thereunder, and shall not be otherwise transferred, assigned, pledged,
hypothecated or otherwise disposed of in any way, whether by operation of law or
otherwise, nor shall it be subject to execution, attachment or similar process.
Notwithstanding the foregoing, the Option may be transferred by the Participant
to (i) the spouse, children or grandchildren of the Participant (each an
"Immediate Family Member"), (ii) a trust or trusts for the exclusive benefit of
any or all Immediate Family Members, or (iii) a partnership in which any or all
Immediate Family Members are the only partners, provided that (x) there may be
no consideration paid or otherwise given for any such transfer, and (y)
subsequent transfer of the Option is prohibited otherwise than by will, the laws
of descent and distribution or pursuant to a domestic relations order. Following
transfer, the Option shall continue to be subject to the same terms and
conditions as were applicable immediately prior to transfer. The provisions of
paragraph 4 above shall continue to be applied with respect to the original
Participant following transfer and the Option shall be
Tiffany & Co. 1998 Directors Option Plan: 1/21/99 Page 2
<PAGE> 3
exercisable by the transferee only to the extent, and for the periods specified,
herein. Upon any attempt to transfer the Option otherwise than as permitted
herein or to assign, pledge, hypothecate or otherwise dispose of the Option
otherwise than as permitted herein, or upon the levy of any execution,
attachment or similar process upon the Option, the Option shall immediately
terminate and become null and void.
10. Definitions. For the purposes of the Option, the words and phrases listed
below shall be defined as follows:
a. Approved Broker. Means one or more securities brokerage firms
designated by the Secretary of the Company from time to time.
b. Change of Control. A "Change of Control" shall be deemed to have
occurred if :
(i) any person (as used herein, the word "person" shall mean an
individual or an entity) or group of persons acting in concert
has acquired thirty-five percent (35%) in voting power or
amount of the equity securities of the Company (including the
acquisition of any right, option warrant or other right to
obtain such voting power or amount, whether or not presently
exercisable) unless such acquisition is authorized or approved
of by the Board of Directors of the Company,
(ii) individuals who constituted the Board of Directors of the
Company on May 1, 1998 (the "Incumbent Board") cease for any
reason to constitute at least a majority of such Board of
Directors, provided that any individual becoming a director
subsequent to May 1, 1988 whose election, or nomination for
election by the Company's stockholders, was approved by a vote
of at least three-quarters of the directors comprising the
Incumbent Board (either by a specific vote or by approval of
the proxy statement of the Company in which such individual is
named as a nominee for director) shall be, for the purposes of
this paragraph 10(a), considered as though such individual
were a member of the Incumbent Board; or
(iii) any other circumstance with respect to a change in control of
the Company occurs which the Committee deems to be a Change in
Control of the Company.
A Change of Control will also be deemed to have occurred as of fourteen
days prior to the date scheduled for a Terminating Transaction if
provisions shall not have been made in writing in connection with such
Terminating Transaction for the assumption of the Option or the
substitution for the Option of a new option covering the stock of a
successor employer corporation, or a parent or subsidiary thereof or of
the Company, with appropriate adjustments as to the number and kind of
shares and prices.
c. Code. The Internal Revenue Code of 1986, as amended.
d. Date of Termination. The Participant's "Date of Termination" shall
be the first day occurring on or after the Grant Date on which
Participant's service on the Board of Directors terminates for any
reason.
e. Disability. Except as otherwise provided by the Committee, the
Participant shall be considered to have a "Disability" if he or she
is unable to engage in any substantial gainful activity by reason of
a medically determinable physical or mental impairment, which
Tiffany & Co. 1998 Directors Option Plan: 1/21/99 Page 3
<PAGE> 4
impairment, in the opinion of a physician selected by the Secretary
of the Company, is expected to have a duration of not less than 120
days.
f. Non-Employee Director. A Non-Employee Director means a member
of the Board who is not at the time also an employee of the
Company or a Related Company.
g. Plan Definitions. Except where the context clearly implies or
indicates the contrary, a word, term, or phrase used in the Plan
shall have the same meaning in this document.
h. Retirement. "Retirement" of the Participant shall mean the
occurrence of the Participant's Date of Termination of service on
the Board by reason of the Participant's retirement from the Board
at or after age 72 or the age provided in any mandatory Non-Employee
Director retirement plan subsequently adopted by the Company.
i. Terminating Transaction. As used herein, the phrase "Terminating
Transaction" shall mean any one of the following:
(i) the dissolution or liquidation of the Company;
(ii) a reorganization, merger or consolidation of the Company; or
(iii) a reorganization, merger or consolidation of the Company with
one or more corporations as a result of which the Company goes
out of existence or becomes a subsidiary of another
corporation, or upon the acquisition of substantially all of
the property or more than eighty percent (80%) of the then
outstanding stock of the Company by another corporation.
11. Heirs and Successors. The terms of the Option shall be binding upon, and
inure to the benefit of, the Company and its successors and assigns, and upon
any person acquiring, whether by merger, consolidation, purchase of assets or
otherwise, all or substantially all of the Company's assets and business.
Participant may designate a beneficiary of his/her rights under the Option by
filing written notice with the Secretary of the Company. In the event of the
Participant's death prior to the full exercise of the Option, the Option may be
exercised by such Beneficiary to the extent that it was exercisable on the
Participant's Termination Date and up until its Expiration Date. If the
Participant fails to designate a Beneficiary, or if the designated Beneficiary
dies before the Participant or before full exercise of the Option, the Option
may be exercised by Participant's estate to the extent that it was exercisable
on the Participant's Termination Date and up until its Expiration Date.
12. Administration. The authority to manage and control the operation and
administration of the Option shall be vested in the Committee, and the Committee
shall have all powers with respect to the Option as it has with respect to the
Plan. Any interpretation of the Option by the Committee and any decision made by
it with respect to the Option is final and binding.
13. Plan Governs. Notwithstanding anything in this Agreement to the contrary,
the terms of the Option shall be subject to the terms of the Plan, a copy of
which may be obtained by the Participant from the office of the Secretary of the
Company.
Tiffany & Co. 1998 Directors Option Plan: 1/21/99 Page 4
<PAGE> 1
Exhibit 10.3
Tiffany & Co.
Report on Form 10-K
Fiscal Year 1998
TIFFANY & CO.
1986 STOCK OPTION PLAN
(As Amended through July 16, 1998)
1. Purpose of the Plan. Under this Stock Option Plan (the "Plan") of Tiffany &
Co., a Delaware corporation (the "Company"), options may be granted to eligible
employees to purchase shares of the Company's common stock, $.01 par value per
share ("Common Stock"). The Plan is designed to enable the Company to attract,
retain and motivate such persons by providing for or increasing their
proprietary interest in the Company.
2. Stock Subject to Plan. The maximum number of shares that may be subject to
options granted hereunder shall be six million four hundred eighteen thousand
(6,418,000) shares of Common Stock, subject to adjustments under Section 7
below. Shares of Common Stock subject to the unexercised portions of any options
granted under this Plan which expire, terminate or are cancelled may again be
subject to options under the Plan.
3. Eligible Persons. The persons eligible to be considered for the grant of
options hereunder are key employees of the Company or its parent or
subsidiaries.
4. Exercise and Payment. An option granted hereunder may be exercised, and
payment for the Common Stock purchased upon such exercise shall be made, as
follows. The option may be exercised in whole or in part as to any shares of
Common Stock that have become exercisable under such option by filing a written
notice of exercise with the Secretary of the Company at its corporate
headquarters prior to the date such option expires. Such notice shall specify
the number of shares which the option holder elects to purchase and shall be
accompanied by either of the following: (a) a bank-certified check payable to
the Company (or other type of check or draft payable to the Company and
acceptable to the Secretary) in the amount of the exercise price for the shares
of Common Stock being exercised, plus any tax resulting from such exercise that
the Company, its parent or subsidiary is required to withhold, as computed by
Tiffany and Company's payroll department; or (b) a copy of directions to, or a
written acknowledgment from, an "Approved Broker" that the Approved Broker has
been directed to sell, for the account of the option holder, shares of Common
Stock (or a sufficient portion of such shares) acquired upon exercise of the
option, together with an undertaking by the Approved Broker to remit to the
Company a sufficient portion of the sale proceeds to pay the exercise price for
the shares exercised plus any tax resulting from such exercise that the Company,
its parent or subsidiary is required to withhold, as computed by Tiffany and
Tiffany & Co. 1986 Stock Option Plan - Amend 07/16/98 Page 1
<PAGE> 2
Company's payroll department. In the case of exercise via method (a), the
exercise shall be deemed complete on the Company's receipt of such notice and
said check or draft. In the case of exercise via method (b), the exercise shall
be deemed complete on the trade date of the sale. The term "Approved Broker"
means any one or more securities brokerage firms designated by the Secretary of
the Company from time to time. If the Committee, as defined in Section 10
herein, shall have authorized such payment and if the Company is not then
prohibited from purchasing or acquiring shares of stock, payment may be made in
whole or in part with shares of stock of the Company delivered in lieu of cash
concurrently with such exercise, the shares so delivered to be valued on the
basis of their fair market value on the date of exercise. If the Company is
required to withhold an amount on account of any federal or state income tax
imposed as a result of such exercise, the optionee shall pay any tax resulting
from such exercise that the Company, its parent or subsidiary is required to
withhold, as computed by Tiffany and Company's payroll department, by check or
cash concurrently with exercise of the option.
5. Exercise Price. The exercise price for each option granted hereunder shall
not be less than 100% of the fair market value of the Common Stock at the date
of the grant of such option.
6. Nontransferability. Except as hereinafter provided in this Section 6, any
option granted under this Plan shall by its terms be nontransferable by the
opionee otherwise than by will, the laws of descent and distribution or pursuant
to a "domestic relations order", as defined in the Internal Revenue Code or
Title I of the Employee Retirement Income Security Act or the rules thereunder,
and shall be exercisable, during the optionee's lifetime, only by the optionee.
The Committee (as defined below) may, in its discretion, authorize all or a
portion of the options to be granted to an optionee to be on terms which permit
transfer by such optionee to (i) the spouse, children or grandchildren of the
optionee (each an "Immediate Family Member"), (ii) a trust or trusts for the
exclusive benefit of any or all Immediate Family Members, or (iii) a partnership
in which any or all Immediate Family Members are the only partners, provided
that (x) there may be no consideration paid or otherwise given for any such
transfer (y) the stock option agreement pursuant to which such options are
granted must be approved by the Committee, and must expressly provide for
transferability in manner consistent with this Section 6, and (z) subsequent
transfer of transferred options shall be prohibited otherwise than by will, the
laws of descent and distribution or pursuant to a domestic relations order.
Following transfer, any such transferred options shall continue to be subject to
the same terms and conditions as were applicable immediately prior to transfer,
provided that for purposes of Section 11 hereof the term "optionee" shall be
deemed to refer to the transferee. Any period or state of continued employment
imposed as a condition to option exercise by the Committee in any stock option
agreement shall continue to be applied with respect to the original optionee
following transfer and each transferred option shall be exercisable by the
transferee only to the extent, and for the periods specified, in such stock
option agreement.
Tiffany & Co. 1986 Stock Option Plan - Amend 07/16/98 Page 2
<PAGE> 3
7. Adjustments. If the outstanding shares of stock of the class then subject to
this Plan are increased or decreased, or are changed into or exchanged for a
different number of kind of shares or securities, as a result of one or more
reorganizations, recapitalizations, stock splits, reverse stock splits, stock
dividends and the like, appropriate adjustments shall be made in the number
and/or type of shares or securities for which options may thereafter be granted
under this Plan and for which options then outstanding under this Plan may
thereafter be exercised. Any such adjustments in outstanding options shall be
made without changing the aggregate exercise price applicable to the unexercised
portions of such options.
8. Maximum Option Term. No option granted under this Plan may be exercised in
whole or in part more than eleven years after the date of grant.
9. Plan Duration. Options may not be granted under this Plan after January 31,
2001.
10. Administration. The Plan shall be administered by a Committee (the
"Committee") of the Board of Directors of the Company (the "Board") which shall
consist of not less than two Directors of the Company each of whom shall be an
"outside director" for purposes of Section 162(m) of the Internal Revenue Code
of 1986, as amended, and regulations promulgated thereunder. The Board may from
time to time add to or remove members from the Committee, and shall have the
sole authority to fill vacancies on the Committee. Subject to the express terms
and conditions of the Plan and the terms of any option outstanding under the
Plan, the Committee shall have full power to construe the Plan and the terms of
any option granted under the Plan, to prescribe, amend and rescind rules and
regulations relating to the Plan or such options and to make all other
determinations necessary or advisable for the administration of the Plan,
including, without limitation, the power to determine which persons meet the
requirements of Section 3 hereof for selection as participants in the Plan, and
to which of the eligible persons, if any, options shall be granted under the
Plan and, subject to the provisions of this Plan, to establish the terms and
conditions required or permitted to be included in option agreements. Each
member of the Committee shall not, at the time he exercises discretion in
administering the Plan, be eligible or at any time within one year prior thereto
have been eligible for selection as a person to whom stock options may be
granted pursuant to the Plan or any other plan of the issuer or any of its
affiliates entitling the participants therein to acquire stock, stock options or
stock appreciation rights of the issuer or any of its Affiliates, provided,
however, that members of the Committee shall be entitled to elect participation
in the Company's 1988 Director Option Plan.
11. Amendment and Termination. The Board may at any time alter, amend, suspend
or terminate this Plan. However, unless taken with the approval of the
stockholders of the Company, no such action of the Board may:
(A) materially increase the benefits accruing to participants in the Plan;
Tiffany & Co. 1986 Stock Option Plan - Amend 07/16/98 Page 3
<PAGE> 4
(B) materially increase the number of securities which may be issued under the
Plan; or
(C) materially modify the requirements as to eligibility for participation in
the Plan.
In addition, no such action shall deprive any optionee, without his consent, of
any option granted to the optionee pursuant to the Plan or of any of his rights
under such option.
12. Exercise in Installments. Subject to Section 13 below options granted under
the Plan shall become exercisable in four equal installments as follows: on or
after the first anniversary of the grant date twenty-five (25%) percent; and
twenty-five (25%) percent on or after the second, third and fourth anniversary
of the grant date, respectively.
13. Change of Control. On the occurrence of a Change in Control of the Company,
any time periods relating to the exercise of any stock option granted under the
Plan shall be accelerated so that such options (including any unmatured
installments thereof) may be immediately exercised in full. A "Change in Control
of the Company" shall be deemed to have occurred if: (A) any person or group of
persons acting in concert acquires thirty-five (35%) in voting power or amount
of the equity securities of the Company (including the acquisition of any right,
option, warrant or other right to obtain such voting power or amount, whether or
not presently exercisable) unless such acquisition is authorized or approved of
by the Board of Directors of the Company; (B) individuals who constitute the
Board of Directors of the Company on January 21, 1988 (the "Incumbent Board")
cease for any reason to constitute at least a majority of such Board of
Directors, provided that any individual becoming a director subsequent to the
date January 21,1988 whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least three-quarters of the directors
comprising the Incumbent Board (either by a specific vote or by approval of
proxy statement of the Company in which such individual is named as a nominee
for director) shall be, for the purposes of this subsection (B), considered as
though such individual were a member of the Incumbent Board; or (C) any other
circumstance with respect to a change in control of the Company occurs which the
Committee deems to be a Change in Control of the Company. As used herein, the
word "person" shall mean an individual or an entity.
14. Termination of Employment for the Convenience of the Company. The Committee,
in the case of an employee's termination of employment for the convenience of
the Company, shall have the authority, exercisable in the discretion of the
Committee on a case by case basis, to (i) extend the date by which option
installments must be exercised following an employee's termination of employment
(the "Reference Date"), but in no event to a date later than the earlier of the
third anniversary of the date of such employee's termination of employment (the
"Third Anniversary Date") or the Expiration Date, (ii) extend the Exercise Date,
but in no event to a date later than the earlier of the Third Anniversary Date
or the Expiration Date, and/or (iii) accelerate the vesting of option
installments which have not become exercisable as of the Reference Date, but in
no event to a date earlier than six months following the date of grant of the
option; provided, however, that, in each such case, the Committee shall have the
authority to
Tiffany & Co. 1986 Stock Option Plan - Amend 07/16/98 Page 4
<PAGE> 5
extend the Reference Date and/or the Exercise Date to a date no later than the
Expiration Date.
15. Maximum Option Grants to an Eligible Person.The maximum number of shares of
Common Stock subject to option grants made in fiscal year of the Company to any
one eligible person hereunder shall be fifty thousand (50,000) shares.
Tiffany & Co. 1986 Stock Option Plan - Amend 07/16/98 Page 5
<PAGE> 1
Exhibit 10.25
Tiffany & Co.
Report on Form 10-K
Fiscal 1998
AMENDED AND RESTATED
DEFERRED COMPENSATION AGREEMENT
This Agreement was originally made effective the 31st day of December 1989
by and between Tiffany and Company, a New York corporation with its executive
offices and principal place of business at 727 Fifth Avenue, New York, New York
10022 ("Tiffany") and William R. Chaney who resides at 51 Shore Road, Clinton,
Connecticut ("Executive") and subsequently amended the 8th day of February 1999.
Whereas, Executive is employed by Tiffany in the capacity of Chairman of
the Board;
Whereas, Tiffany and Executive were parties to a Employment Agreement
dated as of the 1st of October, 1984 (the "Prior Agreement") the term of which
Prior Agreement has expired;
Whereas, under Section 3 of the Prior Agreement Executive was entitled,
upon termination of his employment with Tiffany, to distribution of certain
amounts maintained on the books of Tiffany as a liability to Executive (the
"Deferral Account");
Whereas, as of the last business day of the calendar quarter ended
September 30, 1989 the Deferral Account consisted of a liability to Executive of
$610,225.13 inclusive of accrued interest to that date computed in accordance
with the terms of the Prior Agreement; and
Whereas, Executive is not entitled to participate in the Tiffany and
Company Pension Plan.
NOW THEREFORE, in consideration of the foregoing premises and the
continued service of Executive to Tiffany, the parties hereby agree as follows:
1. Principal Credit to Deferral Account. While this Agreement remains in
effect, as of the last day of each calendar quarter Tiffany shall credit to the
Deferral Account $25,000, provided that no further amounts shall be credited to
the Deferral Account after December 31, 1998.
2. Interest Credit to Deferral Account. Through December 31, 1998, as of
the last day of each calendar quarter Tiffany shall credit to the Deferral
Account an amount determined by multiplying twenty-five (25%) percent of the
Interest Rate by the amount credited, or, if greater, the amount required to
have been credited, to the Deferral Account as of the first day of such calendar
quarter. In the event that the entire balance credited to the Deferral Account
is paid on a date other than the last day of a calendar quarter, interest
prorated on the basis of the Interest Rate, shall be credited to the Deferral
Account through the date of such payment. For the purposes of this Paragraph 2.,
the "Interest Rate" shall be the annual interest rate announced by The Bank of
New York as
<PAGE> 2
the interest rate at which it will lend on an unsecured basis to its
prime commercial borrowers and in effect as of the first business day of the
calendar quarter with respect to which interest is then being credited.
3. Nature of the Deferral Account. Amounts credited to the Deferral
Account shall be unfunded and unsecured liabilities of Tiffany to Executive,
payable only as provided in this Agreement, shall remain part of Tiffany's
general assets and shall be subject to claims of creditors of Tiffany in any
proceeding under the federal Bankruptcy Code to which Tiffany is subject as a
debtor and in any other proceeding before a court of competent jurisdiction in
which Tiffany is adjudicated or determined to be insolvent. Nothing contained in
this Agreement and no action taken pursuant to its provisions shall create or be
construed to create a trust of any kind or fiduciary relationship between
Tiffany and Executive. To the extent Executive or any person acquires a right to
receive payments from Tiffany under this Agreement, such right shall be no
greater than the right of any unsecured general creditor of Tiffany. Amounts
credited to the Deferral Account shall be payable as they become due under the
terms of this Agreement irrespective of any actual investments Tiffany may make
to meet its obligations or to accumulate funds. Neither Tiffany, nor any trustee
(in the event Tiffany elects to use a grantor trust to accumulate funds) shall
be obligated to purchase or maintain any asset or investment for the purpose of
meeting its obligations hereunder.
4. Designation of Beneficiary. Executive may, by an instrument in writing
delivered to Tiffany, designate one or more beneficiaries to receive the amounts
payable after his death under the terms of this Agreement and may change or
revoke such a designation by like notice; failing an effective designation of
such a beneficiary or beneficiaries, such amounts shall be payable on
Executive's death to the legal representative of Executive's estate.
5. Spendthrift Provision. The interest of Executive or any beneficiary
receiving payments hereunder shall not be subject to anticipation, nor to
voluntary or involuntary alienation until distribution is actually made. Neither
Executive nor any beneficiary shall have any right to commute, sell, transfer,
assign or otherwise convey the right to receive any payment under the terms of
this Agreement. Any such attempted assignment shall be considered null and void.
6. Distribution.
(a) In the event Executive dies before February 1, 1999,
distribution of amounts credited or required to have been credited
to the Deferral Account shall, as soon after Executive's death as
practicable, be made in a lump sum to Executive's beneficiary as
designated or otherwise determined pursuant to Paragraph 4. above.
(b) If Executive is living on February 1, 1999, distribution of
amounts credited to the Deferral Account shall be made as follows:
2
<PAGE> 3
(i) using an interest rate of 8% per annum, compounded monthly
(the "Discount Rate"), and Executive's life expectancy as of
February 1, 1999 expressed in integral years as derived from
the table entitled "Table V-Ordinary Life Annuities-One
Life-Expected Return Multiples," promulgated under section
1.72-9 of the Federal Income Tax Regulations, as in effect on
the date of such determination (the "Life Expectancy"), an
annuity payable monthly to Executive shall be calculated as
the monthly payment necessary to amortize the balance credited
to the Deferral Account (or required to have been credited to
such account) as of the date of such termination (the "Lump
Sum Value") by application of the Discount Rate to the Lump
Sum Value over the Life Expectance (the "Annuity Payment");
(ii) the Annuity Payment shall be paid by Tiffany to Executive
on the first day of each month if Executive is living on that
date commencing with March 1, 1999;
(iii) if, on the death of Executive, the aggregate of Annuity
Payments actually made to Executive is less than the Lump Sum
Value, any difference between the Lump Sum Value and such
aggregate of Annuity Payment shall be paid to Executive
beneficiary as designated or otherwise determined pursuant to
Paragraph 4. above.
7. Term and Termination Agreement. This Agreement shall remain in effect
until Tiffany has completed its payment obligations under Paragraph 6. above.
8. Adverse Determination. Notwithstanding anything stated to the contrary
in this Agreement, if at any time, as a result of a Final Determination, a tax
is payable by Executive, his beneficiary or his estate in respect of any amount
credited to the Deferral Account prior to payment under the terms of this
Agreement, then Tiffany shall pay to Executive the amount of such tax and the
Deferral Account balance, or, in the event Annuity Payments are then being paid,
future Annuity Payment, shall be reduced by the amount of such tax. For the
purposes of this Section 9., the term "Final Determination" means (i) an
assessment of tax by the United States Internal Revenue Service addressed to the
Executive or his beneficiary which is not timely appealed to the courts; (ii) a
final determination by the United States Tax Court or any other Federal Court,
the time for an appeal thereof having expired or been waived; or (iii) an
opinion by Tiffany's counsel, addressed to Tiffany and in form and substance
satisfactory to Tiffany, to the effect that amounts credited to the Deferral
Account are subject to Federal income tax to the Executive or his beneficiary
prior to payment under the terms of this Agreement. No Final Determination shall
be deemed to have occurred until Tiffany has actually received
3
<PAGE> 4
a copy of the assessment, court order or opinion which forms the basis thereof
and such other documents as it may reasonably request.
9. Prior Agreement Merged. All provisions in the Prior Agreement in
respect of the Deferral Account are hereby superceded and merged into this
Agreement. Executive and Tiffany agree that the amount credited to the Deferral
Account stated in the fourth Whereas clause above is correctly stated as of the
date therein stated.
10. Obligations to Survive Termination. The obligation of Tiffany to pay
amounts credited or required to be credited to the Deferral Account pursuant to
this Agreement and the provisions of Paragraph 3. through 6. and 8. through 12.
shall survive the termination of this Agreement.
11. Miscellaneous Provisions. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors, assigns,
heirs, estates, beneficiaries and personal representatives. Notices hereunder
shall be deemed effectively given: (a) when mailed, by registered mail, return
receipt requested, from a post office in the United States to the following
addresses:
If to Executive:
William R. Chaney
51 Shore Road
Clinton, Connecticut 06413
If to Tiffany:
Tiffany and Company
727 Fifth Avenue
New York, New York 10022
Attn: Legal Department
or (b) when hand delivered, in the case of notices to Executive, to Executive,
or, in the case of notices to Tiffany, to the Corporate Secretary of Tiffany.
This Agreement shall be governed by and construed, enforced and administered in
accordance with the laws of the State of New York. In the event either party
shall be required to resort to judicial process in order to successfully enforce
this agreement in accordance with its terms or otherwise to remedy a default
under this Agreement, the defaulting party shall pay to the non-defaulting party
the latter's attorneys' fees and other costs of enforcement. In the event that
any sums required to be paid hereunder are not paid within ten (10) days of
written demand for payment, Executive shall be entitled to be paid interest at
the Interest Rate by Tiffany upon such unpaid amount until such amount is paid
in full.
12. Continuance of Employment. This Agreement shall not confer upon Executive
any right with respect to continuance of employment with Tiffany, nor shall it
interfere in
4
<PAGE> 5
any way with the right of Tiffany to terminate his employment at any time with
our without cause.
IN WITNESS WHEREOF, this amended and restated Agreement has been duly executed
by the parties hereto effective as of January 31, 1999.
Tiffany and Company
("Tiffany")
BY:
-------------------------------------
James N. Fernandez
Executive Vice President - Chief
Financial Officer
-------------------------------------
William R. Chaney
("Executive")
5
<PAGE> 1
Exhibit 10.106
Tiffany & Co.
Report on Form 10-K
Fiscal 1998
TIFFANY AND COMPANY
AMENDED AND RESTATED
EXECUTIVE DEFERRAL PLAN
WHEREAS, effective October 1, 1989, Tiffany and Company, a New York corporation,
established an unfunded executive deferral plan for the benefit of a select
group of management or highly compensated employees;
WHEREAS, effective October 1, 1998, Tiffany and Company amended such plan to
permit additional executives and the directors of its parent corporation,
Tiffany & Co., a Delaware corporation, to participate and to provide certain
additional alternatives with respect to compensation deferred in accordance with
such plan; and
WHEREAS, the purpose of the plan is to provide selected executives and directors
an opportunity to defer a portion of their compensation in a manner best suited
to each participant's individual needs.
NOW, THEREFORE, to carry the above intentions into effect, Tiffany and Company
does enter into this Amended and Restated Plan effective October 1, 1998.
This Plan shall be known as the
TIFFANY AND COMPANY
EXECUTIVE DEFERRAL PLAN
10/1/98
<PAGE> 2
TABLE OF CONTENTS
Article Section Page
I DEFINITIONS
.................................................. 1
II MEMBERSHIP IN THE PLAN
2.1 Commencement of Participation ............................. 6
2.2 Procedure For and Effect of Admission...................... 6
2.3 Cessation of Participation................................. 6
III PLAN CONTRIBUTIONS
3.1 Executive Deferral Contribution ........................... 7
3.2 Rules Governing Executive Deferral Contributions........... 7
IV PARTICIPANT'S ACCOUNTS
4.1 Establishment of Accounts.................................. 9
4.2 Deferred Benefit Allocation................................ 9
4.3 Suballocation within the Deferred Benefit Accounts....... 9
4.4 Irrevocable Benefit Allocation............................. 11
4.5 Directed Valuation of Deferred Benefit Accounts............ 11
4.6 Administration of Investments.............................. 12
4.7 Valuation of Deferred Benefit Accounts..................... 12
4.8 Investment Obligation of the Employer...................... 12
4.9 Change of Funds . . . ..................................... 13
V VESTING
5.1 Vesting Schedule........................................... 13
VI BENEFITS/DISTRIBUTIONS
6.1 Termination of Service..................................... 13
6.2 Retirement Account - Form of Payment....................... 14
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10/1/98
<PAGE> 3
TABLE OF CONTENTS
Article Section Page
6.3 Education Account.......................................... 17
6.4 Fixed Period Benefit Account............................... 18
6.5 Disability Hardship Distribution........................... 18
6.6 Tax Withholding............................................ 19
6.7 Withdrawal Option.......................................... 19
VII ADMINISTRATION
7.1 Appointment of Administrator............................... 20
7.2 Administrator's Responsibilities........................... 20
7.3 Records and Accounts....................................... 20
7.4 Administrator's Specific Powers and Duties................. 20
7.5 Employer's Responsibility to Administrator................. 21
7.6 Liability.................................................. 21
7.7 Procedure to Claim Benefits................................ 22
VIII AMENDMENT AND TERMINATION
8.1 Plan Amendment............................................. 23
8.2 No Premature Distribution.................................. 23
8.3 Termination of the Plan.................................... 23
8.4 Effect of Termination . ................................... 23
8.5 Adverse Determination ..................................... 23
IX MISCELLANEOUS
9.1 Supplemental Benefits...................................... 24
9.2 Governing Law.............................................. 24
9.3 Jurisdiction............................................... 24
9.4 Binding Terms.............................................. 25
9.5 Spendthrift Provision...................................... 25
9.6 No Assignment Permitted.................................... 25
9.7 Construction............................................... 25
9.8 No Employment Agreement.................................... 25
- Page ii -
10/1/98
<PAGE> 4
ARTICLE I
DEFINITIONS
1.1 "Administrator" means the individual appointed to administer the Plan
pursuant to Article VII.
1.2 "Base Compensation" means a Participant's salary and wages, including
Executive Deferral Contributions made hereunder and any pretax elective
deferrals to any Employer sponsored retirement savings plan or cafeteria
plan, qualified pursuant to Section 401(k) or Section 125 of the Code, but
excluding bonuses and overtime, all other Employer contributions to
benefit plans, remuneration attributable to Employer sponsored stock
option plans and all other forms of remuneration or reimbursement.
1.3 "Beneficiary" means the person, persons, trust or other entity, designated
by written revocable designation filed with the Administrator by the
Participant to receive payments in the event of the Participant's death.
If a designated Beneficiary does not survive the Participant or if no
Beneficiary is designated as provided above, the Beneficiary shall be the
legal representative of the Participant's estate. If a designated
Beneficiary survives the Participant but dies before payment in full of
benefits under this Plan has been made, the legal representative of such
Beneficiary's estate shall become the Beneficiary. References to a
Participant in this Plan in connection with payments hereunder shall also
refer to such Participant's Beneficiary unless the context clearly
requires otherwise.
1.4 "Benefit Distribution Date" means a future date selected by a Participant
during the applicable Enrollment Period within guidelines established by
the Administrator, as adjusted as permitted in this Plan, on which the
Participant shall be entitled to a benefit pursuant to this Plan equal to
all or a designated portion of the balance of his Fixed Period Benefit
Account.
1.5 "Bonus Compensation" means cash compensation paid to a Participant,
excluding Base Compensation, under the Employer's bonus program or
programs, as such may exist and be modified from time to time, and payable
to a Participant following the conclusion of the Employer's fiscal year in
respect of service performed at any time during such prior fiscal year.
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10/1/98
<PAGE> 5
1.6 "Committee" means the Board of Directors of Tiffany, which shall have
authority over this Plan.
1.7 "Compensation" means Base Compensation, Bonus Compensation and Directors
Compensation in the aggregate.
1.8 "Code" means the Internal Revenue Code of 1986, as amended from time to
time.
1.9 "Deferral Agreement" means a written agreement between a Participant and
the Employer, whereby a Participant agrees to defer a portion of his
Compensation and the Employer agrees to provide benefits pursuant to the
provisions of this Plan.
1.10 "Deferred Benefit Accounts" mean the Retirement Account, Education Account
and the Fixed Period Benefit Account.
1.11 "Determination Date" shall mean December 31, March 31, June 30 and
September 30 of each calendar year and, for each Participant, his date of
death, Retirement, or other termination of employment with Employer and,
with respect to Independent Directors only, termination of service as a
Director.
1.12 "Director" means a member of Parent's Board of Directors.
1.13 "Directors Compensation" means a Director's annual retainer and any
incremental annual retainer paid or payable by Parent to Director for
service as a Director, including any per-meeting-attended compensation,
but excluding Parent's contributions to benefit and retirement plans,
remuneration attributable to Parent-sponsored stock option plans and all
other forms of remuneration or reimbursement.
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10/1/98
<PAGE> 6
1.14 "Disability" means an illness or injury which prevents a Participant from
performing the Participant's occupation. Disability shall be determined in
a uniform manner by the Administrator.
1.15 "Education Account" means a Deferred Benefit Account established pursuant
to Section 4.1.
1.16 "Effective Date" means October 1, 1989.
1.17 "Eligible Student" means an individual who is a relative of a Participant
and who is younger than the age of 14 when a subaccount is initially
established, pursuant to Section 4.7.
1.18 "Eligible Employees" means Directors, all officers of the Employer,
"director"-level employees of Employer, and such other management and
other highly compensated employees of the Employer as identified and
approved by the Committee.
1.19 "Employer" means Tiffany, Parent and any successor organization, or any
other business entity which adopts this Plan with consent of the Board of
Directors of Parent.
1.20 "Enrollment Period" means the 15 day period ending on October 15, 1989 for
the first Plan Year, and thereafter the month of November prior to each
subsequent Plan Year (except for the Plan Year ending December 31, 1999,
for which the Enrollment period shall be the period commencing November 1,
1998 and ending December 15, 1998) or, with respect to a person who
becomes an Eligible Employee during the course of a Plan Year in respect
of such Plan Year, the thirty day period following the date he becomes an
Eligible Employee.
1.21 "Executive Deferral Contribution" means the Plan contribution described in
Section 3.2.
1.22 "Fixed Period Benefit Account" means a Deferred Benefit Account
established pursuant to Section 4.1(C).
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1.23 "Independent Director" means a Director who is not an employee of Employer
at the time Participation in this Plan commences.
1.24 "Investment Fund" or "Fund" means any one of the investment funds
described in Schedule 4.5 which shall serve as means to measure value
increases or decreases with respect to a Participant's Deferred Benefit
Accounts.
1.25 "Parent" means Tiffany & Co., a Delaware corporation, and any successor
organization.
1.26 "Participant" means any Eligible Employee who has met the conditions for
participation as set forth in Article II.
1.27 "Permitted Retirement Age" means that date on which the Participant has
attained age 55, provided that if the Participant is an Independent
Director the Permitted Retirement Age for such Participant shall be his
age on the date his participation in the Plan commenced.
1.28 "Plan" means Tiffany and Company Executive Deferral Plan as described in
this instrument, as amended from time to time.
1.29 "Plan Year" means the period from the November 1, 1989 through December
31, 1989 and thereafter, the twelve (12) consecutive month period
beginning on each January 1 and ending on each December 31.
1.30 "Retirement" means any severance from full-time employment by a
Participant after attaining his Permitted Retirement Age, provided that if
the Participant is an Independent Director, Retirement shall mean any
cessation of service as a Director after attaining his Permitted
Retirement Age. Employment shall be deemed to be "full-time" provided that
the Participant is employed by Employer on a salaried basis.
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1.31 "Termination of Service" means, with respect to a Participant who is not
an Independent Director, a termination of employment with Employer. For
purposes of this definition, a Participant on a leave of absence
authorized by Employer or required by applicable law shall be deemed to
remain employed. With respect to a Participant who is an Independent
Director, a "Termination of Service" shall occur when such Independent
Director ceases to be a Director.
1.32 "Tiffany" means Tiffany and Company, a New York corporation.
1.33 "Retirement Account" means a Deferred Benefit Account established pursuant
to Section 4.1.
1.34 "Vested" means that portion of a Participant's Deferred Benefit Accounts
to which the Participant has a nonforfeitable right as defined in Section
5.1.
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ARTICLE II
MEMBERSHIP IN THE PLAN
2.1 Commencement of Participation. Each Eligible Employee who is an Eligible
Employee at any time during the Enrollment Period for any Plan Year shall
be eligible to become a Participant in the Plan as of the first day of
such Plan Year. Notwithstanding the foregoing, but subject to the
limitation expressed in Subsection 3.2 F below, each employee or Director
who first becomes an Eligible Employee throughout the course of the Plan
Year shall be eligible to become a Participant with respect to said Plan
Year as of the first day of the month that is at least thirty (30) days
after he is designated as an Eligible Employee.
2.2 Procedure For and Effect of Admission. Each individual who becomes
eligible for admission to participate in this Plan shall complete such
forms and provide such data as are reasonably required by the Employer as
a condition of such admission. By becoming a Participant, each individual
shall for all purposes be deemed conclusively to have assented to the
provisions of this Plan and all amendments hereto.
2.3 Cessation of Participation. A Participant shall cease to be a Participant
the earlier of:
A. The date on which the Plan terminates, or
B. The date on which he incurs a Termination of Service.
Notwithstanding the foregoing, a former active Participant will be deemed
a Participant, for all purposes of this Plan except with respect to
contributions as described in Article III, as long as such former active
Participant retains a benefit pursuant to the terms of Article VI.
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ARTICLE III
PLAN CONTRIBUTIONS
3.1 Executive Deferral Contribution. For each Plan Year, each Eligible
Employee may, by timely filing a Deferral Agreement with the
Administrator, authorize the Employer to reduce his Base Compensation, his
Bonus Compensation, his Directors Compensation or any combination of the
foregoing, by fixed percentages, and to have corresponding fixed dollar
amounts credited to his Deferred Benefit Accounts in accordance with
Section 4.2. Credit to Deferred Benefit Accounts shall be made in equal
installments for each pay period in respect of Base Compensation
reductions and in a lump sum for each payment in respect of Bonus
Compensation and Directors Compensation reductions. Subject to the rules
set forth in Section 3.2 below, each Eligible Employee shall file a
Deferral Agreement with the Administrator during the applicable Enrollment
Period for each Plan Year.
3.2 Rules Governing Executive Deferral Contributions.
A. Throughout any one Plan Year, a Participant may defer all or any
portion of his Compensation, except that a Participant may not defer
less than $2,000 (except the first Plan Year of November 1, 1989 to
December 31, 1989 in which a Participant may defer no less than
$500, or except Plan Years in which the Participant elects not to
defer any portion of his Compensation) or more than 50% of Base
Compensation.
B. The amount of Compensation that a Participant elects to defer shall
be credited to the Participant's Deferred Benefit Accounts during
each Plan Year on or about that date on which the Participant would
have, but for his deferral election, have been paid such
Compensation.
C. An election to defer Compensation pursuant to this Plan is
irrevocable and shall continue until the earlier of: (i) the
Participant's Termination of Service, or (ii) the end of the Plan
Year for which the deferral is effective.
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D. In respect of Bonus Compensation or Directors Compensation, an
election to defer must be made in the Enrollment Period last
occurring prior to the start of Employer's fiscal year for which
such Bonus Compensation is paid; provided, however, that in respect
of Bonus Compensation which may become payable in respect of
Employer's fiscal year ending January 31, 1990, such election must
be made, if at all, during the Enrollment period ending on October
15, 1989, and, if made, such election may only be made with respect
to that portion of Bonus Compensation which may exceed the bonus
target or base bonus amount communicated to the Eligible Employee
making such election prior to the making of such election. In the
event such an election is made in respect of Bonus Compensation for
Employer's fiscal year ending January 31, 1990, up to 100% of such
excess Bonus Compensation may be deferred, provided that the amount
so elected shall not exceed 25% of Bonus Compensation payable in
respect of such Fiscal Year.
E. Except as expressly provided in subsection D. above, each Eligible
Employee shall file a Deferral Agreement with the Administrator
prior to the date on which the Participant commences the performance
of services to earn the Compensation deferred hereunder.
F. No person who becomes an Eligible Employee during the course of
Employer's Fiscal Year may file a Deferral Agreement with respect to
Bonus Compensation or Directors Compensation earned in respect of
such fiscal year except as expressly provided in subsection D.
above.
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ARTICLE IV
PARTICIPANT'S ACCOUNTS
4.1 Establishment of Accounts. The following Deferred Benefit Accounts shall
be established with respect to each Participant:
A. Retirement Account,
B. Education Account, and
C. Fixed Period Benefit Account.
All contributions on behalf of a Participant shall be deposited to the
appropriate Deferred Benefit Account, in accordance with Section 4.2.
4.2 Deferred Benefit Allocation. Each Eligible Employee shall submit to the
Administrator, before the close of the Enrollment Period for each Plan
Year, a written statement specifying the Eligible Employee's allocation of
anticipated contributions with respect to his Deferred Benefit Accounts.
4.3 Suballocation Within the Deferred Benefit Accounts.
A. In the event a Participant shall allocate a portion of his
anticipated contributions to his Retirement Account, he may, during
each applicable Enrollment Period, direct that portion of his -
contributions to (i) a lump sum subaccount or to (ii) one of three
installment subaccounts. Each Participant may have only one such
Retirement subaccount at any one time. Participant may direct the
transfer of the balance in one such subaccount to another such
subaccount at any time prior to the Participant's Retirement,
provided that no such transfer may be made during the 12-month
period immediately prior to the Participant's Retirement, and, if
such transfer is
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<PAGE> 13
subsequently determined to have been made during such 12-month
period, such transfer shall be void and without force or effect and
the last prior valid selection of a Retirement subaccount shall
govern. The lump sum subaccount will be paid out in a lump sum
within ninety (90) days of Retirement, and the installment
subaccount will be paid in five (5), ten (10) or fifteen (15) annual
installments, all pursuant to Section 6.1. In the absence of such
designation, contributions for that Plan Year will be paid out in a
lump sum.
B. In the event a Participant shall allocate a portion of his
anticipated contributions to his Education Account, the Participant
may further allocate amongst subaccounts on behalf of Eligible
Students. Said allocation shall be made in writing prior to the
beginning of the Plan Year on Participant's Deferral Agreement, or
such other forms as are required by the Administrator. In the
absence of such suballocation, all contributions to the
Participant's Education Account shall be equally allocated among the
Participant's Education subaccounts. A Participant's election
pursuant to Section 4.5 shall apply uniformly to each subaccount. A
Participant, in any one Plan Year, may not allocate less than $1,000
(except the first Plan Year of October 1, 1989 to December 31, 1989
in which a Participant may allocate no less than $250, or except
Plan Years in which the Participant elects not to defer any portion
of his Compensation) to any one Education subaccount.
C. In the event a Participant shall allocate a portion of his
anticipated contributions to his Fixed Period Benefit Account, the
Participant may further allocate amongst subaccounts differentiated
by Benefit Distribution Dates. Said allocation shall be made in
writing prior to the beginning of the Plan Year on Participant's
Deferral Agreement, or such other forms as are required by the
Administrator, provided that each Participant shall have a one-time
option in respect of each of his Benefit Distribution Dates to
change such Benefit Distribution Date to a date subsequent to such
original Benefit Distribution Date, such option to be exercised, if
at all, at least one year prior to the original Benefit Distribution
Date by written notice to the Administrator. In the absence of such
suballocation, all contributions to the Participant's Fixed Period
Benefit Account
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<PAGE> 14
shall be equally allocated among Participant's subaccounts.
Notwithstanding, at any point in reference, a Participant may not
have more than two (2) such subaccounts. A Participant's election
pursuant to Section 4.5 shall apply uniformly to each subaccount. A
Participant, in any one Plan Year, may not allocate less than $1,000
(except the first Plan Year of October 1, 1989 to December 31, 1989
in which a Participant may allocate no less than $250, or except
Plan Years in which the Participant elects not to defer any portion
of his Compensation) to any one Fixed Period subaccount. A
Participant shall not elect a Benefit Distribution Date with respect
to the Fixed Period Benefit Account which occurs prior to
twenty-four (24) months from the date on which the first
contribution to such subaccount is first credited.
4.4 Irrevocable Benefit Allocation. Once an Eligible Employee has allocated
anticipated contributions under the Plan and the Plan Year has begun, he
may not modify, alter, amend or revoke said allocations. Notwithstanding,
a Participant may, prior to the commencement of a new Plan Year, elect to
modify, alter, amend or revoke his future allocations to his Deferred
Benefit Accounts to the extent the Administrator shall provide, effective
the first day of such new Plan Year.
4.5 Directed Valuation of Deferred Benefit Accounts. As provided herein, a
participant may direct that his Deferred Benefit Accounts be valued, in
accordance with Section 4.7, as if the account were invested in one or
more of the Investment Funds listed in Schedule 4.5 attached. The
Committee may, from time to time, add additional Investment Funds to
Schedule 4.5. A Participant shall submit to the Plan Administrator in
writing his investment selection for evaluation purposes. The Participant
may select one or more investment funds in multiples of 5%. A Participant
may make a separate selection with respect to each Deferred Benefit
Account. Investment Fund elections may be made four (4) times in a Plan
Year at any time.
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<PAGE> 15
4.6 Administration of Investments. The investment gain or loss with respect to
contributions made to the Deferred Benefit Accounts on behalf of a
Participant shall continue to be determined in the manner selected by the
Participant, pursuant to Section 4.5, until a new designation is filed
with the Plan Administrator. If any Participant fails to file a
designation, he shall be deemed to have designated the first Investment
Fund listed in Schedule 4.5 attached. A designation filed by a Participant
changing his Investment Funds shall apply to future contributions and/or
amounts already accumulated in his Deferred Benefit Accounts. A
Participant may change his investment selection four (4) times, at any
time, throughout the course of each Plan Year.
4.7 Valuation of Deferred Benefit Accounts. The Deferred Benefit Accounts of
each Participant shall be valued, on any date prior to complete
distribution of all benefits due Participant under this Plan, based upon
the performance of the Investment Fund(s) selected by the Participant.
Such valuation shall reflect the net asset value expressed per share of
the designated Investment Fund(s). The fair market value of an Investment
Fund shall be determined by the Administrator. It shall represent the fair
market value of all securities or other property held for the respective
fund, plus cash and accrued earnings, less accrued expenses and proper
charges against the fund. Each Deferred Benefit Account shall be valued
separately. A valuation summary shall be prepared on each Determination
Date.
4.8 Investment Obligation of the Employer. Benefits are payable as they become
due irrespective of any actual investments the Employer may make to meet
its obligations. Neither the Employer, nor any trustee (in the event the
Employer elects to use a grantor trust to accumulate funds) shall be
obligated to purchase or maintain any asset, and any reference to
investments or Investment Funds is solely for the purpose of computing the
value of benefits. To the extent a Participant or any person acquires a
right to receive payments from the Employer under this Plan, such right
shall be no greater than the right of any unsecured creditor of the
Employer.
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4.9 Change of Funds. In the event that any of the Investment Funds designated
in Schedule 4.5 attached materially changes its investment objectives,
adopts a plan of liquidation, ceases to report its net asset values or
otherwise ceases to exist, the Employer may amend this Plan by designating
new or additional funds for the purposes of Section 4.7 and each
Participant shall redirect the valuation of his or her Deferred Benefit
Accounts effective with the date of such amendment.
ARTICLE V
VESTING
5.1 Vesting Schedule. A Participant shall have a fully Vested interest with
respect to Executive Deferral Contributions and Investment Fund
performance credited to his Deferred Benefit Accounts, in all instances.
ARTICLE VI
BENEFITS/DISTRIBUTIONS
6.1 Termination of Service.
A. If a Participant incurs a Termination of Service for any reason, the
Employer shall pay to the Participant, or to the Participant's
Beneficiary if applicable, a benefit equal to the value of
Participant's Deferred Benefit Accounts, determined pursuant to
Section 4.7 and Section 5.1.
B. With the exception of funds allocated to the Participant's
Retirement Account, if the Participant incurs a Termination of
Service for any reason, the benefit hereunder, including funds
allocated to the Participant's Education Account and Fixed Period
Benefit Account, shall be paid to the Participant or the
Participant's beneficiary, as applicable, as a lump sum within
ninety (90) days of the date of such Termination of Service.
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<PAGE> 17
C. With respect to funds allocated to the Participant's Retirement
Account, if the Participant incurs a Termination of Service for any
reason other than his Retirement or Disability, the benefit
hereunder allocated to such Retirement Account, shall be paid to the
Participant or the Participant's beneficiary, as applicable, as a
lump sum within ninety (90) days of the date of such Termination of
Service.
D. With respect to funds allocated to the Participant's Retirement
Account, if the Participant incurs a Termination of Service by
reason of his Retirement, the benefit hereunder allocated to such
Retirement Account, shall be paid to the Participant or the
Participant's beneficiary, as provided in Section 6.2 below.
E. With respect to funds allocated to the Participant's Retirement
Account, if the Participant incurs a Termination of Service by
reason of his Disability, the Participant shall remain as a
Participant in the Plan but shall be ineligible for further
contributions to his Deferred Benefit Accounts as described in
Article III. In that circumstance, funds allocated to the
Participant's Retirement Account shall be paid to him commencing on
his 65th birthday in the form he elected pursuant to Section 4.A
6.2 Retirement Account - Form of Payment:
A. If the Participant's Termination of Service shall occur as a result
of Participant's Retirement or Disability, and the Participant has
elected deferrals to a lump sum subaccount under Section 4.3A, the
value of such subaccount is to be paid to the Participant as soon as
administratively possible following his Retirement, or, in the case
of Disability, following his 65th birthday. If the Participant's
Termination of Service shall occur as a result of Participant's
Retirement or Disability, and the Participant has elected deferrals
to an installment subaccount under Section 4.3A, the benefit in
respect of such subaccount shall
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<PAGE> 18
be paid by Employer to Participant in five, ten or 15 annual
installments beginning as soon as administratively possible after
his Retirement, or in the case of Disability, after his 65th
birthday, and with each subsequent annual installment to be paid on
or before February 1 of each subsequent year, determined as follows:
Five Annual Installments
<TABLE>
<CAPTION>
Benefit Year Percentage of Installment Retirement Account
<S> <C>
1 (Year of Retirement or 65th birthday) 20%
2 25%
3 33%
4 50%
5 100%
</TABLE>
Ten Annual Installments
<TABLE>
<CAPTION>
Benefit Year Percentage of Installment Retirement Account
<S> <C>
1 (Year of Retirement or 65th birthday) 10%
2 11%
3 13%
4 14%
5 17%
6 20%
7 25%
8 33%
9 50%
10 100%
</TABLE>
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<PAGE> 19
Fifteen Annual Installments
<TABLE>
<CAPTION>
Benefit Year Percentage of Installment Retirement Account
<S> <C>
1 (Year of Retirement or 65th birthday) 7%
2 7%
3 8%
4 8%
5 9%
6 10%
7 11%
8 12%
9 12%
10 17%
11 20%
12 25%
13 33%
14 50%
15 100%
</TABLE>
In the event a Participant receiving such installments dies before
all installments are paid, Beneficiary shall receive the balance
remaining in such subaccount in a lump sum.
B. Notwithstanding any provision to the contrary, if at the time
benefits are to commence, the Participant's Retirement Account has a
value less than $50,000, the Participant's benefit hereunder shall
be paid to the Participant as a lump sum within ninety (90) days of
termination.
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<PAGE> 20
6.3 Education Account.
A. If a Participant does not incur a Termination of Service prior to
January 1 of the calendar year in which an Eligible Student of the
Participant attains a Determination Age, the Employer shall pay to
the Participant a benefit, as soon as administratively possible,
determined as follows:
<TABLE>
<CAPTION>
Eligible Student's Percentage of Eligible
Determination Age Student's Subaccount
<S> <C>
18 25%
19 33%
20 50%
21 100%
</TABLE>
B. If a Participant should incur a Termination of Service for any
reason while having a balance in his Education Account, the Vested
portion of the balance shall be distributed to the Participant, or
Beneficiary if applicable, in accordance with Section 6.1.
C. Notwithstanding any provision to the contrary, if, on the January 1
of the calendar year in which an Eligible Student of Participant
attains age 18, the Eligible Student's subaccount has a balance of
less than $20,000, then said balance shall be paid to the
Participant as soon as administratively possible.
D. Each Participant shall have a one-time option in respect of each of
such Participant's Eligible Students, to increase each of the
Determination Ages for such Eligible Student by one or more full
years, such option to be exercised, if at all, by written notice
given to the Administrator no less than one year earlier than the
earliest original Determination Age for such Eligible Student.
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6.4 Fixed Period Benefit Account.
A. If a Participant does not incur a Termination of Service prior to a
designated Benefit Distribution Date, the Employer shall pay to the
Participant a benefit equal to the balance of the Participant's
subaccount which has been earmarked with respect to said Benefit
Distribution Date.
B. If a Participant should incur a Termination of Service for any
reason while having a balance in his Fixed Period Benefit Account,
the balance shall be distributed to the Participant, or Beneficiary,
if applicable, in accordance with Section 6.1
6.5 Disability Hardship Distribution.
A. In the event of a Participant's Disability, a Participant may apply
in writing to the Administrator for withdrawal against his Deferred
Benefit Accounts at any time. The withdrawal shall only be allowed
at the discretion of the Administrator and for purposes which
constitute an "Unforeseen Emergency". As used herein, an Unforeseen
Emergency means a severe financial hardship to the Participant
resulting from the Disability. The Administrator will assess if
circumstances constitute an Unforeseen Emergency based upon the
facts of each case. However, the withdrawal shall not be allowed to
the extent that such hardship is or may be relieved:
1. Through reimbursement or compensation by insurance or
otherwise, or
2. By liquidation of the Participant's assets, to the extent that
liquidation of such assets would not itself constitute a
severe financial hardship.
If approved, the withdrawal shall be equal to the lesser of (i) the
amount required to be distributed to meet the need caused by the
Unforeseen Emergency, or (ii) the aggregate balance of the
Participant's Deferred Benefit Accounts.
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<PAGE> 22
B. To the extent a withdrawal shall be permitted pursuant to this
Section 6.5, the Participant's Deferred Benefit Accounts shall be
correspondingly reduced in the following order:
1. The Fixed Period Benefit Account,
2. The Education Account,
3. The Retirement Account.
6.6 Tax Withholding. To the extent required by the law in effect at the time
benefits are distributed pursuant to this Article VI, the Employer or its
agents shall withhold any taxes required by the federal or any state or
local government from payments made hereunder.
6.7 Withdrawal Option. Notwithstanding anything stated to the contrary in this
Plan, each Participant shall have the option to withdraw and receive a
distribution of all, but not less than all, of his entire balance in all
Deferred Benefit Accounts subject to the following conditions:
A. as consideration for the withdrawal, Employer shall reduce the balance
in each of Participant's Deferred Benefit accounts by ten percent (10%)
immediately prior to permitting such withdrawal and distribution, the
benefit of such reduction to accrue to Participant's Employer except in
the case of an Independent Director, in which case such reduction shall
accrue to the benefit of Parent;
B. as further consideration for the withdrawal, Participant shall not be
entitled to make further deferrals into the Plan until the start of the
second Plan Year to commence following the Plan Year of such withdrawal.
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<PAGE> 23
ARTICLE VII
ADMINISTRATION
7.1 Appointment of Administrator. Tiffany shall appoint, on behalf of all
Participants, an Administrator. The Administrator may be removed by
Tiffany at any time and he may resign at any time by submitting his
resignation in writing to Tiffany. A new Administrator shall be appointed
as soon as possible in the event that the Administrator is removed or
resigns from his position. Any person so appointed shall signify his
acceptance by filing a written acceptance with Tiffany.
7.2 Administrator's Responsibilities. The Administrator is responsible for the
day to day administration of the Plan. He may appoint other persons or
entities to perform any of his fiduciary functions. Such appointment shall
be made and accepted by the appointee in writing and shall be effective
upon the written approval of Tiffany. The Administrator and any such
appointee may employ advisors and other persons necessary or convenient to
help him carry out his duties including his fiduciary duties. The
Administrator shall have the right to remove any such appointee from his
position. Any person, group of persons or entity may serve in more than
one fiduciary capacity.
7.3 Records and Accounts. The Administrator shall maintain or shall cause to
be maintained accurate and detailed records and accounts of Participants
and of their rights under the Plan and of all investments, receipts,
disbursements and other transactions. Such accounts, books and records
relating thereto shall be open at all reasonable times to inspection and
audit by the Employer and by persons designated thereby.
7.4 Administrator's Specific Powers and Duties. In addition to any powers,
rights and duties set forth elsewhere in the Plan, the Administrator shall
have the following discretionary powers and duties:
A. To adopt such rules and regulations consistent with the provisions
of the Plan;
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<PAGE> 24
B. To enforce the Plan in accordance with its terms and any rules and
regulations he establishes;
C. To maintain records concerning the Plan sufficient to prepare
reports, returns and other information required by the Plan or by
law;
D. To construe and interpret the Plan and to resolve all questions
arising under the Plan;
E. To direct the Employer to pay benefits under the Plan, and to give
such other directions and instructions as may be necessary for the
proper administration of the Plan;
F. To be responsible for the preparation, filing and disclosure on
behalf of the Plan of such documents and reports as are required by
any applicable federal or state law.
7.5 Employer's Responsibility to Administrator. The Employer shall furnish the
Administrator such data and information as he may require. The records of
the Employer shall be determinative of each Participant's period of
employment, termination of employment and the reason therefor, leave of
absence, reemployment, years of service, personal data, and compensation
reductions. Participants and their Beneficiaries shall furnish to the
Administrator such evidence, data, or information, and execute such
documents as the Administrator requests.
7.6 Liability. Neither the Administrator nor the Employer shall be liable to
any person for any action taken or omitted in connection with the
administration of this Plan unless attributable to his own fraud or
willful misconduct; nor shall the Employer be liable to any person for
such action unless attributable to fraud or willful misconduct on the part
of the director, officer or employee of the Employer.
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<PAGE> 25
7.7 Procedure to Claim Benefits. Each Participant or Beneficiary must claim any
benefit to which he is entitled under this Plan by a written notification to the
Administrator. If a claim is denied, it must be denied within a reasonable
period of time, and be contained in a written notice stating the following:
A. The specific reason for the denial,
B. Specific reference to the Plan Provision on which the denial is
based,
C. Description of additional information necessary for the claimant to
present his claim, if any, and an explanation of why such material
is necessary, and
D. An explanation of the Plan's claim procedure.
The claimant will have sixty (60) days to request a review of the denial
by the Administrator, who will provide a full and fair review. The request
for review must be written and submitted to the same person who handles
initial claims. The claimant may review pertinent documents, and he may
submit issues and comments in writing. The decision by the Administrator
with respect to the review must be given within sixty (60) days after
receipt of the request, unless special circumstances require an extension
(such as for a hearing). In no event shall the decision be delayed beyond
one hundred twenty (120) days after receipt of the request for review. The
decision shall be written in a manner calculated to be understood by the
claimant, and it shall include specific reasons and refer to specific Plan
provisions as to its effect.
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<PAGE> 26
ARTICLE VIII
AMENDMENT AND TERMINATION
8.1 Plan Amendment. The Plan may be amended in whole or in part by Tiffany and
Parent at any time; provided that no such amendment shall reduce any
Participant's Vested Deferred Benefits. Notice of any such amendment shall
be given in writing to each Participant and each Beneficiary of a deceased
Participant.
8.2 No Premature Distribution. Subject to Sections 8.3 and 8.4, no amendment
hereto shall permit amounts accumulated pursuant to the Plan prior to the
amendment to be paid to a Participant or Beneficiary prior to the time he
would otherwise be entitled thereto.
8.3 Termination of the Plan. Tiffany reserves the right to terminate the Plan
and/or the Deferral Agreements pertaining to Participants at any time in
the event that Tiffany, in its sole discretion, shall determine that the
economics of the Plan have been adversely and materially affected by a
change in the tax laws, other governmental action or other event beyond
the control of the Participant and Tiffany or that the termination of the
Plan is otherwise in the best interest of the Tiffany.
8.4 Effect of Termination. In the event of Plan termination pursuant to
Section 8.3, the Employer shall pay a benefit to the Participant or the
Beneficiary of any deceased Participant, in lieu of other benefits under
this Plan, equal to the full value of Participant's Deferred Benefit
Accounts determined pursuant to Section 4.7, provided, however, that in
the event that installment payments pursuant to Section 6.1C.1 have
commenced in respect to a Participant, such installments payments will
continue to made to such Participant and no premature distribution will be
made in respect of such installment payments to such Participant.
8.5 Adverse Determination. Notwithstanding anything stated to the contrary in
this Plan, if at any time, as a result of a Final Determination, a tax is
payable by a Participant in respect of any benefit under this
- Page 23 -
10/1/98
<PAGE> 27
Plan prior to payment under the terms of this Plan of such benefit, then
Employer shall pay to the Participant who is required to pay such tax the
amount of such tax and such Participant's Deferred Benefits shall be
reduced by the amount of such tax. Employer reserves the right, in its
sole discretion, to allocate the amount of such tax among the various
Deferred Benefit Accounts of any Participant who is required to pay such
tax. For the purposes of this Section 8.5 the term "Final Determination"
means (i) an assessment of tax by the United States Internal Revenue
Service addressed to the Participant or his Beneficiary which is not
timely appealed to the courts; (ii) a final determination by the United
States Tax Court or any other Federal Court, the time for an appeal
thereof having expired or been waived; or (iii) an opinion by Employer's
counsel, addressed to Employer and in form and substance satisfactory to
Employer, to the effect that amounts payable under the Plan are subject to
Federal income tax to the Participant or his Beneficiary prior to payment
under the terms of the Plan. No Final Determination shall be deemed to
have occurred until the Employer has actually received a copy of the
assessment, court order or opinion which forms the basis thereof and such
other documents as it may reasonably request.
ARTICLE IX
MISCELLANEOUS
9.1 Supplemental Benefits. The benefits provided for the Participants under
this Plan are in addition to benefits provided by any other plan or
program of the Employer and, except as otherwise expressly provided for
herein, the benefits of this Plan shall supplement and shall not supersede
any plan or agreement between the Employer and any Participant.
9.2 Governing Law. The Plan shall be governed and construed under the laws of
the State of New York as in effect at the time of its adoption.
9.3 Jurisdiction. The courts of the State of New York shall have exclusive
jurisdiction in any or all actions arising under this Plan.
- Page 24 -
10/1/98
<PAGE> 28
9.4 Binding Terms. The terms of this Plan shall be binding upon and inure to
the benefit of the parties hereto, their respective heirs, executors,
administrators and successors.
9.5 Spendthrift Provision. The interest of any Participant or any beneficiary
receiving payments hereunder shall not be subject to anticipation, nor to
voluntary or involuntary alienation until distribution is actually made.
9.6 No Assignment Permitted. No Participant, Beneficiary or heir shall have
any right to commute, sell, transfer, assign or otherwise convey the right
to receive any payment under the terms of this Plan. Any such attempted
assignment shall be considered null and void.
9.7 Construction. All headings preceding the text of the several Articles
hereof are inserted solely for reference and shall not constitute a part
of this Plan, nor affect its meaning, construction or effect. Where the
context admits, words in the masculine gender shall include the feminine
and neuter genders, and the singular shall mean the plural.
9.8 No Employment Agreement. Nothing in this Plan or in any Deferral Agreement
entered into under this Plan shall confer on any Participant the right to
continued employment with any Employer and, except as expressly set forth
in a written agreement entered into with the express authorization of the
Board of Directors of Employer, both the Participant and the Employer
shall be free to terminate Participant's employment for any cause or
without cause.
- Page 25 -
10/1/98
<PAGE> 29
Tiffany and Company
("Tiffany")
By:________________________
Name: Patrick B. Dorsey
Title: Senior Vice President - Secretary
Attest:__________________________
Name: Scott Klion
Title: Assistant Secretary
Tiffany & Co.
("Parent")
By:________________________
Name: Patrick B. Dorsey
Title: Senior Vice President - Secretary
Attest:_________________________
Name: Scott Klion
Title: Assistant Secretary
- Page 26 -
10/1/98
<PAGE> 30
Schedule 4.5 to Tiffany and Company Executive Deferral Plan
Investment Funds
1. Fidelity Cash Reserves, 82 Devonshire Street, Boston Massachusetts.
Investment Objective: as high a level of current income as is
consistent with the preservation of capital and liquidity through
investment in money market instruments.
2. Fidelity Magellan Funds, 82 Devonshire Street, Boston Massachusetts.
Investment Objective: capital appreciation by investment primarily
in common stock and securities convertible into common stock.
3. Fidelity Capital Appreciation Fund, 82 Devonshire Street, Boston
Massachusetts. Investment Objective: capital appreciation.
Effective January 1, 1999 the Following Investment Funds Will Replace Those
Indicated Above
1. Nationwide Separate Account Trust Money Market Fund (Nationwide Advisory
Services, Inc.). Investment Objective: to provide as high a level of
current income as is considered consistent with the preservation of
capital and liquidity by investing primarily money market
instruments.
2. Nationwide Separate Account Trust Nationwide Multi Sector Bond Fund (Saloman
Brothers Asset Management). Investment Objective: to obtain a high
level of current income. Capital appreciation is a secondary
objective.
3. Dreyfus Corporation Stock Index Fund (Dreyfus Mellon Equity Associates).
Investment Objective: to provide investment result that correspond
to the price and yield performance of publicly traded common stocks
in the aggregate, as represented by the Standard & Poor's 500
Composite Index. In anticipation of taking a market position, the
Fund is permitted to purchase and sell stock index futures. The Fund
is neither affiliated with nor sponsored by Standard & Poor's.
4. Fidelity VIP: Growth Opportunities Portfolio - Service Class (Fidelity
Management & Research Corporation). Investment Objective: seeks
capital growth and does not pursue income.
5. Fidelity VIP II: Contrafund Portfolio - Service Class (Fidelity Management &
Research Corporation). Investment Objective: seeks long-term capital
appreciation by investing primarily in a broad variety of common
stocks, using both growth-oriented and contrarian principles.
- Page 27 -
10/1/98
<PAGE> 1
Exhibit 10.108
Tiffany & Co.
Report on Form 10-K
Fiscal 1998
AMENDED AND RESTATED
TIFFANY & CO. RETIREMENT PLAN
FOR NON-EMPLOYEE DIRECTORS
By resolution of its Board of Directors taken January 19, 1989, Tiffany & Co.
established this Retirement Plan for Non-Employee Directors as a non-qualified
deferred compensation plan for the exclusive benefit of its non-employee
directors. This plan has been subsequently amended by resolutions of the Board
of Directors taken March 16, 1989 and January 21, 1999.
ARTICLE I
INTRODUCTION
Section 1.1 Name of Plan. The name of the plan is the "Tiffany & Co.
Retirement Plan for Non-Employee Directors." It is also
referred to as the "Plan."
Section 1.2 Effective Date. The effective date of the Plan is January 1,
1989.
ARTICLE II
DEFINITIONS
Section 2.1 "Administrator" shall mean the Secretary of the Company.
Section 2.2 "Board" shall mean the Board of Directors of the Company.
Section 2.3 "Company" shall mean Tiffany & Co., a Delaware corporation.
Section 2.4 "Compensation Committee" shall mean the Compensation Committee
appointed by the Board, or its delegate.
Section 2.5 "Director" shall mean a member of the Board.
Section 2.6 "Non-Employee Director" shall mean a Director who, at the time
he or she ceases to serve on the Board, is not an employee of
the Company or any of its subsidiaries or affiliated business
entities.
Section 2.7 "Participant" shall mean a Non-Employee Director.
Section 2.8 "Payment Date" shall mean the first business day of each
calendar quarter.
Section 2.9 "Retainer" shall mean the lesser of (i) the annual retainer
fee in effect at the time a Participant's service on the Board
ceases, exclusive of additional fees,
1
<PAGE> 2
if any, paid with respect to service on Board committees and
any fees paid on a per-meeting-attended basis and (ii)
$38,000.
Section 2.10 "Retirement Account Balance" shall mean, with respect to a
Participant, an amount equal to (i) such Participant's full
and fractional Years of Service (with partial months of
service counted as full months) multiplied by (ii) such
Participant's Retainer, minus (a) the pro-rata portion of the
Retainer received by such Participant for any period during
which such Participant did not serve in the capacity of
Director except to the extent such portion has been forfeited
(including forfeitures under the Company's 1988 Director
Option Plan) or repaid by such Participant prior to the first
Payment Date and (b) the sum of all payments made to such
Participant pursuant to Section 3.3 below.
Section 2.11 "Retirement Age" shall mean, with respect to a Participant,
the later of (i) such Participant's 65th birthday or (ii) the
date such Participant ceases to serve on the Board.
Section 2.12 "Year of Service" shall mean each 12 month period subsequent
to October 15, 1984 during which a Participant serves as a
Director inclusive of any time served as a Director while an
employee of the Company or any of its subsidiaries or
affiliated business entities.
ARTICLE III
BENEFITS UNDER THE PLAN
Section 3.1 Eligibility to Receive Benefits Under the Plan. A Participant
under this Plan shall be eligible to receive benefits under
this Plan only if, at the time he or she ceases to serve on
the Board, such Participant (i) is vested pursuant to Section
3.2 below, and (ii) has not earned an accrued benefit under
any retirement plan which is (a) sponsored by the Company or
any of its subsidiaries or affiliated businesses and (b)
qualified under Section 401 (a) of the Internal Revenue Code
of 1986, as amended.
Section 3.2 Vesting of Benefits Under the Plan. No Participant shall be
vested in any benefits until the Participant completes 5 years
of Service on the Board. After a Participant completes 5 years
of Service on the Board, the Participant's benefits under the
Plan shall be fully vested. In the case of any break in
service, all Years of Service shall be aggregated to measure
the total Years of Service.
Section 3.3 Amount of Annual Benefit Payable Under The Plan. A Participant
who is eligible to receive benefits under Section 3.1 shall be
entitled to receive a quarterly benefit equal to the lesser of
(i) twenty-five percent (25%) of his or her Retainer or (ii)
his or her Retirement Account Balance.
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<PAGE> 3
Section 3.4 Time and Duration of Payments Under the Plan. Benefits under
the Plan shall be paid on each Payment Date, provided the
Participant is alive on such Payment Date, beginning with the
Payment Date immediately following the date a Participant
reaches Retirement Age and shall continue until the
Participant's Retirement Account Balance equals zero (0).
In no event shall any benefits be paid under the Plan after
the death of a Participant other than benefits due and payable
under the Plan at the time of the death of the Participant.
Notwithstanding any other provision of this Plan to the
contrary, the Compensation Committee may, in its sole
discretion by majority approval of its members, direct that
payments be made before such payments are otherwise due if,
for any reason (including, but not limited to, a change in the
tax or revenue laws of the United States of America, a
published ruling or similar announcement issued by the
Internal Revenue Service, a regulation issued by the Secretary
of the Treasury or his delegate, or a decision by a court of
competent jurisdiction involving a Participant or beneficiary)
it believes that a Participant or beneficiary has recognized
or will recognize and will be required to pay federal income
taxes in respect of amounts that are or will be payable to him
or her under the Plan before they are paid. In making this
determination, the Compensation Committee shall take into
account the hardship that would be imposed on the Participant
or beneficiary by the payment of federal income taxes under
such circumstances.
Section 3.5 Non-Assignability of Interests. The interests herein and the
right to receive benefits hereunder may not be anticipated,
alienated, sold, transferred, assigned, pledged, encumbered,
or subjected to any charge or legal process, and if any
attempt is made to do so, or a Participant becomes bankrupt,
the interests under the Plan of the person affected may be
terminated by the Compensation Committee, which, in its sole
discretion, may cause the same to be held or applied for the
benefit of one or more of the dependents of such person or
make any other disposition of such interests as it deems
appropriate.
ARTICLE IV
PLAN ADMINISTRATION
Section 4.1 Administration. The Plan shall be administered by the
Administrator. However, the Compensation Committee shall have
the authority to interpret the Plan and any such
interpretation shall be final and binding on all parties. The
Board, or if specifically delegated, its delegate, may amend
or terminate the Plan at any time, provided that no such
amendment or termination shall adversely affect the amounts
payable or accrued under the Plan before the time of such
amendment or termination
3
<PAGE> 4
unless the Participant becomes entitled to a benefit equal in
value to such amount under another plan or practice adopted by
the Company. The Company will pay for all distributions made
pursuant to the Plan and for all costs, charges and expenses
relating to the administration of the Plan.
Section 4.2 Applicable Law. All questions pertaining to the construction,
validity and effect of the Plan shall be determined in
accordance with the laws of the United States and the internal
laws of the State of New York.
Certified as correct:
- --------------------------
Patrick B. Dorsey
Secretary of Tiffany & Co.
4
<PAGE> 1
Exhibit 10.113
Tiffany & Co.
Report on Form 10-K
Fiscal 1998
<PAGE> 2
TIFFANY AND COMPANY
PENSION PLAN
================================================================================
SECTION 1 - DEFINITIONS
================================================================================
The following words and phrases as used herein shall have the following
meanings unless a different meaning is plainly required by the context:
(1) "Plan" Tiffany and Company Pension Plan, as described herein or
as from time to time hereafter amended or restated.
(2) "Company" Tiffany and Company, Howard H. Sweet & Son, Inc.
(formerly, Tiffco Jewelry and Chain Crafts, Inc.), or
Judel Products Corp. (formerly, Glassware Acquisition
Inc.), provided, however, that, in the case of a person
who is an Employee of Tiffany and Company on his
Employment Commencement Date, the term "Company" as used
herein with respect to such person shall refer to
Tiffany and Company, in the case of a person who is an
Employee of Howard H. Sweet & Son, Inc. on his
Employment Commencement Date, the term "Company" as used
herein with respect to such person shall refer to Howard
H. Sweet & Son, Inc., and in the case of a person who is
an Employee of Judel Products Corp. on his Employment
Commencement Date, the term "Company" as used herein
with respect to such person shall refer to Judel
Products Corp.
(3) "Board of
Directors" Board of Directors of Tiffany and Company.
(4) "Pre-ERISA
Plan" Tiffany and Company Pension Plan and Trust as in effect
through January 31, 1976, incorporating an informal
pension plan maintained by the Company prior to February
1, 1968.
1
<PAGE> 3
(5) "Affiliate" Any member of the controlled group of companies of which
the Company is a member within the meaning of Section
414(b), (c) and (m) of the Code.
(6) "Committee" The Pension Committee as described in Section 7.
(7) "Plan Year" Each twelve (12) month period commencing February 1 and
ending on or before January 31, 1981, the eleven (11)
month period ending December 31, 1981 and each calendar
year thereafter.
(8) "Employee" Any person employed by the Company who receives regular
stated compensation from the Company, but excluding
employees (a) whose principal place of work is outside
the United States and (b) who are paid their
Compensation from a foreign bank or bank branch or who
are eligible to receive retirement, severance or similar
benefits under foreign law or as a result of foreign
custom. Notwithstanding any other provision of the Plan,
in the case of an Employee who shall transfer from a
foreign location to a U.S. location or vice versa, the
Committee may, by regulation or otherwise and to the
extent it considers advisable, treat service and/or
compensation during the period of such transfer,
including compensation from and service with an
Affiliate, as service and/or compensation with the
Company for the purposes of vesting and/or for
determining the amount of pension or other benefits
which may be payable under the Plan.
Based on his stated work schedule an Employee shall be
classified as a Regular Employee or a Part-time
Employee. A change in status between Part-time Employee
and Regular Employee shall be deemed effective for
purposes of Subsections (3) and (4) of Section 4 as of
the first of the month coincident with or next following
the date of such change or, in the case of an Employee
who terminates employment and is reemployed in a
different status prior to incurring a Break in Service,
as of the intervening first day of a Plan Year or, if
none, as of the first of the month coincident with or
next following the date of termination.
2
<PAGE> 4
If a change in status between Part-time Employee and
Regular Employee is deemed effective on other than the
first day of a Plan Year and clause (ii) (A) of
Subsection 4(3) is applicable to the Employee, he shall
not incur a Break in Service with respect to the Plan
Year in which the change is deemed effective, and shall
for purposes of determining Compensation, Average Final
Compensation and Creditable Service be considered to
have been a Regular Employee for the entirety of such
Plan Year; if such a change in status is deemed
effective on other than the first day of a Plan Year and
clause (ii) (B) of Subsection 4(3) or Subsection 4(4) is
applicable to the Employee, he shall for purposes of
determining Compensation, Average Final Compensation and
Creditable Service be considered to have been a
Part-time Employee for the entirety of the Plan Year in
which the change is deemed effective.
(9) "Participant" Any person included as a Participant as provided in
Section 2, except an Employee covered by a collective
bargaining agreement which expressly excludes members of
the collective bargaining unit from the Plan.
(10) "Compensation" (i) In the case of an Employee who is not paid on a
piecework basis, the actual base salary paid to him for
services rendered to the Company (exclusive of amounts
attributable to the exercise of employee stock options),
including straight time for all hours worked,
commissions, bonuses, premiums and incentives; and (ii)
in the case of an Employee who is paid on a piecework
basis, the actual remuneration paid to him; and (iii) in
the case of any Employee shown in the attached Appendix
I, the reference to Company for purposes of this
Subsection 1(10) only shall also refer to Affiliates of
the Company prior to October 15, 1984.
[Rule: For the purposes of determining a Participant's
Compensation under the Plan, such calculation shall be
made without regard to any deductions from a
Participant's earnings for (i) contributions to the
Tiffany & Co. Employee Profit Sharing and Retirement
Savings Plan, (ii) premium payments under any of the
Company's health care plan(s), (iii) allocations to a
Dependent Care Spending Account, or (iv) deferrals under
the Company's Executive
3
<PAGE> 5
Deferral Plan, which are not includable in the gross
income of the Participant for the taxable year in which
such contributions, payments, allocations and/or
deferrals are made.]
(11) "Average Final
Compensation" With respect to an Employee his average annual
Compensation during those five years of his last ten
years of Creditable Service in which his compensation
was highest. If an Employee has less than five years of
Creditable Service or less than five Plan Years in which
he accrued Creditable Service, as the case may be, his
"Average Final Compensation" shall be computed over all
such years.
Except in respect of subdivision (b) of Subsection 5(1),
"Average Final Compensation" shall reflect those five
years of his last ten years of creditable service prior
to July 31, 1985 or December 31, 1984, as required by
Section 5, in which his compensation was highest.
Compensation earned subsequent to July 31, 1985 or
December 31, 1984, as required by Section 5, shall not
be reflected in this calculation.
[Rule: With respect to the change in the definition of
Average Final Compensation under Subsection 1(11) of the
Plan effective for Plan Years beginning after December
31, 1994, such change shall not apply to any
Compensation earned prior to the effective date of such
change. Accordingly, if Compensation for any Plan Year
beginning prior to January 1, 1995 is taken into account
in calculating Average Final Compensation or for any
other purpose under the Plan, Compensation for such Plan
Year shall be determined in accordance with the previous
definition of Average Final Compensation. In addition,
the Accrued Benefit determined in accordance with the
new definition of Average Final Compensation shall not
be less than the Accrued Benefit determined as of
December 31, 1994 under the previous definition.]
4
<PAGE> 6
(12) "Creditable
Service" The period including fractions of a year rounded up to
the next whole month of an Employee's service which is
counted as a period of service for vesting purposes
under Section 4; provided, however, that in the case of
an Employee who accrued Creditable Service hereunder
both as a Part-time Employee and also as a Regular
Employee, any Plan Year during which he completes at
least 1,000 hours of service but less than the standard
number of hours of service in the regularly scheduled
work weeks for the location at which he is employed
shall be counted as the corresponding fraction of a year
of Creditable Service; and provided, further, that in
the event of a change in status to which clause (ii)(B)
of Subsection 4(3) applies, there shall be taken into
account for purposes of the preceding clause, with
respect to the Plan Year in which the change in status
is effective, forty-five hours of service for each week
or partial week of service performed subsequent to the
change in status and before the end of such Plan Year.
If an Employee becomes re-employed after February 1,
1976, and again becomes a Participant pursuant to
Section 2, subject to Subsection 4(5), his service shall
be credited as of his Reemployment Commencement Date.
For an Employee shown in the attached Appendix I, any
period during which the Employee was an employee of an
Affiliate of the Company prior to October 15, 1984.
(13) "Actuarial
Equivalent" A benefit of equivalent value, when computed on the
basis of the factors shown in Appendix II.
(14) "Social
Security
Benefit" The amount of the Participant's anticipated unreduced
primary insurance benefit under Title II of the Federal
Social Security Act. The benefit shall be computed on
the basis of such Act in effect at the earlier of July
31, 1985, or the time he last ceases to be a
Participant, and shall consist of that annual amount to
which he would upon proper application be entitled at
the date of retirement or termination, or at age 65 if
later, on the basis of his
5
<PAGE> 7
Compensation as determined under the Plan irrespective
of earnings he may be receiving in excess of any limit
on earnings for full entitlement to such benefit.
When used in connection with the computation of any
retirement allowance other than a retirement allowance
payable to a Participant who terminates employment at or
after age 65, it shall mean the said Social Security
Benefit computed on the assumption that the Participant
will continue to receive Compensation until age 65 for
purposes of Social Security in the same amount as in
effect on the date of his retirement or termination.
With respect to periods for which the Participant's
actual compensation for Social Security purposes is not
available, the Social Security Benefit shall be
calculated on the assumption that the Participant had
compensation for Social Security purposes after 1951, or
age 22 if later and prior to his last date of hire or
rehire which increased 6 percent each year to his
Compensation on such date of hire or rehire.
Each Participant shall have the right to have his Social
Security Benefit computed on the basis of the
Participant's actual salary history as of the earlier of
July 31, 1985, or the time he last ceases to be a
Participant, instead of estimated compensation. Each
Employee shall be provided with written notice of the
Employee's right to supply actual salary history and of
the financial consequences of failing to supply such
history. The notice must be given each time the summary
plan description is provided to the Employee and must
also be given upon separation from service. The notice
must state that the Employee can obtain the actual
salary history from the Social Security Administration.
If the Participant supplies documentation of his or her
actual salary history, the Participant's benefit will be
adjusted to the offset based on actual salary history
for years previously estimated before separation from
service (assuming no post-separation or post-retirement
compensation). Such documentation must be supplied
within a reasonable period following the later of the
date of separation from service (by retirement or
otherwise) or the time when the Participant is notified
of the benefit to which he is entitled.
(15) "Hour of
6
<PAGE> 8
Service" (1) Any hour for which a Regular Employee or a Part-time
Employee is directly or indirectly paid or entitled to
payment by the Company for the performance of duties,
which such hours shall be credited, in the case of a
Part-time Employee, for the computation period or
periods in which the duties are performed;
(2) Any hour for which a Part-time Employee is directly
or indirectly paid or entitled to payment by the Company
for reasons (such as vacation, sickness or disability)
other than for the performance of duties, which such
hours shall be credited to the Part-time Employee in
accordance with Department of Labor Regulations section
2530.200b-2; and
(3) Any hour for which back pay, irrespective of
mitigation of damages, has been either awarded or agreed
to by the Company in the case of a Part-time Employee,
which such hours shall be credited to the Part-time
Employee for the computation period or periods to which
the award or agreement pertains.
Any Employee who is paid on a piecework basis shall be
credited with ten Hours of Service for each day on which
he would be entitled to credit for one Hour of Service
under the foregoing definition.
(16) "Employment
Commencement
Date" In the case of a Regular Employee, the date on which he
first performs an Hour of Service. In the case of a
Part-time Employee, "Employment Commencement Date" shall
mean the first day for which he is entitled to be
credited with an Hour of Service under subdivision (1)
of Subsection 1(15) above.
(17) "Discontinuance
of Active
Employment Date" In the case of a Regular Employee, the earlier of (i)
his retirement or other termination of employment with
the Company, or (ii) the first anniversary of the first
day of any continuing period of absence from service
with the Company, with or without pay, which is neither
(A) a leave
7
<PAGE> 9
of absence described in Subsection (1), (2) or (3) of
Section 3, nor (B) the result of his retirement or
termination.
(18) "Break in
Service" (1) In the case of a Part-time Employee, a Plan Year in
which he fails to complete an Hour of Service, other
than a Plan Year during any part of which he is on a
leave of absence described in Section 3. In the case of
a Regular Employee, a Break in Service shall occur when
he fails to perform an Hour of Service within a one-year
period beginning on any Discontinuance of Active
Employment Date.
(2) In addition, and notwithstanding the rules described
under subdivision (1) of Subsection 1(18) above, any
individual who is absent from the service of the Company
on account of pregnancy, birth of a child of such
individual, or for purposes of caring for such a child
during the period immediately following childbirth or
placement for adoption shall be credited, for purposes
of this Section, with the Hours of Service for which he
would normally have received credit had he not been
absent from the service of the Company for one of the
reasons described above, up to a maximum of five hundred
and one (501) Hours of Service, which hours shall be
credited in accordance with Section 202(b)(5) of ERISA,
as amended by the Retirement Equity Act of 1984, and
related regulations.
(19) "Reemployment
Commencement
Date" In the case of a Regular Employee, the date on which he
first performs an Hour of Service following a Break in
Service. In the case of a Part-time Employee,
"Reemployment Commencement Date" shall mean the first
day for which he is entitled to be credited with an Hour
of Service under subdivision (1) of Subsection 1(15)
following (i) a Break in Service which follows either
(A) a Plan Year or other eligibility computation period
described in Section 2 in which he is credited with at
least an Hour of Service, or (B) a Plan Year during any
part of which he is on a leave of absence described in
Section 3, or (ii) a Plan Year in which he is credited
with no Hours of Service which follows a Reemployment
Commencement Date established
8
<PAGE> 10
under clause (i).
(20) The masculine pronoun wherever used shall include the
feminine.
(21) "Code" Internal Revenue Code of 1986, as amended.
(22) "Taxable Wage
Base" The contribution and benefit base under section 230 of
the Federal Social Security Act as in effect in the year
in question.
(23) "Covered
Compensation" The average (without indexing) of the Taxable Wage Bases
in effect for each calendar year during the 35-year
period ending with the year in which the Participant
attains (or will attain) social security retirement age,
calculated as provided in Treasury Regulation
ss.1.401(1)-1(c)(7).
(24) "Accrued Benefit" The amount on a given date of the benefits provided
under Subsection 5(1) of the Plan using Average Final
Compensation, Covered Compensation and Creditable
Service determined as of such date. The Accrued Benefit
may be expressed in a form which is the actuarial
equivalent.
9
<PAGE> 11
SECTION 2 - PARTICIPATION
================================================================================
(1) Any person who is a Participant as of December 31, 1981 shall remain a
Participant in the Plan on January 1, 1982. After December 31, 1981, a Regular
Employee shall become a Participant on the first anniversary of his Employment
Commencement Date, provided that he is an Employee on such first anniversary. A
Part-time Employee shall become a Participant after December 31, 1981 on January
1 or July 1 coincident with or next following the first anniversary of his
Employment Commencement Date, provided (i) that he is an Employee on such
January 1 or July 1, and (ii) that he completes 1,000 Hours of Service during
the one-year period commencing on his Employment Commencement Date. If a person
would have become a Participant but for the fact that he was not an Employee on
the applicable entry date, he shall nevertheless become a Participant
immediately upon his again becoming an Employee, provided he again becomes an
Employee prior to incurring a Break in Service.
(2) If a Part-time Employee does not complete 1,000 Hours of Service during the
one-year period commencing on his Employment Commencement Date, he shall become
a Participant immediately following the close of the first Plan Year commencing
after his Employment Commencement Date in which he does complete 1,000 Hours of
Service, other than a Plan Year in which he has a Reemployment Commencement
Date, in which case he shall become a Participant immediately following the
close of (i) the one-year period commencing on such Reemployment Commencement
Date or (ii) the first Plan Year commencing after such Reemployment Commencement
Date, in which he completes 1,000 Hours of Service.
(3) A Regular Employee who has become a Participant shall cease to be a
Participant on his Discontinuance of Active Employment Date, and a Part-time
Employee who has become a Participant shall cease to be a Participant on the
date he ceases to be an Employee or, if earlier, on the date on which he incurs
a Break in Service. Such a former Participant, unless he ceased to be a
Participant as a result of incurring a Break in Service, shall immediately again
become a Participant if, prior to incurring a Break in Service, he either (i)
performs an Hour of Service as a Regular Employee, or (ii) is entitled to be
credited with an Hour of Service under subdivision (1) of Subsection 1(15) as a
Part-time Employee.
(4) If an Employee who is vested ceases to be a Participant and has a subsequent
Reemployment Commencement Date on which he is a Regular Employee, he shall again
become a Participant as of his Reemployment Commencement Date if (i) he is an
Employee on the first anniversary of such date or, (ii) he is not an Employee on
such first anniversary but again becomes an Employee prior to incurring a Break
in Service which is subsequent to his Reemployment Commencement Date. If an
Employee who is vested ceases to be a Participant and has a subsequent
Reemployment Commencement Date on which he is a Part-time Employee, he shall
again become a Participant as of his Reemployment Commencement Date if he
completes 1,000 Hours of Service during the one-year period commencing on his
Reemployment
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<PAGE> 12
Commencement Date or, if he does not, as of the first day of the first Plan Year
commencing after his Reemployment Commencement Date in which he completes 1,000
Hours of Service, other than a Plan Year in which he has another Reemployment
Commencement Date.
(5) If any Employee who is not vested ceases to be a Participant and has a
subsequent Reemployment Commencement Date, he shall again become a Participant
in accordance with the appropriate rule of Subsection (4) for vested Employees,
provided that the number of consecutive one-year Breaks in Service did not equal
or exceed the greater of 5 or the aggregate number of years of service before
such Break in Service. If his prior service does not satisfy the applicable
condition of the preceding sentence, his Reemployment Commencement Date will be
deemed his Employment Commencement Date for purposes of this Section, and rules
of Subsections (1) and (2) hereof will apply.
(6) For purposes of this Section 2, in determining whether an Employee shall
become a Participant, service with any Affiliate of the Company shall be taken
into account, in accordance with the foregoing rules, as if such service had
been rendered to the Company and such service shall include service as a leased
employee within the meaning of Code Section 414(n) of the Company or an
Affiliate.
(7) For purposes of this Section 2, William R. Chaney will not be considered a
Participant at any time under the provisions of this Plan.
(8) Notwithstanding anything herein to the contrary, for purposes of this
Section 2, any person who was an employee of Howard H. Sweet & Son, Inc.
(formerly Tiffco Jewelry and Chain Crafts, Inc.) on January 27, 1997, shall
become a Participant in the Plan as of his or her Employment Commencement Date.
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<PAGE> 13
SECTION 3 - LEAVES OF ABSENCE
================================================================================
(1) The Company may authorize an unpaid or paid leave of absence under its
standard personnel practices as applied in a uniform and non-discriminatory
manner to all Employees similarly situated, provided that the Employee must
return to service with the Company within the period of time specified in the
authorization.
(2) Any Employee who shall be granted a leave of absence for service in the
armed forces of the United States or in emergency government service, or
pursuant to a leave granted by the Company, shall be deemed to be an Employee
during such leave and his Compensation in the last full calendar year of his
employment immediately preceding the beginning of such leave shall be deemed to
be his annual Compensation for the purposes of the Plan during such leave,
provided that such Employee returns to the employ of the Company within the
period provided by law for the protection of his reemployment rights following
his discharge or release from active duty in such armed forces.
(3) The Committee may, under rules uniformly applicable to all Employees
similarly situated, include as service and compensation, respectively, for any
Participant retiring hereunder, any period or periods of service and the
compensation earned during such period or periods, not otherwise creditable or
recognized hereunder, rendered or earned in the employment of any Affiliate;
provided that the retirement allowance payable on account of such additional
period of service shall be reduced by any employer-provided retirement benefit
which is payable on account of the same period of service under any retirement
plan of such Affiliate.
(4) Anything herein contained to the contrary notwithstanding, the Committee
may, under rules uniformly applicable to all Employees similarly situated,
include as service such other periods of excused absence from employment as it
deems appropriate and consistent with Plan objectives.
[Rule: Except as otherwise specifically provided in this Section 3, where
the Company authorizes a paid leave of absence which does not require the
Employee to return to service with the Company, such Employee shall be
deemed to be an Employee during such leave for all purposes under the
Plan.]
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<PAGE> 14
SECTION 4 - VESTING
================================================================================
(1) A person shall be vested if the period of his service equals or exceeds five
years computed in accordance with the rules set forth in this section or when he
attains normal retirement age as specified in subdivision (a) of Subsection 5(2)
hereof. A person shall also be vested if he was (i) an employee of Howard H.
Sweet & Son, Inc. (formerly Tiffco Jewelry and Chain Crafts, Inc.) on January
27, 1997, and (ii) a Participant in the Plan as of such date.
(2) There shall be counted as periods of service for vesting purposes the sum of
the following periods:
(a) any period prior to February 1, 1976 during which a person was an
Employee, unless such period would have been disregarded in computing service
under the rules of the Plan regarding Breaks in Service then applicable, but
including any period which was disregarded solely because of the Participant's
age;
(b) with respect to a Part-time Employee, each Plan Year beginning on or
after February 1, 1976 during which such Employee completes 1,000 Hours of
Service;
(c) with respect to a Regular Employee, each period of his employment with
the Employer, beginning on both (i) the later of February 1, 1976 or his
Employment Commencement Date and (ii) any Reemployment Commencement Date after
February 1, 1976, and ending on his Discontinuance of Active Employment Date
next following;
(d) with respect to a Regular Employee, the period between any
Discontinuance of Active Employment Date and the date on which he next performs
an Hour of Service if such date is within one year of such Discontinuance of
Active Employment Date; provided, however, that if a Regular Employee's
employment is terminated during any absence from service which would not
otherwise result in a Discontinuance of Active Employment Date until the first
anniversary of the first day thereof, vesting service shall include the period
from his discontinuance of Active Employment Date to the date on which he next
performs such an Hour of Service only if he next performs such an Hour of
Service within one year of the first day of such absence.
(e) with respect to an Employee shown in the attached Appendix I, the
period during which the Employee was an employee of an Affiliate of the Company
prior to October 15, 1984.
Notwithstanding the foregoing, in no event shall the number of years of
service credited to an Employee under the Plan as in effect on January 1, 1982
be less than the number of such years credited to him under the Plan as in
effect on December 31, 1981.
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<PAGE> 15
(3) For purposes of Subsection (2) above, if a person's status is changed from
Part-time Employee to Regular Employee, he shall receive credit, as of the date
such change in status is effective, for a period of service consisting of (i)
service credited to him under Subsection (2)(a) and (b) for Plan Years prior to
the Plan Year in which the change in status is effective, and (ii) the greater
of (A) the period beginning on the first day of the Plan Year in which the
change in status is effective (or, if later, the first day he was an Employee
during such Plan Year) and ending on the date such change in status is
effective, or (B) the service which would be taken into account for such period
under Subsection (2)(b) on the basis of Hours of Service completed to the date
of change. If clause (ii)(A) of the preceding sentence applies, the Employee
shall receive credit for service subsequent to the change in status commencing
on the first day thereafter on which he is an Employee; if clause (ii)(B) of
such sentence applies, he shall only receive credit for service subsequent to
the change in status commencing on the day after the last day of the Plan Year
in which the change in status is effective.
(4) For purposes of Subsection (2) above, if a person's status is changed from
Regular Employee to Part-time Employee, he shall receive credit, as of the date
such change in status is effective, for (i) a number of years of service equal
to the number of 1-year periods of service credited to him under Subsections
(2)(a), (c) and (d) as of the date the change in status is effective, and (ii)
forty-five Hours of Service for each week or partial week of any fractional part
of a year credited to him under such Subsections (2)(a), (c) and (d) as of the
date the change in status is effective, such hours to be credited to him for
purposes of Subsection 2(b) in the Plan Year in which the change is effective.
(5) Notwithstanding anything to the contrary above, if a former Participant
again becomes a Participant after incurring a Break in Service, service credited
for vesting purposes prior to the date his participation ceased shall be
disregarded if (A) his service for vesting purposes on such date is less than
five years and (B) if the number of his consecutive one-year Breaks in Service
equals or exceeds 5. However, for purposes of this Subsection (5), there shall
be no forfeiture of vesting service prior to the date participation ceased if he
remains a Participant at all times during those four consecutive Plan Years next
following the Plan year in which he again becomes a Participant.
(6) Solely for the purposes of calculating vesting service under this Section 4
and not for the purpose of calculating Creditable Service under Subsection 1(12)
hereof (except to the extent provided in Section 3 hereof), service with any
Affiliate of the Company shall be taken into account as if the term "Company" in
the foregoing rules included such Affiliate and service as a leased employee
within the meaning of Section 414(n) on the Company or an Affiliate shall also
be taken into account, provided that no period of service shall be taken into
account hereunder more than once.
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<PAGE> 16
SECTION 5 - BENEFITS
================================================================================
(1) (a) Subject to Subsection 5(3), any person who, subsequent to December 31,
1984, ceases to be a Participant after he is vested and whose Month of
Retirement occurs prior to December 1, 1988, shall be entitled to an annual
retirement allowance, payable in monthly installments commencing at the end of
the calendar month immediately following his Month of Retirement and continuing
to and including the earlier of the December 1988 monthly payment or the last
monthly payment in the month of his death, equal to the annual retirement
allowance computed in subdivision (c) of this Subsection, plus, for each year or
fraction of a year of Creditable Service beginning January 1, 1985, the sum of
1-1/2 percent of Compensation not in excess of the Taxable Wage Base and 2
percent of Compensation in excess of the Taxable Wage Base. For this subdivision
(a) of Subsection 5(1) only, Compensation earned after January 1, 1985, for any
Participant who works less than a full Plan Year, will equal the Compensation he
would have earned if he had worked the full Plan Year. In addition, a
Participant's "Month of Retirement" for the purposes of this Subsection 5(1)
only is the month in which he attains the normal retirement age specified in
subdivision (a) of Subsection 5(2) or, if later, in which he ceases to be a
Participant.
(b) Subject to Subsection 5(3), any person who, subsequent to December 31,
1984, ceases to be a Participant after he is vested shall be entitled to an
annual retirement allowance, payable in monthly installments commencing at the
end of the later of January 1989 or the calendar month immediately following his
Month of Retirement, and continuing to and including the last monthly payment in
the month of his death, equal to 1 percent of the Participant's Average Final
Compensation not in excess of Covered Compensation multiplied by the number of
his years, including fractions thereof, of Creditable Service, plus 1-1/2
percent of his Average Final Compensation in excess of Covered Compensation
multiplied by the number of his years, including fractions thereof, of
Creditable Service. For this subdivision (b) of Subsection 5(1) only,
Compensation earned after January 1, 1985, for any Participant or former
Participant who works less than a full Plan Year, will equal the Compensation he
would have earned if he had worked the full Plan Year.
(c) The annual retirement allowance accrued as of December 31, 1984, shall
be equal to the excess of (i) 1-3/4 percent of the Participant's Average Final
Compensation (determined as of December 31, 1984) multiplied by the number of
his years of Creditable Service (determined as of December 31, 1984) up to ten
plus 1-1/2 percent of the Participant's Average Final Compensation (determined
as of December 31, 1984) multiplied by his remaining years of Creditable Service
(determined as of December 31, 1984) over (ii) 1-1/4 percent of the
Participant's Social Security Benefit (determined as if the Participant had
terminated as of December 31, 1984) multiplied by the number of his years of
Creditable Service (determined as of December 31, 1984) completed by him
subsequent to the end of the calendar month in which he attained age 25 (for
purposes of this clause (ii) of this Subsection 5(1)(b), prorating Creditable
15
<PAGE> 17
Service accrued for the Plan Year in which he attained age 25 if he was then
considered a Part-time Employee), up to a maximum of 50 years.
(d) In no event shall the annual retirement allowance computed in
subdivisions (a), (b) and (c) of this Subsection (5)(1) be less than the annual
retirement allowance computed as the excess of (i) 1-3/4 percent of the
Participant's Average Final Compensation (determined as of July 31, 1985)
multiplied by the number of his years of Creditable Service (determined as of
July 31, 1985) up to ten plus 1-1/2 percent of the Participant's Average Final
Compensation (determined as of July 31, 1985), multiplied by his remaining years
of Creditable Service (determined as of July 31, 1985) over (ii) 1-1/4 percent
of the Participant's Social Security Benefit (determined as if the Participant
had terminated as of July 31, 1985) multiplied by the number of his years of
Creditable Service (determined as of July 31, 1985) completed by him subsequent
to the end of the calendar month in which he attained age 25 (for purposes of
this clause (ii) of this Subsection 5(1)(c), prorating Creditable Service
accrued for the Plan Year in which he attained age 25 if he was then considered
a Part-time Employee), up to a maximum of 50 years.
(e) In no event shall the annual retirement allowance computed in
subdivisions (a), (b) and (c), and subject to a minimum benefit as computed in
subdivision (d) of this Subsection (5)(1) be less than $100 multiplied by the
number of his years of Creditable Service. In addition, no Participant's Accrued
Benefit shall be less than what such Participant had accrued as of the last day
of the last Plan Year beginning before January 1, 1989.
(2) (a) Normal Retirement - A Participant who has reached the later of (i) his
65th birthday or (ii) the 5th anniversary of his date of hire (normal retirement
age hereunder) may retire on a retirement allowance computed in accordance with
Subsection 5(1); except that any Participant shall, at his election, be
continued in service after age 65. At normal retirement age, all benefits
payable under the Plan shall be nonforfeitable.
(b) Early Retirement - Any Participant who has attained age 60 and has
rendered 15 or more years of Creditable Service shall be retired by the
Committee on a retirement allowance on the first day of the calendar month next
following receipt by the Committee of a written application therefor by the
Participant. At the Participant's election, he shall receive a retirement
allowance commencing on his retirement which shall be equal to the retirement
allowance computed in accordance with 5(1) he would otherwise receive upon
attaining age 65, reduced by 1/12th of 5 percent for each month by which the
date of his retirement allowance would otherwise have commenced under Subsection
5(1).
At the time of retirement pursuant to this subsection (b) on a
retirement allowance commencing on his retirement, the Participant may elect to
convert the retirement allowance otherwise payable to him into an Actuarial
Equivalent of such amount so that, with his Social Security Benefit which, for
this purpose, shall be assumed to commence as of either his sixty-second or
sixty-fifth birthday, as the Participant elects, the Participant will receive,
so far as
16
<PAGE> 18
possible, the same amount each year before and after he commences to receive
such Social Security Benefit.
(c) Vested Retirement - Payments to any person who ceases to be a
Participant on or after February 1, 1976, and is entitled to a retirement
allowance pursuant to Subsection 5(1) and to whom subdivisions (a) and (b) of
Subsection 5(2) do not apply shall commence on the last day of the calendar
month next following the later of (i) the occurrence of his 65th birthday or
(ii) receipt by the Committee of a written application therefor; provided that
if the proper amount of such payment cannot for any reason be ascertained by
such date, a payment retroactive to such date shall be made within sixty days of
the earliest date on which it can be ascertained. Such a person may, by written
notice to the Committee, elect to have his retirement allowance commence at any
time after he has attained age 60 and completed 15 years of Creditable Service
and after receipt by the Committee of his application for benefits; provided,
however, that payment of such allowance prior to the attainment of age 65 shall
be in a reduced amount and shall be the Actuarial Equivalent as of the date
payments commence of the retirement allowance computed in accordance with
Subsection 5(1) which he would otherwise receive after attaining age 65.
(3) Optional Benefits in Lieu of Regular Benefits. (a) Prior to commencement of
the payment of a retirement allowance to a Participant, he shall be given a
written explanation of the benefits and the options under subdivision (b) hereof
pursuant to which he may provide a benefit for his spouse in the event of his
death after his retirement. Unless an optional form of benefit is selected
pursuant to an election meeting the same requirements as prescribed in Section
5(3)(c), or with respect to former Participants in Section 5(4)(f), within the
ninety (90) day period ending on the date benefit payments would commence, a
married Participant shall be deemed to have elected to convert his retirement
allowance into an Actuarial Equivalent in the form of an annuity for his life
with a survivor annuity for the life of his spouse equal to one-half of the
amount of the annuity payable during their joint lives.
(b) Any Participant may, by written notice made in accordance with the
same requirements for former Participants as prescribed in Section 5(4)(f) and
filed with the Committee prior to the date of the commencement of his retirement
allowance, elect to convert his retirement allowance into the Actuarial
Equivalent thereof paying a proportionately reduced retirement allowance during
his life, with the provision that after his death an allowance of 50%,
66-2/3%,75% or 100% of the rate of his reduced allowance, at his designation,
shall continue during the life of, and shall be paid to, the beneficiary
designated by him at the time of electing the option. The election of an
optional benefit may be revoked or changed by the Participant at any time prior
to the benefit commencement date; provided, however, that if the Participant or
the beneficiary designated under the option dies prior to the date the election
of the option becomes effective, the option shall thereby be automatically
revoked; and provided, further, that if the designated beneficiary is other than
the Participant's spouse, the present value of the payments to be made to such
Participant shall be more than 50 percent of the present value of the total
payments to be made to the Participant and his beneficiaries. A Participant's
designation of
17
<PAGE> 19
a beneficiary other than the Participant's spouse shall not be effective unless
(i) the Participant and his spouse have waived the spouse's allowance defined in
Subsection 5(4)(d) and the spouse has waived his or her right to be the
Participant's beneficiary, (ii) the Participant has no spouse, or (iii) the
spouse cannot be located.
(c) Effective on or after August 23, 1984, in the event that a married
Participant elects to receive his Plan benefit in a form other than an annuity
for his life with a survivor annuity for the life of his spouse, such election
shall not take effect unless written consent of the spouse to such election,
witnessed by a notary public or a member of the Committee, is on file with the
Committee. Such consent shall be irrevocable as to any specific waiver or
designation of any beneficiary. (The requirement of spousal consent may be
waived by the Committee under certain limited circumstances in accordance with
Section 417(a)(2) of the Internal Revenue code of 1954, as amended, and related
regulations.) A spousal consent filed with the Committee shall be applicable
only with respect to the spouse who has signed such form.
(4) Survivorship Benefits. (a) Upon (i) the death of a Participant who has
become vested in his Accrued Benefit, as provided in Section 4 of the Plan, (ii)
the death of a Participant who has attained normal retirement age as specified
in Subdivision (a) of Subsection 5(2), or (iii) the death of a former
Participant who had attained age 60 and rendered 15 or more years of Creditable
Service prior to the date he ceased to be a Participant (but who was not
receiving at the time of his death any retirement allowance), there shall be
payable to the Participant's or former Participant's spouse, if any, a spouse's
allowance defined in Subsection 5(4)(d) below.
(b) Unless an optional form of benefit is selected within the election
period pursuant to a qualified election, upon the death of a former Participant
who had become vested in his Accrued Benefit, as provided in Section 4 of the
Plan, there shall be payable to the former Participant's spouse, if any, a
spouse's allowance as prescribed in Subsection 5(4)(e) below.
(c) The spouse's allowance shall commence as the first day of the calendar
month following the month in which the Participant or former Participant died or
would have been age 60, whichever is the later, except that the Committee may,
under rules uniformly applicable to all Participants and former Participants
similarly situated, direct payment commencing on the first day of any earlier
calendar month after the Participant's or former Participant's death.
(d) If the Committee does not direct early commencement of payment, the
spouse's allowance shall be the greater of (i) an allowance for the life of the
spouse, payable monthly, which is equal to 20 percent of the Participant's or
former Participant's annual rate of compensation at the time of his death or
earlier termination of employment, or (ii) an allowance equal to the allowance
the spouse would have received if the Participant or former Participant had
retired or terminated his service on the date of his death and elected to
receive, based on his Average Final Compensation, years of Creditable Service
and age at such date, the maximum retirement allowance payable to him under
Subsections 5(1) and 5(2), commencing at the earliest possible date and
continuing after his death in the same monthly amount during the life of his
18
<PAGE> 20
spouse. If the Committee does direct early commencement of payment, the spouse's
allowance shall be a monthly allowance for the life of the spouse which is the
Actuarial Equivalent of the allowance the spouse would otherwise have received
pursuant to the preceding sentences. Notwithstanding the foregoing, in no event
shall the spouse's allowance be less than the amount the spouse would have
received under the terms of the Plan as in effect on December 31, 1984, had the
Participant died on that date.
(e) If the Committee does not direct early commencement of payment, and
unless an optional form of benefit is selected within the election periods
pursuant to a qualified election, the former Participant's spouse allowance
shall equal the allowance the spouse would have received if the former
Participant had retired or terminated his service on the date of his death and
elected to receive, based on his Average Final Compensation, years of Creditable
Service at the date of termination of service with the Company, a retirement
allowance payable to him under Subsection 5(1) and 5(2), commencing at the
earliest possible date and continuing after his death in a amount equal to 50%
of the amount that would have been payable to the Participant during his life.
If the Committee does not direct early commencement of payment, the spouse's
allowance shall be a monthly allowance for the life of the spouse which is the
Actuarial Equivalent of the allowance the spouse would otherwise receive
pursuant to the preceding sentences. Notwithstanding the foregoing, in no event
shall the spouse's allowance be less than the amount the spouse would have
received under the terms of the plan as in effect on December 31, 1984 had the
former Participant died on that date.
(f) (i) Definitions. Election Period for Former Participants - The
election period shall begin on the date that participation ceases.
Qualified Election for Former Participants - A waiver of the
preretirement survivor annuity as described in Subsection 5(4)(e). The waiver
must be in writing and must be consented to by the Participant's spouse. The
spouse's consent to a waiver must be witnessed by a plan representative or
notary public. Notwithstanding this consent requirement, if the Participant
establishes to the satisfaction of a plan representative that such written
consent may not be obtained because there is no spouse or the spouse cannot be
located, a waiver will be deemed a qualified election. Any consent necessary
under this provision will be valid only with respect to the spouse who signs the
consent, or in the event of a deemed qualified election, the designated spouse.
Additionally, a revocation of a prior waiver may be made by a Participant
without the consent of the spouse at any time before the commencement of
benefits. The number of revocations shall not be limited.
(ii) Notice Requirements. In the case of a qualified preretirement
survivor annuity as described in Subsection 5(4)(e), the plan administrator
shall provide each former Participant a written explanation of: (i) the terms
and conditions of a qualified preretirement survivor annuity; (ii) the former
Participant's right to make and the effect of an election to waive the qualified
preretirement survivor annuity form of benefit; (iii) the rights of a former
Participant's spouse; and (iv) the right to make, and the effect of, a
revocation of a previous
19
<PAGE> 21
election to waive the qualified preretirement survivor annuity. The Plan
administrator shall provide such notice within the period beginning with the
first day of the Plan Year in which the Participant attains age 32 and ending
with the close of the Plan Year preceding the Plan Year in which the Participant
attains age 35. If the Participant enters the Plan after the first day of the
Plan Year in which the Participant attained age 32, the Plan administrator shall
provide such notice no later than the close of the second Plan Year following
the entry of the Participant into the Plan.
(5) Restoration to Participation. Anything herein contained to the contrary
notwithstanding, if a former Participant who has received or is receiving
benefits under this Section 5 again becomes an Employee, (i) any benefits he is
receiving shall cease upon his reemployment if he is reemployed as a Regular
Employee, or upon his satisfying the participation requirements of Section 2 if
he is reemployed as a Part-time Employee, provided that benefits will not be
suspended in any calendar month unless the Employee has completed at least 40
hours of service with the company in service recognized under Section
203(a)(3)(B) of ERISA or received payment for any such hours of service
performed on each of 8 or more days in such month, (ii) he shall then again
become a Participant, and (iii) the Creditable Service which he had when he last
ceased to be an Employee shall be restored to him. On his subsequent retirement
the benefit payable shall be based on his Compensation and Creditable Service
before and after the period of prior retirement, reduced by an amount which is
the Actuarial Equivalent of the benefits he received prior to his restoration to
participation; provided, however, that such benefit shall not be less than the
benefit he was receiving during his prior retirement. If benefit payments have
been suspended, payments shall resume no later than the first day of the third
calendar month after the calendar month in which the Employee ceases to be
employed in ERISA Section 203(a)(3)(B) service. No payment shall be withheld by
the Plan pursuant to this section unless the Plan notifies the Employee by
personal delivery or first class mail during the first calendar month or payroll
period in which the Plan withholds payments that his benefits are suspended.
Such notifications shall contain a description of the specific reasons why
benefit payments are being suspended, a description of the Plan provision
relating to the suspension of payments, a copy of such provisions, and a
statement to the effect that applicable Department of Labor regulations may be
found in Section 2530.203-3 of the Code of Federal Regulations. In addition, the
notice shall inform the Employee of the Plan's procedures for affording a review
of the suspension of benefits. Requests for such reviews may be considered in
accordance with the claims procedure adopted by the Plan pursuant to Section 503
of ERISA and applicable regulations.
(6) Termination of Benefit Payments. Payment of benefits under this Section 5 to
a former Participant, his spouse or other beneficiary shall cease with the
monthly payment for the month in which such former Participant, spouse or
beneficiary dies.
(7) Disabled Participants. Anything herein contained to the contrary
notwithstanding, any Participant while in receipt of payments under the
Company's Short Term Illness Plan, Extended Illness Plan, Short Term Disability
Plan or Long Term Disability Plan (collectively, the
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<PAGE> 22
"Program"), shall be treated as a Participant and shall continue to accrue
Creditable Service until he dies, retires, or becomes ineligible for further
payments under such Program, and his Compensation in the last full year of his
employment shall be deemed to be his annual Compensation for purposes of the
Plan during such period. In the event such a Participant dies, retires or
becomes ineligible for further payments under such Program and is not restored
to active service, any retirement allowance payable on his account under the
Plan shall be made on the basis of his age, Average Final Compensation and
Creditable Service at the time he died, retired or became ineligible.
(8) Maximum Trust Benefits. (a) Basic Limitation - Subject to the adjustments
provided under Subsection (8)(b) of this Section, and in accordance with Section
415(b) of the Code, the maximum annual benefit payable to a Participant in a
form described in this Section, commencing on or after the Participant's
sixty-second (62nd) birthday and prior to his sixty-fifth (65th) birthday under
this Plan and any other defined benefit plan maintained by the Company for any
Plan year shall, in no event, exceed the lesser of: (1) $90,000 (as adjusted in
accordance with Code Section 415(b)(2)(B) and regulations issued thereunder), or
(2) one hundred percent (100%) of the Participant's average total Compensation
for the three consecutive Plan Years during which he was a Participant and had
the greatest aggregate total compensation from the Company.
(b) Adjustments in the Limitation - (1) The maximum annual retirement
allowance permitted under Subsection (8)(a) to any Participant who has completed
less than ten (10) Years of Service with the Company shall be the amount
determined under Subsection (8)(a), multiplied by a fraction, the numerator of
which is the number of the Participant's Years of Service (including fractions
of a year) and the denominator of which is ten (10). (2) The maximum annual
retirement allowance permitted under Subsection (8)(a)(1) above shall be
adjusted annually (or when allowable) for increases in the cost of living, in
accordance with regulations issued by the Secretary of the Treasury pursuant to
the provisions of Section 415(d) of the Code, as amended. Each adjustment (when
allowable) shall be limited to the scheduled annual increase determined by the
commissioner of the Internal Revenue Service. Such cost of living adjustment
(when allowable) shall be effective not earlier than January 1 of the year in
which it is made. (3) The maximum annual retirement allowance payable under
Subsection (8)(a)(1) to any Participant who attains an early retirement age as
specified in Section 5(2)(b) that occurs prior to his attainment of age
sixty-two (62) shall be the Actuarial Equivalent of such maximum benefit under
Subsection (8)(a)(1) commencing at age sixty-two (62) but based on the greater
of the rate specified in Section 1(13) or a five percent (5.0%) interest rate,
but not less than $75,000. (4) The maximum annual retirement allowance payable
under Subsection (8)(a)(1) to any Participant whose actual retirement occurs
after he attains the normal retirement age specified in Section 5(2)(a) shall be
the Actuarial Equivalent of such maximum benefit under Subsection (8)(a)(1),
commencing at his Normal Retirement Date but based on the lesser of the rate
specified in Section 1(13) or a five percent (5.0%) interest rate.
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<PAGE> 23
(c) Limitation for Multiple Plans - In any case in which an Employee is a
participant in both a tax-qualified defined benefit plan and a tax-qualified
defined contribution plan maintained by the Company, the sum of the defined
benefit plan fraction and the defined contribution plan fraction for any Plan
Year shall not exceed 1.0. In the event such sum would otherwise exceed 1.0, the
benefit projected under the defined benefit plan will be reduced as necessary so
that such sum shall equal 1.0.
(1) The defined benefit plan fraction for any Plan Year is a fraction: (a)
the numerator of which is the projected annual benefit of the Participant
under the Plan (determined as of the close of the Plan Year), and (b) the
denominator of which is the lesser of (i) or (ii), as follows: (i) 1.25
multiplied by the defined benefit plan dollar limitation under Subsection
(8)(a)(1) in effect for such year, or (ii) 1.4 multiplied by the amount
specified under Subsection (8)(a)(2) for such year, (determined as of the
close of the Plan Year).
(2) The defined contribution plan fraction for any calendar year is a
fraction: (a) the numerator of which is the sum of the "annual additions",
as defined in Section 415(c) of the Code, to the Participant's account as
of the close of the Plan Year, and (b) the denominator of which is the sum
of the lesser of (i) or (ii) for such year and each prior Year of Service
with the Company: (i) 1.25 multiplied by the defined contribution plan
dollar limitation in effect for such year, or (ii) 1.4 multiplied by
twenty-five percent (25%) of the Participant's Compensation for such year.
(9) Prior Plan Provisions. Anything to the contrary herein notwithstanding, the
Accrued Benefit and service credited for vesting purposes of any person who is a
Participant on December 31, 1984 and January 1, 1985 for any period of service
ending on or before December 31, 1984 shall be no less than the benefit he would
have accrued at December 31, 1984 or the vesting service he would have completed
at December 31, 1984 under the terms of the Plan as in effect on such date,
assuming his credited service and Average Final Compensation were computed on
such date.
(10) Limitation on Timing of Commencement of Benefit Payments. As required under
Sections 401(a)(14) and 401(a)(9) of the Code, the timing of the commencement of
payment of benefits under the Plan shall be subject to the following rules:
(a) General Rule - Unless the Participant otherwise elects, the payment of
benefits under the Plan to a Participant may not be delayed beyond the later of
the sixtieth (60th) day after the close of the Plan Year in which the latest of
the following events occurs:
(1) the Participant's 65th birthday,
(2) the tenth (10th) anniversary of the year in which the Participant
commenced participation in the Plan, or
22
<PAGE> 24
(3) the Participant's termination of service with the Company.
(b) In general, distribution of benefits shall not be made or commence
later than April 1 of the calendar year following the calendar year in which the
employee attains age 70-1/2. For the purposes of this Section, Participants who
are age 70-1/2 or older as of January 1, 1989, and who have not retired shall be
deemed to have attained age 70-1/2 on such date. Notwithstanding the foregoing,
a Participant who has attained age 70-1/2 either (i) before January 1, 1988, or
(ii) after December 31, 1998, and who is not a 5-percent owner (as defined in
Section 416(i) of the Code) will not commence payments until his retirement.
In the event a distribution of benefits to a Participant is required
to begin under this Subsection before a Participant's actual retirement, such
Participant's Accrued Benefit shall be determined as of the December 31
immediately preceding the date such distribution is required to begin. As of
each succeeding December 31 prior to the Participant's actual retirement and as
of his actual retirement, the Participant's Accrued Benefit shall be recomputed
as if each such date were his actual retirement date.However, the amount of any
additional Accrued Benefit resulting from such recomputation shall be reduced by
the Actuarial Equivalent of the total benefits received by the Participant under
the Plan prior to such recomputation. In no event, however, shall the
Participant's Accrued Benefit, upon any recomputation hereunder, be less than
the greater of (i) such Participant's Accrued Benefit as of December 31, 1994,
and (ii) such Participant's Accrued Benefit as of the immediately preceding
recomputation.
In the event a distribution of benefits to a Participant is not
required to begin under this Subsection before the Participant's actual
retirement, such Participant's Accrued Benefit shall be determined as of April 1
of the calendar year following the calendar year in which the Participant
attains age 70-1/2. As of each succeeding December 31 prior to the Participant's
actual retirement and as of his actual retirement, the Participant's Accrued
Benefit shall be recomputed as if each such date were his actual retirement
date. The amount of Accrued Benefit resulting from such recomputation shall be
the greater of (a) the Accrued Benefit computed in accordance with Section 5
(without regard to this Subsection) based on his Average Final Compensation and
Creditable Service as of the recomputation date or (b) the Actuarial Equivalent
of the Accrued Benefit determined at the immediately preceding recomputation
date. In no event, however, shall the Participant's Accrued Benefit, upon any
recomputation hereunder, be less than the greater of (i) such Participant's
Accrued Benefit as of December 31, 1998, and (ii) such Participant's Accrued
Benefit as of the immediately preceding recomputation.
(11) Compensation Limit. In addition to other applicable limitations which may
be set forth in the Plan and notwithstanding any other contrary provision of the
Plan, for Plan Years beginning on or after January 1, 1994, the annual
compensation of each employee taken into account under the Plan shall not exceed
the annual compensation limit established by the Omnibus Budget Reconciliation
Act of 1993 ("OBRA '93"). The annual compensation limit is $150,000, as adjusted
by the Commissioner of Internal Revenue for increases in the cost of living in
accordance with Section 401(a)(17) of the Code. The cost-of-living adjustment in
effect for a
23
<PAGE> 25
calendar year applies to any period, not exceeding 12 months, over which
compensation is determined (a "Determination Period") beginning in such calendar
year. If a Determination Period consists of fewer than 12 months, the OBRA '93
annual compensation limit will be multiplied by a fraction, the numerator of
which is the number of months in the Determination Period, and the denominator
of which is 12. For Plan Years beginning on or after January 1, 1994, any
reference in this Plan to the limitation under Section 401(a)(17) of the Code
shall mean the OBRA '93 annual compensation limit set forth in the provision.
If compensation for any prior Determination Period is taken into
account in determining a Participant's benefits accruing in the current Plan
Year, the compensation for that prior Determination Period is subject to the
OBRA '93 annual compensation limit in effect for that prior Determination
Period. For this purpose, for Determination Periods beginning before the first
day of the first Plan Year beginning on or after January 1, 1994, the OBRA '93
annual compensation limit is $150,000.
Notwithstanding any other provision in the Plan, each Section
401(a)(17) Participant's Accrued Benefit under this Plan will be the greater of:
(a) such Participant's Accrued Benefit as of the last day of the Plan Year
beginning before January 1, 1994, frozen in accordance with Section
1.401(a)(4)-13 of the Code regulations; or
(b) such Participant's Accrued Benefit determined with respect to the benefit
formula applicable for the Plan Year beginning on or after January 1,
1994, as applied to the Participant's total years of Creditable Service
taken into account under the Plan for purposes of benefit accruals.
For purposes of this Subsection, a Section 401(a)(17) Participant means a
Participant whose current Accrued Benefit as of a date on or after January 1,
1994, is based on Compensation for a year beginning prior to the first day of
the first Plan Year beginning on or after January 1, 1994, that exceeded
$150,000.
(12) Intentionally omitted.
(13) Required Cash-outs of Certain Accrued Benefits. If a Participant terminates
service and the present value of the vested accrued pension or survivor benefit
provided under Subsection 5(2), 5(3), or 5(4) in respect of such Participant is
equal to or less than $5,000, the person to whom such benefits would otherwise
be paid in monthly installments shall receive a lump-sum distribution of the
present value of the entire vested portion of such Accrued Benefit, except that,
in the case of a qualified joint and survivor annuity or qualified
pre-retirement survivor annuity, as such terms are defined under Code Sections
417(b) and 417(c), respectively, no such lump-sum distribution shall be made
after the annuity starting date, as defined under Section 417(f)(2) of the Code.
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<PAGE> 26
For the purposes of determining the present value of a vested Accrued
Benefit under this Subsection in respect of (i) current and future Participants
who terminate service with the Company on and after January 1, 1997, and (ii)
former Participants who, as of January 1, 1997, have not previously received a
mandatory lump-sum distribution and are not currently receiving an annual
retirement allowance under the Plan, the interest rate assumption shall be the
annual rate of interest on 30-year U.S. Treasury securities in the third month
prior to the date of distribution; and the mortality rate assumption shall be
based on the GAM 1983 Mortality Table (with mortality rates composed of 50% of
the male rates and 50% of the female rates), as such may be amended from time to
time.
Notwithstanding Subsections 1(12) and 4(5) and any other provision herein
to the contrary, if a former Employee who has received a lump-sum distribution
of his entire non-forfeitable benefit under the Plan pursuant to this Subsection
is re-employed by the Company, he shall be treated as a new Employee and prior
service performed by the Employee in respect of such distribution shall be
disregarded for purposes of determining his Accrued Benefit under the Plan.
(14) Rollover of Eligible Distributions. This Section shall apply to
distributions made on or after January 1, 1993. Notwithstanding any provision in
the Plan to the contrary that would otherwise limit a distributee's election
under this Section, a distributee may elect, at the time and in the manner
prescribed by the Pension Committee, to have any portion of an eligible rollover
distribution paid directly to an eligible retirement plan specified by the
distributee in a direct rollover.
For purposes of this Section:
(a) "eligible rollover distribution" shall mean any distribution of all or any
portion of the balance to the credit of the distributee, except that an
eligible rollover distribution does not include (i) any distribution that
is one of a series of substantially equal payments (not less frequently
than annually) made for the life (or life expectancy) of the distributee
or the joint lives (or joint life expectancies) of the distributee and the
distributee's designated beneficiary, or for a period of ten years or
more, (ii) any distribution to the extent such distribution is required
under Section 401(a)(9) of the Code, and (iii) the portion of any
distribution that is not includible in gross income (determined without
regard to the exclusion for net unrealized appreciation with respect to
employer securities).
(b) "eligible retirement plan" shall mean an individual retirement account
described in Section 408(a) of the Code, an individual retirement annuity
described in Section 408(b) of the Code, an annuity plan described in
Section 403(a) of the Code, or an qualified trust described in Section
401(a) of the Code, that accepts the distributee's eligible rollover
distribution. However, in the case of an eligible rollover distribution to
a surviving spouse, an eligible retirement plan is an individual
retirement account or individual retirement annuity.
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<PAGE> 27
(c) "distributee" shall mean a Participant or former Participant. In addition,
the Participant's or former Participant's surviving spouse and the
Participant's or former Participant's spouse or former spouse who is the
alternate payee under a qualified domestic relations order, as defined in
Section 414(p) of the Code, are distributees with regard to the interest
of the spouse or former spouse.
(d) "direct rollover" shall mean a payment by the Plan to the eligible
retirement plan specified by the distributee.
"(15) Additional Benefit Amounts for Certain Retirees. With respect to each
former Participant in the Plan, or surviving spouse or other designated
beneficiary of such former Participant, who in either case is listed by name or
social security number in the attached Appendix III, such person shall be paid
on a monthly basis, in addition to any monthly benefit such person is otherwise
entitled to receive under the terms of the Plan, the amount set opposite such
person's name in Appendix III, beginning May 1, 1998, and continuing until such
person's death. Thereafter, if such person is a former Participant and shall
have made one of the elections described in and in accordance with Section 3(b)
hereof and such election is then in effect and has not been revoked, such
payments shall continue during the life of, and shall be paid to, such person's
surviving spouse or other beneficiary designated in such election until his or
her death, provided, however, that, if such election provides for less than 100%
of the former Participant's retirement allowance be paid to his or her surviving
spouse or other beneficiary after the former Participant's death, the
supplemental payments provided for in this Section 5(15) to such surviving
spouse or other beneficiary shall be reduced in the same proportion as the
former Participant's retirement allowance is adjusted pursuant to such
election."
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<PAGE> 28
SECTION 6 - CONTRIBUTIONS
================================================================================
(1) All contributions under the Plan shall be made by the Company, and no
contributions shall be required of Participants. The contributions shall be
payable at such intervals as may be agreed upon by the Company and the
Committee, but at least annually, and shall consist of such contributions as the
Board of Directors may deem advisable, but at least an amount sufficient to
maintain the Plan on a sound actuarial basis. All contributions shall be
transferred by the Company to the Trustee or Trustees to be used in accordance
with the Plan, except that such contributions are to revert to the Company,
without earnings thereon but reduced by any losses thereon, under the following
conditions:
(a) In the case of a contribution which is made by the Company by reason of a
mistake in fact, such contribution shall be returned to the Company within
one (1) year following its payment to the Plan; and
(b) If all or a portion of any contribution is determined to be non-deductible
under Section 404 of the Code, such contribution, to the extent that it is
determined to be non-deductible, shall be returned to the Company within
one (1) year following such determination.
(2) Forfeitures arising from termination of service, death, or for any other
reason shall not be applied to increase the benefits which any person would
otherwise receive under the Plan but shall be used to reduce Plan contributions.
27
<PAGE> 29
SECTION 7 - ADMINISTRATION OF THE PLAN
================================================================================
(1) The general administration of the Plan shall be the responsibility of a
Pension Committee of no less than three members appointed from time to time by
the Board of Directors to serve at the pleasure of the Board of Directors. The
Committee is designated as the named fiduciary within the meaning of Section
402(a) of the Employee Retirement Income Security Act of 1974.
(2) Any Employee appointed a member of the Committee shall serve without
compensation with respect to his services on the Committee. Any member of the
Committee may resign by delivering his written resignation to the Board of
Directors.
(3) The Board of Directors shall appoint one of the members of the Committee as
Chairman. The Secretary, who need not be one of the members of the Committee,
shall be designated by the Committee.
(4) The administrative expenses of the Plan shall be paid by the Company.
(5) The Committee shall designate bank depositories and shall delegate authority
in connection therewith. It may delegate any portion of its authority to
designated individuals or committees, and may retain legal counsel, auditors,
actuaries and consultants and obtain clerical, accounting and other services,
all as it deems necessary in carrying out the provisions of the Plan.
(6) The Committee may act at a meeting or in writing without a meeting. Meetings
shall be held upon such notice, at such places and at such times as the
Committee may from time to time determine. A majority of the member of the
Committee shall constitute a quorum for the transaction of business. All actions
taken by the Committee shall be by the vote of a majority of the members of the
Committee, including actions in writing taken without a meeting.
(7) The Committee from time to time may establish rules for the administration
of the Plan and the transaction of its business. All rules and decisions of the
Committee shall be uniformly and consistently applied to all Participants who
are similarly situated. When making a determination or calculation, the
Committee shall be entitled to rely upon information furnished to it by a
Participant, the Company, the legal counsel of the Company or the Trustee of the
Plan trust. The interpretation and construction of any provision of the Plan by
a majority of the members of the Committee shall be final and conclusive.
(8) The Committee shall adopt from time to time interest assumptions, service
tables, mortality tables and such other data, procedures and methods as may be
necessary or desirable for use in all actuarial calculations required in
connection with the Plan. As an aid to the Committee, the actuary designated by
the Committee shall make annual actuarial valuations of
28
<PAGE> 30
the assets and liabilities, actual and contingent, of the Plan, and shall
certify to the Committee the tables which he would recommend for use by the
Committee.
(9) The Committee shall establish and cause to be maintained a funding standard
account and such other and additional accounts as it deems necessary for the
proper administration of the Plan. It shall keep or cause to be kept in
convenient form such data as may be necessary for actuarial valuations of the
assets and liabilities of the Plan. The Committee shall prepare or cause to be
prepared annually a report showing in reasonable detail the assets and
liabilities of the Plan and giving a brief account of the operation of the Plan
for the past year, and recommending the amount of the Company's contribution to
the Plan for the ensuing year. Such report shall be submitted to the Board of
Directors and shall be filed in the office of the Secretary of the Committee.
(10) In addition to the foregoing, the Committee shall have such duties and
powers as may be necessary to discharge its duties hereunder, including, but not
by way of limitation, the following:
(a) to construe and interpret the Plan, decide all questions of
eligibility and determine the amount, manner and time of payment of any benefits
hereunder;
(b) to prescribe procedures to be followed by Participants or other
beneficiaries filing applications for benefits;
(c) to prepare and distribute in such manner as the Committee determines
to be appropriate, information explaining the Plan;
(d) to receive from the Company and from Participants such information as
shall be necessary for the proper administration of the Plan;
(e) to furnish the Company, upon request, such annual reports with respect
to the administration of the Plan as are reasonable and appropriate;
(f) to receive, review and keep on file (as it deems convenient or proper)
reports of the financial condition, and of the receipts and disbursements, of
the Plan trust from the Trustee; and
(g) to appoint or employ individuals to assist in the administration of
the Plan and any other agents it deems advisable, including legal and actuarial
counsel.
The Committee shall have no power to add to, subtract from or modify any
of the terms of the Plan, or to change or add to any benefits provided by the
Plan, or to waive or fail to apply any requirements for eligibility for a
benefit under the Plan.
29
<PAGE> 31
(11) The Committee shall issue directions to the Trustee concerning all benefits
which are to be paid from the Plan trust pursuant to the provisions of the Plan.
(12) The Committee may require a Participant or other beneficiary to complete
and file with the Committee an application for a benefit and all other forms
approved by the Committee, and to furnish all pertinent information requested by
the Committee. The Committee may rely upon all such information so furnished it,
including the Participant's or other beneficiary's current mailing address.
(13) The Committee and the individual members thereof shall be indemnified by
the Company and not from the Plan trust against any and all liabilities arising
by reason of any act or failure to act made in good faith pursuant to the
provisions of the Plan, including expenses reasonably incurred in the defense of
any claim relating thereto.
(14) In the event of an error in administering the Plan, including, without
limitation, as to eligibility, participation or Creditable Service of any
Participant, or as to the amount of payments made or to be made to a Participant
or other beneficiary, the Committee may take any action, including making such
contributions or payments or demanding such refunds or repayments it deems
appropriate, to place the Participant or other beneficiary as nearly as possible
in the position he would have been in had there been no error.
30
<PAGE> 32
SECTION 8 - MANAGEMENT OF ASSETS
================================================================================
(1) All assets of the Plan shall be held as a special trust for use in
connection with the Plan and providing the benefits and paying the expenses of
the Plan, and no part of the corpus or income shall be used for or diverted to
purposes other than for the exclusive benefit of Participants, retired
Participants and their beneficiaries under the Plan prior to the satisfaction of
all liabilities with respect to such Participants, retired Participants and
their beneficiaries under the Plan. No person shall have any interest in or
right to any part of the earnings of the trust, or any right in, or to, or under
the trust or any part of the assets thereof, except as and to the extent
expressly provided in the Plan and trust agreement.
(2) The Trustee or Trustees shall be appointed from time to time by the
Committee by appropriate instrument with such powers, duties, rights and
obligations as the Committee shall approve. The Committee may remove any Trustee
at any time, upon reasonable notice, and upon such removal or upon the
resignation of any Trustee the Committee shall designate a successor Trustee or
Trustees.
(3) The Committee shall determine the manner in which the funds of the Plan
shall be disbursed but subject to the provisions of the trust instrument under
which the assets of the Plan are held.
(4) The Committee shall have the power to appoint one or more investment
managers, within the meaning of Section 3(38) of the Employee Retirement Income
Security Act of 1974, to manage (including the power to acquire and dispose of)
any assets of the Plan which have been transferred to any Trustee or a specified
portion thereof. In the event that the Committee shall appoint such investment
managers, each such investment manager shall be solely responsible for the
management and control of the assets to which he or it is appointed.
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<PAGE> 33
SECTION 9 - CERTAIN RIGHTS AND OBLIGATIONS
================================================================================
(1) It is the intention of the Company to continue the Plan and make its
contributions regularly each year, but the Company, by action of its Board of
Directors, may for any reason terminate or partially terminate the Plan. If all
liabilities to or on account of the Participants, retired Participants and their
beneficiaries have been satisfied or provided for in full and there is an amount
remaining due to erroneous actuarial computations during the previous life of
the Plan (within the meaning of the regulations under the Internal Revenue
Code), then and not otherwise the Company shall be entitled to receive such
remaining amount.
(2) The establishment of the Plan shall not be construed as conferring any legal
rights upon any Employee or any person for a continuation of employment nor
shall it interfere with the right of the Company to discharge any Employee and
to treat him without regard to the effect which such treatment might have upon
him as a Participant in the Plan.
(3) Any rulings made or acts taken under the Plan by the Board of Directors or
by the Committee with respect to classification of Employees, contributions, or
benefits shall be uniform in their nature and applicable to all those persons
similarly situated. No ruling shall be made or act taken which shall be
discriminatory under the provisions of the Internal Revenue Code.
(4) The provisions of this Subsection (4) shall apply to any one of the 25
highest paid Employees of the Company on any "Commencement Date" whose
anticipated retirement allowance provided under the Plan at normal retirement
date exceeds $1,500 per annum. "Commencement Date" shall mean the effective date
of any amendment to the Plan which increases the benefits. In the event that
during the first 10 years following a "Commencement Date" the Plan is
terminated, the amount of the retirement allowance provided under the Plan for
any one of the aforesaid Employees shall not be greater than the amount of
allowance that can be provided by the largest of the following amounts: (a)
$20,000, or (b) 20% of the first $50,000 of the Participant's "Annual
Compensation", multiplied by the number of years and fractions thereof since the
"Commencement Date" in which the full current costs have been met. As used in
this paragraph, "Annual Compensation" means average compensation during the five
calendar years (or the Participant's period of employment if less than five
years) immediately preceding the date of termination of the Plan or immediately
preceding the date of commencement of retirement benefits under the Plan, if
earlier. The foregoing conditions shall not restrict the current payment of full
retirement benefits called for by the Plan for any Participant or beneficiary
who has retired while the Plan is in full effect and its full current costs have
been met.
In the event that the present value of Plan assets as of the date of
termination of the Plan, calculated utilizing Pension Benefit Guaranty
Corporation assumptions as of the date of termination, equals or exceeds the
present value of the total Accrued Benefits for all Participants
32
<PAGE> 34
(whether or not nonforfeitable), Subsection (4) shall not be applicable to
restrict the Accrued Benefits payable to the twenty-five (25) highest paid
Employees.
This Subsection (4) is included in this Plan to conform to the
requirements of Treasury Regulations Section 1.401-4(c) and shall cease to be
effective at such time as the provisions of Treasury Regulations Section
1.401-4(c) or any substitute therefor are no longer effective or applicable.
(5) If any company is now or hereafter becomes an Affiliate of the Company, the
Board of Directors may include the employees of such Affiliate in the
participation in the Plan upon appropriate action by such company necessary to
adopt the Plan. In such event, or if any persons become Employees of the Company
as the result of merger or consolidation or as the result of acquisition of all
or part of the assets or business of another company, the Board of Directors
shall determine to what extent, if any, credit and benefits shall be granted for
previous service with such Affiliate, but subject to the continued qualification
of the trust for the Plan as tax exempt under the Internal Revenue Code. Any
such Affiliate may terminate its participation in the Plan upon appropriate
action by it, in which event the funds of the Plan held on account of
Participants in the employ of such company not yet retired, after provision in
full for all Participants who have retired from the employ of such company,
shall be determined by the Committee on the basis of actuarial valuation, and
shall be applied as provided in Section 9(1), in the manner there provided if
the Plan should be terminated, or shall be segregated by the Trustee as a
separate trust, pursuant to certification to the Trustee by the Committee
continuing the Plan as a separate Plan for the employees of such company under
which the Board of Directors of such company shall succeed to all the powers and
duties of the Board of Directors, including the appointment of members of the
Committee.
(6) The Plan shall not be merged no consolidated with, nor shall there be a
transfer of any of its assets or liabilities to, any other plan, unless each
Participant, former Participant or beneficiary shall (if the resulting plan were
then terminated) be entitled to receive a benefit immediately after the merger,
consolidation or transfer which is equal to or greater than the benefit he would
have been entitled to receive immediately before the merger, consolidation or
transfer (if the Plan had then been terminated).
(7) Upon the Plan's termination or partial termination, the rights of all
affected Employees to benefits accrued to the date of such termination or
discontinuance, to the extent then funded, shall be nonforfeitable.
(8) Where a Participant or beneficiary is receiving benefits under the Plan, or
where a Participant has been separated from service and has nonforfeitable
rights to benefits under the Plan, such benefits will not be decreased because
of an increase in the benefit levels or wage payments under Title II of the
Social Security Act, if such increase takes place after the later of (a) the
last day of the Participant's service with Company or (b) September 2, 1974.
(9) Unless otherwise specifically provided herein, the terms of the Plan in
effect at the date
33
<PAGE> 35
an Employee's service terminates shall determine his rights and benefits
thereafter.
34
<PAGE> 36
SECTION 10 - CLAIM PROCEDURES
================================================================================
(1) Every claim for benefits under the Plan shall be in writing directed to the
Committee or its designee.
(2) Each claim filed shall be passed upon by the Committee within a reasonable
time from its receipt. If a claim is denied in whole or in part the claimant
shall be given written notice of the denial in language calculated to be
understood by the claimant, which notice shall: (i) specify the reason or
reasons for the denial; (ii) specify the Plan provisions giving rise to the
denial; and (iii) describe any further information or documentation necessary
for the claim to be honored and explain why such documentation or information is
necessary, and explain the Plan's review procedure.
(3) Upon the written request of any claimant whose claim has been denied in
whole or in part, the Committee shall make a full and fair review of the claim
and furnish the claimant with a written decision concerning it.
35
<PAGE> 37
SECTION 11 - NON-ALIENATION OF BENEFITS
================================================================================
(1) No benefit under the Plan shall be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance or charge. Any
attempt so to anticipate, alienate, sell, transfer, assign, pledge, encumber or
charge the same shall be void; nor shall any such benefit be in any manner
liable for or subject to the debts, contracts, liabilities, engagements or torts
of the person entitled to such benefit, unless the assignment of such benefit or
right is pursuant to a "qualified domestic relations order" as defined at
Section 206(d)(3)(B)(i) of ERISA, as amended by the Retirement Equity Act of
1984, and related regulations.
(2) If any person entitled to a benefit under the Plan becomes bankrupt or
attempts to anticipate, alienate, sell, transfer, assign, pledge, encumber or
charge any benefit under the Plan except as specifically provided herein, then
such benefit shall, in the discretion of the Committee, cease and determine. In
that event the Committee shall hold or apply the same for the benefit of such
person, his spouse, children, or other dependents, or any of them in such manner
and in such proportion as the Committee may deem proper.
36
<PAGE> 38
SECTION 12 - TOP HEAVY PLAN
================================================================================
(1) Precedence of Section. Anything in this Plan to the contrary
notwithstanding, the provisions of this Section 12 shall supercede and take
precedence over any other provisions of the Plan for any Plan Year in which the
Plan is determined to be a Top Heavy Plan as determined under Section 12(3).
(2) Definitions. For purposes of determining whether the Plan is a Top Heavy
Plan, as determined under Section 12(3) below, for any Plan Year commencing on
or after January 1, 1984, the following terms, wherever capitalized, shall have
the meanings set forth below:
(a) Accrued Benefit - "Accrued Benefit" means the benefit accrued by a
Participant under Section 5 of the Plan.
(b) Determination Date - "Determination Date" means the date on which the
Plan is tested to determine if it is a Top Heavy Plan, which date shall be the
last day of the Plan Year preceding the Plan Year for which the determination is
being made.
(c) Key Employee - "Key Employee" means an Employee who, at any time
during the current Plan Year or any of the four (4) preceding Plan Years, is or
was:
(1) Officer - An officer of the Company (but not more than the lesser of:
(a) fifty (50) Employees, or (b) the greater of three (3) or ten percent
of the Employees of the Company shall be considered officers for this
purposes) whose annual Compensation is at least $45,000 or such greater
amount as may be recognized for increase in the cost of living in
accordance with Code Section 416(i)(1)(A)(i), or
(2) Employee Owner - One (1) of the ten (10) Employees owning the largest
interests in the Company provided that his annual Compensation is at least
$30,000 or such greater amount as may be recognized for increases in the
cost of living in accordance with Code Section 416(i)(1)(A)(ii) (for
purposes of this Section 12(2)(c)(2), if two (2) Employees have the same
interest in the Company, the Employee with the greater annual Compensation
shall be treated as having a larger interest), or
(3) Five Percent Shareholder - An Employee who is an owner of five percent
(5%) or more of the Company, or
(4) Highly Compensated Shareholder - An Employee who is an owner of one
percent (1%) or more of the Company and who has annual Compensation from
the Company in excess of $150,000.
37
<PAGE> 39
(d) Former Key Employee - "Former Key Employee" means a Participant in the
Plan who, at any time during the four (4) preceding Plan Years, was a Key
Employee but who is not a Key Employee in the current Plan Year or who
terminated his service with the Company in one of the four (4) preceding Plan
Years and was not a Key Employee in the Plan Year in which he terminated.
(e) Non-Key Employee - "Non-Key Employee" means a Participant in the Plan
who, at any time during the current Plan Year, is neither a Key Employee nor a
Former Key Employee.
(f) Top Heavy Plan - "Top Heavy Plan" means a Plan which is determined to
be a Top Heavy Plan for a Plan Year, as described in Section 12(3).
(3) Determination of Top Heavy Plan Status. With respect to each Plan Year
commencing on or after January 1, 1984, a calculation shall be made as of the
applicable Determination Date to determine if the Plan is a Top Heavy Plan for
such Plan Year. A Plan shall be considered to be a Top Heavy Plan for a Plan
Year if the aggregate present value of the Accrued Benefit of Key Employees
(excluding Former Key Employees) under the Plan exceeds sixty percent (60%) of
the aggregate present value of the Accrued Benefit of all Key Employees
(excluding Former Key Employees) and all Non-Key Employees under the Plan,
determined as of the Determination Date. In making such determination, the
Accrued Benefit of all individuals who were not employed by the Company during
the five (5) year period ending on the Determination Date shall be excluded. In
determining if the Plan is a Top Heavy Plan, it shall be aggregated with each
other plan of the Company and/or a related organization in the required
aggregation group as defined at Section 416(g)(2)(A)(i) of the Code and may be
aggregated with any other plans of the Company and/or a related organization in
the permissive aggregation group as defined at Section 416(g)(2)(A)(ii) of the
Code.
(4) Intentionally omitted.
(5) Vesting in Top Heavy Plan Year. With respect to any Plan Year for which the
Plan is determined to be a Top Heavy Plan, each Participant's accrued retirement
allowance benefit shall vest in accordance with the following vesting schedule,
in lieu of the vesting provisions described in Section 4:
<TABLE>
<CAPTION>
Years of Service Vesting Percentage
---------------- ------------------
<S> <C>
Less than 2 0%
2 but less than 3 20%
3 but less than 4 40%
4 but less than 5 60%
5 but less than 6 80%
6 or more 100%
</TABLE>
38
<PAGE> 40
(6) Minimum Benefit Under Top Heavy Plan. Anything in Section 5 to the contrary
notwithstanding, if the Plan is determined to be a Top Heavy Plan for any Plan
Year commencing on or after January 1, 1984, in no event shall the annual
retirement allowance payable to a Participant in the form and manner and at the
time specified in Section 5 be less than: (a) 2.0% of the Participant's average
Compensation for the five (5) consecutive year period in which his Compensation
from the Company was the highest, multiplied by; (b) the number of Plan Years
for which the Plan is determined to be a Top Heavy Plan, but in no event more
than ten (10) such Plan Years.
(7) Maximum Limitation Under Top Heavy Plan. With respect to any Plan Year for
which the Plan is determined to be a Top Heavy Plan, a 1.0 limitation shall be
substituted for the 1.25 limitations at Subsection (8)(c)(1)(b)(i) and
(8)(c)(2)(b)(i) of Section 5.
39
<PAGE> 41
SECTION 13 - AMENDMENTS
================================================================================
The Board of Directors may, at any time and from time to time, modify or amend
in whole or in part any or all of the provisions of the Plan; provided that no
such modification or amendment shall make it possible for any part of the assets
of the Plan to be used for, or diverted to, purposes other than for the
exclusive benefit of Participants, former Participants and their beneficiaries
under the Plan prior to the satisfaction of all Plan liabilities to them.
40
<PAGE> 42
SECTION 14 - CONSTRUCTION
================================================================================
The Plan shall be construed, regulated and administered under the laws of the
State of New York and the United States.
41
<PAGE> 1
Exhibit 10.115a
Tiffany & Co.
Report on Form 10-K
Fiscal 1998
Tiffany and Company
Split-Dollar Life Insurance Agreement
================================================================================
RIDER NO. 2 TO SPLIT-DOLLAR LIFE INSURANCE AGREEMENT
Employee: William R. Chaney
Owner: 1994 Chaney Family Trust u/a 2/23/94
THIS RIDER amends that certain Split-Dollar Life Insurance Agreement made
as of the 23rd day of February, 1994 by and between Tiffany and Company
("Tiffany") and the Employee and Owner named above (the "Agreement") and Rider
No.1 to the Agreement. This Rider shall become part of the Agreement and any
term or phrase defined in the Agreement shall have the same meaning in this
Rider except as herein provided. To the extent that any term or provision of
this Rider conflicts with any term or provision of the Agreement, this Rider
shall supersede and control the Agreement and Rider No. 1.
Defined Term. The following initially capitalized term shall have the meaning
ascribed to it below in lieu of that provided in Rider No. 1:
"Reduced Employee Death Benefit" means a reduced death benefit payable to
Owner from the Policy pursuant to this Agreement equal to Two Hundred
Percent (200%) of Ending Compensation less Five Hundred Thousand Dollars
($500,000).
IN WITNESS WHEREOF, the parties have signed and sealed this Rider as of the ___
day of October, 1998.
WITNESS:
- ------------------------------ ----------------------------------------
William R. Chaney (Employee)
ATTEST: Tiffany and Company
("Tiffany")
By
- ------------------------------ --------------------------------------
Patrick B. Dorsey James N. Fernandez
Secretary Executive Vice President
WITNESS: 1994 Chaney Famjily Trust u/a 2/23/94
(owner)
By
- ----------------------------- --------------------------------------
Carole C. Prosser, Trustee
1
<PAGE> 2
Tiffany and Company
Split-Dollar Life Insurance Agreement
================================================================================
RIDER NO. 3 TO SPLIT-DOLLAR LIFE INSURANCE AGREEMENT
Employee: William R. Chaney
Owner: 1994 Chaney Family Trust u/a 2/23/94
THIS RIDER amends that certain Split-Dollar Life Insurance Agreement made
as of the 23rd day of February, 1994 by and between Tiffany and Company
("Tiffany") and the Employee and Owner named above (the "Agreement") and Riders
Nos. 1 and 2 to the Agreement. This Rider shall become part of the Agreement and
any term or phrase defined in the Agreement shall have the same meaning in this
Rider except as herein provided. To the extent that any term or provision of
this Rider conflicts with any term or provision of the Agreement, this Rider
shall supersede and control the Agreement and Rider Nos. 1 and 2.
Defined Terms. The following initially capitalized term shall have the meaning
ascribed to it below in lieu of that provided in Rider No. 1:
"Retirement" means January 31, 1999, whether or not Employee continues to
be employed by Tiffany.
IN WITNESS WHEREOF, the parties have signed and sealed this Rider as of the ___
day of March, 1999.
WITNESS:
- ------------------------------ ----------------------------------------
William R. Chaney (Employee)
ATTEST: Tiffany and Company
("Tiffany")
By
- ------------------------------ --------------------------------------
Patrick B. Dorsey James N. Fernandez
Secretary Executive Vice President
WITNESS: 1994 Chaney Family Trust u/a 2/23/94
(owner)
By
- ----------------------------- --------------------------------------
Carole C. Prosser, Trustee
1
<PAGE> 3
Tiffany and Company
Split-Dollar Life Insurance Agreement
================================================================================
RIDER NO. 2 TO SPLIT-DOLLAR LIFE INSURANCE AGREEMENT
Employee: William R. Chaney
Owner: Babette C. Chaney et al Trust u/a 2/23/94
THIS RIDER supplements and amends that certain Split-Dollar Life Insurance
Agreement made as of the 23rd day of February, 1994 by and between Tiffany and
Company ("Tiffany") and the Employee and Owner named above (the "Agreement") and
Rider No. 1 to the Agreement. This Rider shall become part of the Agreement and
any term or phrase defined in the Agreement shall have the same meaning in this
Rider except as herein provided. To the extent that any term or provision of
this Rider conflicts with any term or provision of the Agreement, this Rider
shall supersede and control the Agreement and Rider No. 1 thereto.
Defined Terms. The following initially capitalized terms and phrases are hereby
deleted from the list of Defined Terms provided in Rider No. 1: "Ending
Compensation" and "Reduced Employee Death Benefit." The following initially
defined term is hereby added to the list of Defined Terms set forth in Paragraph
A. in Rider No. 1 and shall be used in substitution for the term "Reduced
Employee Death Benefit" wherever such deleted term is used throughout Rider No.
1:
"Post-Retirement Employee Death Benefit" means a death benefit payable to
Owner from the Policy pursuant to this Agreement equal to Five Hundred
Thousand Dollars ($500,000).
IN WITNESS WHEREOF, the parties have signed and sealed this Rider as of
the _____ day of October, 1998.
WITNESS:
- ------------------------------ ----------------------------------------
William R. Chaney (Employee)
ATTEST: Tiffany and Company
("Tiffany")
By
- ------------------------------ --------------------------------------
Patrick B. Dorsey James N. Fernandez
Secretary Senior Vice President
WITNESS: Babette C. Chaney et al Trust
u/a 2/23/94 (owner)
By
- ----------------------------- --------------------------------------
Carole C. Prosser, Trustee
1
<PAGE> 4
Tiffany and Company
Split-Dollar Life Insurance Agreement
================================================================================
RIDER NO. 3 TO SPLIT-DOLLAR LIFE INSURANCE AGREEMENT
Employee: William R. Chaney
Owner: Babette C. Chaney Trust u/a 2/23/94
THIS RIDER supplements and amends that certain Split-Dollar Life Insurance
Agreement made as of the 23rd day of February, 1994 by and between Tiffany and
Company ("Tiffany") and the Employee and Owner named above (the "Agreement") and
Riders Nos.1 and 2 to the Agreement. This Rider shall become part of the
Agreement and any term or phrase defined in the Agreement shall have the same
meaning in this Rider except as herein provided. To the extent that any term or
provision of this Rider conflicts with any term or provision of the Agreement,
this Rider shall supersede and control the Agreement and Rider Nos. 1 and 2
thereto.
Defined Terms. The following initially capitalized term shall have the meaning
ascribed to it below in lieu of that provided in Rider No. 1:
"Retirement" means January 31, 1999, whether or not Employee continues to
be employed by Tiffany.
IN WITNESS WHEREOF, the parties have signed and sealed this Rider as of the ___
day of March, 1999.
WITNESS:
- ------------------------------ ----------------------------------------
William R. Chaney (Employee)
ATTEST: Tiffany and Company
("Tiffany")
By
- ------------------------------ --------------------------------------
Patrick B. Dorsey James N. Fernandez
Secretary Senior Vice President
WITNESS: Babette C. Chaney et al Trust u/a
2/23/94 (owner)
By
- ----------------------------- --------------------------------------
Carole C. Prosser, Trustee
1
<PAGE> 1
Exhibit 10.116a
Tiffany & Co.
Report on Form 10-K
Fiscal 1998
TIFFANY & CO.
AMENDMENT NO. 6
AMENDMENT NO. 6 (this "Amendment"), dated as of October 1, 1998, to the
Credit Agreement, dated as of June 26, 1995, by and among Tiffany & Co., Tiffany
and Company, Tiffany & Co. International, the Subsidiary Borrowers thereto, the
Lenders party thereto, 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, as amended by Amendment No. 1, dated as of November 9,
1995, Amendment No. 2, dated as of August 15, 1996, Amendment No. 3, dated as of
January 22, 1997, Amendment No. 4, dated as of August 4, 1997, and Amendment No.
5, dated as of November 20, 1997 (as amended, the "Credit Agreement").
Except as otherwise provided herein, capitalized terms used herein which
are not defined herein shall have the meanings set forth in the Credit
Agreement.
In consideration of the covenants, conditions and agreements hereinafter
set forth, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, and pursuant to Section 11.1 of the
Credit Agreement, the Parent, the Borrowers and the Administrative Agent hereby
agree as follows:
1. Section 8.8(c) of the Credit Agreement is hereby amended and restated
in its entirety to read as follows:
and (c) the Parent may from time to time purchase up to $150,000,000
in aggregate amount of its Stock, provided that immediately before
and after giving effect thereto no Default or Event of Default shall
or would exist.
2. This Amendment shall become effective immediately upon the receipt by
the Administrative Agent of this Amendment executed by a duly authorized officer
or officers of the Parent, the Borrowers, the Administrative Agent, the
Arranging Agent, the Issuing Bank and Swing Line Lender, and the Required
Lenders. In all other respects the Credit Agreement and the other Loan Documents
shall remain in full force and effect.
3. In order to induce the Administrative Agent to execute this Amendment
and the Arranging Agent, the Issuing Bank and Swing Line Lender, and the Lenders
to consent thereto, the Parent and the Borrowers each hereby (a) certifies that,
on the date hereof and
<PAGE> 2
immediately before and after giving effect to this Amendment, all
representations and warranties contained in the Credit Agreement are and will be
true and correct in all respects, (b) certifies that, immediately before and
after giving effect to this Amendment, no Default or Event of Default exists or
will exist under the Loan Documents, and (c) agrees to pay the reasonable fees
and disbursements of counsel to the Administrative Agent incurred in connection
with the preparation, negotiation and closing of this Amendment.
4. Each of the Parent and the Borrowers hereby (a) reaffirms and admits
the validity, enforceability and continuation of all the Loan Documents to which
it is a party, and its obligations thereunder, and (b) agrees and admits that as
of the date hereof it has no valid defenses to or offsets against any of its
obligations to the Administrative Agent, the Arranging Agent, the Issuing Bank
and Swing Line Lender, or the Lenders under the Loan Documents to which it is a
party.
5. This Amendment may be executed in any number of counterparts, each of
which shall be an original and all of which shall constitute one agreement. It
shall not be necessary in making proof of this Amendment to produce or account
for more than one counterpart signed by the party to be charged.
6. This Amendment is being delivered in and is intended to be performed in
the State of New York and shall be construed and enforceable in accordance with,
and be governed by, the internal laws of the State of New York without regard to
principles of conflict of laws.
The parties have caused this Amendment to be duly executed as of the date
first written above.
TIFFANY & CO., a Delaware corporation
By:_______________________________________
Name:_____________________________________
Title:____________________________________
TIFFANY AND COMPANY, a New York
corporation
By:_______________________________________
Name:_____________________________________
Title:____________________________________
2
<PAGE> 3
TIFFANY & CO. INTERNATIONAL, a
Delaware corporation
By:_______________________________________
Name:_____________________________________
Title:____________________________________
SOCIETE FRANCAISE POUR LE DEVELOPPMENT DE
LA PORCELAINE D'ART (S.A.R.L.), a French
corporation
By:_______________________________________
Name:_____________________________________
Title:____________________________________
TIFFANY & CO. OF NEW YORK LIMITED, a Hong
Kong corporation
By:_______________________________________
Name:_____________________________________
Title:____________________________________
TIFFANY-FARAONE S.P.A., an Italian
corporation
By:_______________________________________
Name:_____________________________________
Title:____________________________________
TIFFANY & CO. JAPAN INC., a Delaware
corporation
By:_______________________________________
Name:_____________________________________
Title:____________________________________
3
<PAGE> 4
TIFFANY & CO. PTE, LTD., a Singapore
corporation
By:_______________________________________
Name:_____________________________________
Title:____________________________________
TIFFANY & CO, a United Kingdom corporation
By:_______________________________________
Name:_____________________________________
Title:____________________________________
TIFFANY & CO. WATCH CENTER S.A., a Swiss
corporation
By:_______________________________________
Name:_____________________________________
Title:____________________________________
TIFFCO KOREA LTD., a Korean corporation
By:_______________________________________
Name:_____________________________________
Title:____________________________________
THE BANK OF NEW YORK, as Administrative
Agent
By:_______________________________________
Name:_____________________________________
Title:____________________________________
4
<PAGE> 5
AGREED AND CONSENTED TO:
THE BANK OF NEW YORK, as
Arranging Agent, as the Issuing
Bank and Swing Line Lender, and
as a Lender
By:_______________________________________
Name:_____________________________________
Title:____________________________________
THE CHASE MANHATTAN BANK
By:_______________________________________
Name:_____________________________________
Title:____________________________________
THE DAI-ICHI KANGYO BANK
LIMITED (NEW YORK BRANCH)
By:_______________________________________
Name:_____________________________________
Title:____________________________________
THE FUJI BANK, LTD.
By:_______________________________________
Name:_____________________________________
Title:____________________________________
5
<PAGE> 6
FLEET NATIONAL BANK
By:_______________________________________
Name:_____________________________________
Title:____________________________________
By:_______________________________________
Name:_____________________________________
Title:____________________________________
FLEET PRECIOUS METALS INC.
By:_______________________________________
Name:_____________________________________
Title:____________________________________
By:_______________________________________
Name:_____________________________________
Title:____________________________________
6
<PAGE> 7
TIFFANY & CO.
AMENDMENT NO. 7
AMENDMENT NO. 7 (this "Amendment"), dated as of November 30, 1998, to the
Credit Agreement, dated as of June 26, 1995, by and among Tiffany & Co., Tiffany
and Company, Tiffany & Co. International, the Subsidiary Borrowers thereto, the
Lenders party thereto, 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, as amended by Amendment No. 1, dated as of November 9,
1995, Amendment No. 2, dated as of August 15, 1996, Amendment No. 3, dated as of
January 22, 1997, Amendment No. 4, dated as of August 4, 1997, Amendment No. 5,
dated as of November 20, 1997, and Amendment No. 6, dated as of October 1, 1998
(as amended, the "Credit Agreement").
Except as otherwise provided herein, capitalized terms used herein which
are not defined herein shall have the meanings set forth in the Credit
Agreement.
In consideration of the covenants, conditions and agreements hereinafter
set forth, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, and pursuant to Section 11.1 of the
Credit Agreement, the Parent, the Borrowers and the Administrative Agent hereby
agree as follows:
1. Section 1.1 of the Credit Agreement is hereby amended to amend and
restate in its entirety clause (g) of the definition of "Indebtedness" to read
as follows:
and (g) Contingent Obligations of such Person of Indebtedness of
others.
2. Section 2.1(e)(iii) of the Credit Agreement is hereby amended to delete
the amount "$5,000,000" appearing at the end thereof and to replace it with the
amount "$6,000,000".
3. Section 8.1 of the Credit Agreement is hereby amended and restated in
its entirety to read as follows:
8.1. Indebtedness
Create, incur, assume or suffer to exist any Indebtedness, or permit
any of its Subsidiaries so to do, except any one or more of the following
types of Indebtedness: (a) Indebtedness under the Loan Documents, (b)
Indebtedness of the Subsidiaries of the Parent in an aggregate principal
amount determined on a Consolidated basis not in excess of $35,000,000 at
any one time outstanding, provided that (i) immediately before and after
giving effect to the creation, incurrence or assumption of such
Indebtedness no Default or Event of Default
7
<PAGE> 8
shall or would exist and (ii) if such Indebtedness is secured, the Lien
securing such Indebtedness is permitted by Section 8.3, (c) Indebtedness
set forth on Schedule 8.1 and any refinancings, extensions and renewals
thereof, (d) Intercompany Debt and (e) Indebtedness of the Parent (which,
in the case of the Parent's proposed Indebtedness in the form of senior
notes up to a maximum aggregate principal amount of $100,000,000 to be
issued in or around December, 1998, may be guaranteed by Tiffany, Tiffany
International and/or Tiffany Japan), provided that immediately before and
after giving effect to the creation, incurrence or assumption of such
Indebtedness no Default or Event of Default shall or would exist.
4. Section 8.2(ii) of the Credit Agreement is hereby amended and restated
in its entirety to read as follows:
(ii) Interest Rate Protection Arrangements and Other Hedging
Arrangements entered into in the ordinary course of business in
respect of Indebtedness permitted under Section 8.1.
5. Section 8.7(i) of the Credit Agreement is hereby amended and restated
in its entirety to read as follows:
(i) Acquisitions permitted by Section 8.6 and Restricted Payments
permitted by Section 8.8.
6. Schedule 8.1 to the Credit Agreement is hereby amended and restated in
its entirety in the form attached hereto.
7. Exhibit A-2 to the Credit Agreement is hereby amended and restated in
its entirety in the form attached hereto.
8. This Amendment shall become effective immediately upon the receipt by
the Administrative Agent of this Amendment executed by a duly authorized officer
or officers of the Parent, the Borrowers, the Administrative Agent, the
Arranging Agent, the Issuing Bank and Swing Line Lender, and the Required
Lenders. In all other respects the Credit Agreement and the other Loan Documents
shall remain in full force and effect.
9. In order to induce the Administrative Agent to execute this Amendment
and the Arranging Agent, the Issuing Bank and Swing Line Lender, and the Lenders
to consent thereto, the Parent and the Borrowers each hereby (a) certifies that,
on the date hereof and immediately before and after giving effect to this
Amendment, all representations and warranties contained in the Credit Agreement
are and will be true and correct in all respects, (b) certifies that,
immediately before and after giving effect to this Amendment, no Default or
Event of Default exists or will exist under the Loan Documents, and (c) agrees
to pay the reasonable fees and disbursements of counsel to the
8
<PAGE> 9
Administrative Agent incurred in connection with the preparation, negotiation
and closing of this Amendment.
10. Each of the Parent and the Borrowers hereby (a) reaffirms and admits
the validity, enforceability and continuation of all the Loan Documents to which
it is a party, and its obligations thereunder, and (b) agrees and admits that as
of the date hereof it has no valid defenses to or offsets against any of its
obligations to the Administrative Agent, the Arranging Agent, the Issuing Bank
and Swing Line Lender, or the Lenders under the Loan Documents to which it is a
party.
11. This Amendment may be executed in any number of counterparts, each of
which shall be an original and all of which shall constitute one agreement. It
shall not be necessary in making proof of this Amendment to produce or account
for more than one counterpart signed by the party to be charged.
12. This Amendment is being delivered in and is intended to be performed
in the State of New York and shall be construed and enforceable in accordance
with, and be governed by, the internal laws of the State of New York without
regard to principles of conflict of laws.
9
<PAGE> 10
The parties have caused this Amendment to be duly executed as of the date
first written above.
TIFFANY & CO., a Delaware corporation
By:_______________________________________
Name:_____________________________________
Title:____________________________________
TIFFANY AND COMPANY, a New York
corporation
By:_______________________________________
Name:_____________________________________
Title:____________________________________
TIFFANY & CO. INTERNATIONAL, a Delaware
corporation
By:_______________________________________
Name:_____________________________________
Title:____________________________________
SOCIETE FRANCAISE POUR LE DEVELOPPMENT DE
LA PORCELAINE D'ART (S.A.R.L.), a French
corporation
By:_______________________________________
Name:_____________________________________
Title:____________________________________
10
<PAGE> 11
TIFFANY-FARAONE S.P.A., an Italian
corporation
By:_______________________________________
Name:_____________________________________
Title:____________________________________
TIFFANY & CO. JAPAN INC., a Delaware
corporation
By:_______________________________________
Name:_____________________________________
Title:____________________________________
TIFFANY & CO. PTE, LTD., a Singapore
corporation
By:_______________________________________
Name:_____________________________________
Title:____________________________________
TIFFANY & CO, a United Kingdom corporation
By:_______________________________________
Name:_____________________________________
Title:____________________________________
11
<PAGE> 12
TIFFANY & CO. WATCH CENTER S.A., a Swiss
corporation
By:_______________________________________
Name:_____________________________________
Title:____________________________________
TIFFCO KOREA LTD., a Korean corporation
By:_______________________________________
Name:_____________________________________
Title:____________________________________
TIFFANY & CO. MEXICO, S.A. de C.V., a
Mexican corporation
By:_______________________________________
Name:_____________________________________
Title:____________________________________
THE BANK OF NEW YORK, as Administrative
Agent
By:_______________________________________
Name:_____________________________________
Title:____________________________________
12
<PAGE> 13
AGREED AND CONSENTED TO:
THE BANK OF NEW YORK, as
Arranging Agent, as the Issuing
Bank and Swing Line Lender, and
as a Lender
By:_______________________________________
Name:_____________________________________
Title:____________________________________
THE CHASE MANHATTAN BANK
By:_______________________________________
Name:_____________________________________
Title:____________________________________
THE DAI-ICHI KANGYO BANK
LIMITED (NEW YORK BRANCH)
By:_______________________________________
Name:_____________________________________
Title:____________________________________
THE FUJI BANK, LTD.
By:_______________________________________
Name:_____________________________________
Title:____________________________________
13
<PAGE> 14
FLEET NATIONAL BANK
By:_______________________________________
Name:_____________________________________
Title:____________________________________
By:_______________________________________
Name:_____________________________________
Title:____________________________________
FLEET PRECIOUS METALS INC.
By:_______________________________________
Name:_____________________________________
Title:____________________________________
By:_______________________________________
Name:_____________________________________
Title:____________________________________
14
<PAGE> 15
Schedule 8.1
List of Existing Indebtedness
1. $51,500,000 7.52% Senior Notes due January 31, 2003 of Parent (as
guaranteed by Tiffany, Tiffany International and Tiffany Japan).
2. $10,000,000 unsecured uncommited line of credit provided by The Bank of
New York to Tiffany.
3. (Y) 5,000,000,000 4.50% Term Notes due 2011 of Tiffany Japan (as
guaranteed by Parent).
15
<PAGE> 16
TIFFANY EXHIBIT A2
LIST OF INDIVIDUAL CURRENCY COMMITMENTS
Australian Dollars
Lender Individual Currency Commitment
DaiIchi Kangyo $3,500,000.00
Fuji Bank $3,000,000.00
Canadian Dollars
Lender Individual Currency Commitment
- -
Hong Kong Dollars
Lender Individual Currency Commitment
BNY $3,000,000.00
Italian Lira
Lender Individual Currency Commitment
The Chase Manhattan Bank $6,000,000.00
Korean Won
Lender Individual Currency Commitment
BNY $4,000,000.00
Malaysian Ringgit
Lender Individual Currency Commitment
- -
Mexican Pesos
Lender Individual Currency Commitment
- -
New Taiwan Dollars
Lender Individual Currency Commitment
BNY $5,000,000.00
Philippine Pesos
Lender Individual Currency Commitment
- -
Singapore Dollars
Lender Individual Currency Commitment
BNY $3,000,000.00
16
<PAGE> 17
Swiss Francs
Lender Individual Currency Commitment
The Chase Manhattan Bank $5,000,000.00
Thai Baht
Lender Individual Currency Commitment
- -
17
<PAGE> 18
TIFFANY & CO.
AMENDMENT NO. 8
AMENDMENT NO. 8 (this "Amendment"), dated as of March 8, 1999, to the
Credit Agreement, dated as of June 26, 1995, by and among Tiffany & Co., Tiffany
and Company, Tiffany & Co. International, the Subsidiary Borrowers thereto, the
Lenders party thereto, 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, as amended by Amendment No. 1, dated as of November 9,
1995, Amendment No. 2, dated as of August 15, 1996, Amendment No. 3, dated as of
January 22, 1997, Amendment No. 4, dated as of August 4, 1997, Amendment No. 5,
dated as of November 20, 1997, Amendment No. 6, dated as of October 1, 1998, and
Amendment No. 7, dated as of November 30, 1998 (as amended, the "Credit
Agreement").
Except as otherwise provided herein, capitalized terms used herein which
are not defined herein shall have the meanings set forth in the Credit
Agreement.
In consideration of the covenants, conditions and agreements hereinafter
set forth, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, and pursuant to Section 11.1 of the
Credit Agreement, the Parent, the Borrowers and the Administrative Agent hereby
agree as follows:
1. The Credit Agreement is hereby amended to add a new Section 2.26 to
read as follows:
2.26 European Economic and Monetary Union.
(a) Definitions. In this Section 2.26 and in each other provision of this
Agreement to which reference is made in this Section 2.26 expressly or
impliedly, the following terms have the meanings given to them in this
Section 2.26:
"EMU": economic and monetary union as contemplated in the Treaty
on European Union.
"EMU legislation": legislative measures of the European Counsel for
the introduction of, changeover to or operation of a single or unified
European currency (whether known as the euro or otherwise), being in part
the implementation of the third stage of EMU.
"euro": the single currency of participating member states of the
European Union.
18
<PAGE> 19
"national currency unit": the unit of currency (other than the
euro) of a participating member state.
"participating member state": each state so described in any EMU
legislation.
"Treaty on European Union": the Treaty of Rome of March 25, 1957, as
amended by the Single European Act 1986 and the Maastricht Treaty (which
was signed at Maastricht on February 7, 1992, and came into force on
November 1, 1993), as amended from time to time.
(b) Loans. Any Loan in the currency of a participating member state
shall be made, at the request of the applicable Borrower, either in the
euro or the national currency unit of such participating member state.
(c) Business Days. With respect to any amount denominated or to be
denominated in the euro, any reference to a "Business Day" shall be
construed as a reference to a day (other than a Saturday or Sunday) on
which banks are generally open for business in London and New York City.
(d) Euro Screen Rate. If the Administrative Agent determines that
there is no Core Currency Euro Rate or Individual Currency Rate, as
applicable, displayed on the applicable screen for determining such rate
for deposits denominated in the national currency unit in which any Loans
are denominated, the Core Currency Euro Rate or Individual Currency Rate,
as applicable, for such Loans shall be based upon the rate displayed on
the applicable page of the applicable screen for the offering of deposits
denominated in the euro as determined by the Administrative Agent.
(e) Payments to the Administrative Agent or Lenders. Sections 2.4,
2.5 and 2.20(b) shall be construed so that, in relation to the payment of
any amount of euros or national currency units, such amount shall be made
available to the Administrative Agent or the applicable Lender in
immediately available, freely transferable, cleared funds to its
Applicable Payment Office.
(f) Payments by the Administrative Agent to the Lenders. Any amount
payable by the Administrative Agent to the Lenders under this Agreement in
the currency of a participating member state shall be paid in the euro.
(g) Payments by the Administrative Agent Generally. With respect to
the payment of any amount denominated in the euro or in a national
currency unit, the Administrative Agent shall not be liable to any Credit
Party or any of the Lenders in any way whatsoever for any delay, or the
consequences of any delay, in the crediting to any account of any amount
required by this Agreement to be paid
19
<PAGE> 20
by the Administrative Agent if the Administrative Agent shall have taken
all relevant steps to achieve, on the date required by this Agreement, the
payment of such amount in immediately available, freely transferable,
cleared funds (in the euro or, as the case may be, in a national currency
unit) to the account with the bank in the principal financial center in
the participating member state which the applicable Credit Party or, as
the case may be, any Lender shall have specified for such purpose. In this
paragraph (g), "all relevant steps" means all such steps as may be
prescribed from time to time by the regulations or operating procedures of
such clearing or settlement system as the Administrative Agent may from
time determine for the purpose of clearing or settling payments of the
euro.
(h) Basis of Accrual. If the basis of accrual of interest or fees
expressed in this Agreement with respect to the currency of any state that
becomes a participating state shall be inconsistent with any convention or
practice in the London Interbank Market or other applicable interbank
market, as determined by the Administrative Agent, for the basis of
accrual of interest or fees in respect of the euro, such convention or
practice shall replace such expressed basis effective as of and from the
date on which such state becomes a participating member state; provided
that if any Loan in the currency of such state is outstanding immediately
prior to such date, such replacement shall take effect, with respect to
such Loan, at the end of the then current Interest Period.
(i) Rounding and Other Consequential Changes. Without prejudice and
in addition to any method of conversion or rounding prescribed by any EMU
legislation and without prejudice to the respective liabilities for
indebtedness of any Credit Party to the Lenders and the Lenders to any
Credit Party under or pursuant to this Agreement:
(i) each reference in this Agreement to a minimum amount (or an
integral multiple thereof) in a national currency unit to be paid to
or by the Administrative Agent shall be replaced by a reference to
such reasonably comparable and convenient amount (or an integral
multiple thereof) in the euro as the Administrative Agent may from
time to time specify; and
(ii) except as expressly provided in this Section 2.26, each
provision of this Agreement shall be subject to such reasonable
changes of construction as the Administrative Agent may from time to
time specify to be necessary or appropriate to reflect the
introduction of or changeover to the euro in participating member
states.
(j) Continuity of Contract. The Credit Parties, the Administrative
Agent, the Issuing Bank, the Swing Line Lender and the Lenders agree that
the occurrence or non-occurrence of EMU, any event or events associated
with EMU
20
<PAGE> 21
and/or the introduction of the euro in all or any part of the European
Union will not result in the discharge, cancellation, recision or
termination in whole or in part of any agreement between the Credit
Parties, the Administrative Agent, the Issuing Bank, the Swing Line Lender
and the Lenders, or give the Credit Parties, the Administrative Agent, the
Issuing Bank, the Swing Line Lender or the Lenders the right to cancel,
rescind, terminate or vary any agreement, other than as expressly set
forth in the Loan Documents.
2. SECTION 4 OF THE AGREEMENT IS AMENDED TO ADD A NEW SECTION 4.18
TO READ AS FOLLOWS:
1.1 SECTION 4.18 YEAR 2000.
Any reprogramming required to permit the
proper functioning, in and following the
year 2000, of (i) the Parent's and its
Subsidiaries' computer systems and (ii)
equipment containing embedded microchips
(including systems and equipment supplied by
others or with which the Parent's or its
Subsidiaries' systems interact) and the
testing of all such systems and equipment,
as so reprogrammed, will be completed by
June 30, 1999. The cost to the Parent and
its Subsidiaries of such reprogramming and
testing and of the reasonably foreseeable
consequences of year 2000 to the Parent and
its Subsidiaries (including reprogramming
errors and the failure of others' systems or
equipment) will not result in a Default or a
Material Adverse effect. Except for such of
the reprogramming referred to in the
preceding sentence as may be necessary, the
computer and management information systems
of the Parent and its Subsidiaries are and,
with ordinary course upgrading and
maintenance, will continue for the term of
this Agreement to be, sufficient to permit
the Parent and its Subsidiaries to conduct
their business without Material Adverse
effect.
3. EXHIBIT Q TO THE CREDIT AGREEMENT IS HEREBY AMENDED AND RESTATED
IN ITS ENTIRETY IN THE FORM ATTACHED HERETO AS EXHIBIT Q.
21
<PAGE> 22
4. FOR PURPOSES OF SUPPLEMENTING EXHIBIT R TO THE CREDIT AGREEMENT,
EACH LENDER AGREES TO SUPPLY TO THE ADMINISTRATIVE AGENT ITS
APPLICABLE LENDING OFFICES AND APPLICABLE PAYMENT OFFICES WITH
RESPECT TO LOANS DENOMINATED IN THE EURO.
5. This Amendment shall become effective immediately upon the receipt by
the Administrative Agent of (i) this Amendment executed by a duly authorized
officer or officers of the Parent, the Borrowers, the Administrative Agent, the
Arranging Agent, the Issuing Bank, the Swing Line Lender and all of the Lenders
and (ii) all fees payable in connection with this Amendment. In all other
respects the Credit Agreement and the other Loan Documents shall remain in full
force and effect.
6. In order to induce the Administrative Agent to execute this Amendment
and the Arranging Agent, the Issuing Bank, the Swing Line Lender and the Lenders
to consent thereto, the Parent and the Borrowers each hereby agrees to pay the
reasonable fees and disbursements of counsel to the Administrative Agent
incurred in connection with the preparation, negotiation and closing of this
Amendment.
7. Each of the Parent and the Borrowers hereby (a) reaffirms and admits
the validity, enforceability and continuation of all the Loan Documents to which
it is a party, and its obligations thereunder, and (b) agrees and admits that as
of the date hereof it has no valid defenses to or offsets against any of its
obligations to the Administrative Agent, the Arranging Agent, the Issuing Bank,
the Swing Line Lender or the Lenders under the Loan Documents to which it is a
party.
8. This Amendment may be executed in any number of counterparts, each of
which shall be an original and all of which shall constitute one agreement. It
shall not be necessary in making proof of this Amendment to produce or account
for more than one counterpart signed by the party to be charged.
9. This Amendment is being delivered in and is intended to be performed in
the State of New York and shall be construed and enforceable in accordance with,
and be governed by, the internal laws of the State of New York without regard to
principles of conflict of laws.
22
<PAGE> 23
The parties have caused this Amendment to be duly executed as of the date
first written above.
TIFFANY & CO., a Delaware corporation
By:_______________________________________
Name:_____________________________________
Title:____________________________________
TIFFANY AND COMPANY, a New York
corporation
By:_______________________________________
Name:_____________________________________
Title:____________________________________
TIFFANY & CO. INTERNATIONAL, a Delaware
corporation
By:_______________________________________
Name:_____________________________________
Title:____________________________________
SOCIETE FRANCAISE POUR LE DEVELOPPMENT DE
LA PORCELAINE D'ART (S.A.R.L.), a French
corporation
By:_______________________________________
Name:_____________________________________
Title:____________________________________
23
<PAGE> 24
TIFFANY-FARAONE S.P.A., an Italian
corporation
By:_______________________________________
Name:_____________________________________
Title:____________________________________
TIFFANY & CO. JAPAN INC., a Delaware
corporation
By:_______________________________________
Name:_____________________________________
Title:____________________________________
TIFFANY & CO. PTE, LTD., a Singapore
corporation
By:_______________________________________
Name:_____________________________________
Title:____________________________________
TIFFANY & CO, a United Kingdom
corporation
By:_______________________________________
Name:_____________________________________
Title:____________________________________
TIFFANY & CO. WATCH CENTER S.A., a Swiss
corporation
By:_______________________________________
Name:_____________________________________
Title:____________________________________
24
<PAGE> 25
TIFFCO KOREA LTD., a Korean corporation
By:_______________________________________
Name:_____________________________________
Title:____________________________________
TIFFANY & CO. MEXICO, S.A. de C.V., a
Mexican corporation
By:_______________________________________
Name:_____________________________________
Title:____________________________________
THE BANK OF NEW YORK, as Administrative
Agent
By:_______________________________________
Name:_____________________________________
Title:____________________________________
25
<PAGE> 26
AGREED AND CONSENTED TO:
THE BANK OF NEW YORK, as
Arranging Agent, as the Issuing
Bank and Swing Line Lender, and
as a Lender
By:_______________________________________
Name:_____________________________________
Title:____________________________________
THE CHASE MANHATTAN BANK
By:_______________________________________
Name:_____________________________________
Title:____________________________________
THE DAI-ICHI KANGYO BANK
LIMITED (NEW YORK BRANCH)
By:_______________________________________
Name:_____________________________________
Title:____________________________________
THE FUJI BANK, LTD.
By:_______________________________________
Name:_____________________________________
Title:____________________________________
26
<PAGE> 27
FLEET NATIONAL BANK
By:_______________________________________
Name:_____________________________________
Title:____________________________________
By:_______________________________________
Name:_____________________________________
Title:____________________________________
FLEET PRECIOUS METALS INC.
By:_______________________________________
Name:_____________________________________
Title:____________________________________
By:_______________________________________
Name:_____________________________________
Title:____________________________________
27
<PAGE> 28
TIFFANY EXHIBIT Q
LIST OF ADMINISTRATIVE AGENT'S
DOMESTIC PAYMENT OFFICE,
ADDRESS FOR NOTICES AND
APPLICABLE PAYMENT OFFICES
DOMESTIC PAYMENT OFFICE ADDRESS FOR NOTICES
The Bank of New York The Bank of New York
One Wall Street One Wall Street
Agency Function Administration Agency Function
18th Floor Administration
New York, New York 10286 18th Floor
Attention: Genoveso Caviness New York, New York 10286
Telephone: (212) 635-4693 Attention: Genoveso Caviness
Facsimile: (212) 635-6365 Telephone: (212) 635-4693
6366 or 6367 Facsmile: (212) 635-6365
6366 or 6367
with a copy to: with a copy to:
The Bank of New York The Bank of New York
One Wall Street One Wall Street
New York, New York 10286 New York, New York 10286
Attn: Howard F. Bascom, Attn: Howard F. Bascom,
Vice President Vice President
Telephone: (212) 635-1308 Telephone: (212) 635-1308
Facsimile: (212) 635-1481 Facsimile: (212) 635-1481
Applicable Payment Offices
For Core Currency Loans
1. Dollar Loans - ABR Advances
The Bank of New York
New York
ABA No.: 021000018
Acct No.: 890-0065-737
IFO: Agency Function Admin.
Reference: Tiffany
Attn: Genoveso Caviness
28
<PAGE> 29
Telephone: (212) 635-4693
Facsimile: (212) 635-6365
2. Dollar Loans - Eurodollar Advances
The Bank of New York
New York
ABA No.: 021000018
Acct No.: 890-0065-737
IFO: Agency Function Admin.
Reference: Tiffany
Attn: Genoveso Caviness
Telephone: (212) 635-4693
Facsimile: (212) 635-6365
3. French Franc/Euro Loans
Societe Generale
Fontenay
Acct No.: 001014422680
IFO: The Bank of New York, NY
IBF
Off Shore Support
Reference: Tiffany
Attn: Yves Legrand
Head of Operations
Telephone: 33 1 41141224
4. German Mark/Euro Loans
Bank of New York
Frankfurt
Acct No.: 0820468800400
IFO: The Bank of New York, NY
IBF
Off Shore Support
Reference: Tiffany
Attn: Klavs Rueckert
Telephone: 49-69-97151230
Facsimile: 49-69-97151272
29
<PAGE> 30
5. Japanese Yen Loans
Bank of New York
Tokyo
Acct No.: 0856480002500
IFO: The Bank of New York, NY
IBF
Off Shore Support
Reference: Tiffany
Attn: S. Katsuhara
Telephone: 81-33-595-1135
Facsimile: 81-33-595-0738
6. Sterling Pound Loans
Bank of New York
London
Acct No.: 0845464600401
IFO: The Bank of New York, NY
IBF
Off Shore Support
Reference: Tiffany
Attn: Graham Mason
Telephone: 44-171-255-2323
Facsimile: 44-171-322-6034
30
<PAGE> 1
Exhibit 10.119a
Tiffany & Co.
Report on Form 10-K
Fiscal 1998
AMENDMENT NO. 1
This Amendment No. 1 to that certain Agreement and Consent to Assignment
dated as of December 1, 1995, among Tiffany & Co., Tiffany and Company and State
Street Bank and Trust Company (successor in interest to Fleet National Bank of
Connecticut), as Collateral Trustee under the Indenture (the "Agreement and
Consent").
Except as otherwise provided herein, capitalized terms used herein which
are not defined herein shall have the meanings assigned to them in the Agreement
and Consent.
In consideration of the covenants, conditions and agreements hereinafter
set forth, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parent, Lessee and Bank hereby
agree as follows:
1. Effective November 3, 1998, Section 2.12(c) of the Agreement and
Consent shall be deleted in its entirety and the following inserted in its
place:
(c) Intercompany Debt - Debt of the Lessee or another Restricted
Subsidiary owing to, or, in the case of a Guaranty, incurred on behalf of,
the Parent or another Restricted Subsidiary.
2. Each of the Lessee and Parent hereby (a) reaffirms and admits the
validity, enforceability and continuation of the Agreement and Consent, and (b)
agrees and admits that as of the date hereof it has no valid defenses to or
offsets against any of their respective obligations thereunder.
3. This Amendment No. 1 may be executed in any number of counterparts,
each of which shall be an original and all of which shall together constitute
one agreement. It shall not be necessary in making proof of this Amendment No. 1
to produce or account for more than one counterpart signed by the party to be
charged.
4. This Amendment shall be governed by and construed in accordance with
Section 6.5 of the Agreement and Consent.
The parties have caused this Amendment No. 1 to be duly executed as of the
date first above written.
TIFFANY & CO.
By:_____________________________________
Name:___________________________________
Title:__________________________________
Page 1 of 3
<PAGE> 2
TIFFANY AND COMPANY
By:_____________________________________
Name:___________________________________
Title:__________________________________
STATE STREET BANK AND TRUST COMPANY, not
in its individual capacity, but solely
as Owner Collateral Trustee under the
Owner Collateral Trust Indenture
By:_____________________________________
Name:___________________________________
Title:__________________________________
STATE STREET BANK AND TRUST COMPANY, not
in its individual capacity, but solely
as Beneficiary Collateral Trustee under
the Beneficiary Collateral Trust
Indenture
By:_____________________________________
Name:___________________________________
Title:__________________________________
Page 2 of 3
<PAGE> 3
The undersigned First Union National Bank (formerly, 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,
hereby consents to the foregoing Amendment No. 1 and confirms that it has
received the written approval of the Required Holders to provide this consent
and enter into this Amendment No. 1.
FIRST UNION NATIONAL BANK, 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:_____________________________________
Name:___________________________________
Title:__________________________________
Page 3 of 3
<PAGE> 1
Exhibit 10.122a
Tiffany & Co.
Report on Form 10-K
Fiscal 1998
AMENDMENT NO. 1
This Amendment No. 1 to that certain Guarantee dated April 3, 1996 (the
"Guarantee"), from Tiffany & Co. ("Guarantor") in respect of certain obligations
of Tiffany & Co. Japan Inc., Japan Branch ("Borrower") to American Family Life
Assurance Company of Columbus, Japan Branch ("Lender") is made as of the 18th
day of November, 1998.
Except as otherwise provided herein, capitalized terms used herein which
are not defined herein shall have the meanings assigned to them in the
Guarantee.
In consideration of the covenants, conditions and agreements hereinafter
set forth, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Guarantor, Lender and Borrower
hereby agree as follows:
1. Effective April 3, 1996, clauses (ii) through (v), inclusive, of
Section 13(m) of the Guarantee are hereby deleted in their entirety and the
following inserted in their place:
(ii) Indebtedness owed:
(A) from a Subsidiary of the Guarantor to the Guarantor:
(B) from the Guarantor to a Subsidiary of the Guarantor;
(C) from one Subsidiary of the Guarantor to another;
(D) by a Subsidiary of the Guarantor under a guarantee
incurred by such Subsidiary on behalf of another Subsidiary of the
Guarantor or the Guarantor;
(iii) Any Indebtedness of the Guarantor;
(iv) Indebtedness of the Borrower (other than Indebtedness permitted
under clause (ii) above or clause (v) below), up to the maximum aggregate
principal amount of JP(Y)10,450,000,000;
(v) Indebtedness of up to the maximum aggregate principal amount of
US$160,000,000 arising under that certain Credit Agreement dated as of
June 26, 1995, by and among Tiffany & Co., Tiffany and Company, Tiffany &
Co. International, the Subsidiary Borrowers thereto, the Lenders party
thereto, The Bank of New York, as
Page 1 of 3
<PAGE> 2
Issuing Bank and Swing Line Lender, The Bank of New York, as Arranging
Agent, and The Bank of New York, as Administrative Agent, as such may be
amended and supplemented from time to time; and
(vi) Any other Indebtedness of Subsidiaries of the Guarantor
not otherwise permitted under sub-sections (i) through (v) above up to the
maximum aggregate principal amount outstanding at any one time of
US$10,000,000.
2. From and after the date hereof, when the Guarantor shall deliver to the
Lender its financial statements pursuant to Section 13(a)(i) or (ii) of the
Guarantee, the Guarantor shall also provide the Lender with a certificate signed
by an officer of and on behalf of the Guarantor certifying that it complied with
the covenants set forth in the Guarantee as of the date of the relevant
financial statements, or if it failed to comply with any of the covenants set
forth in Section 13 as of such date, describing such non-compliance in
reasonable detail, in each case accompanied by calculations in reasonable detail
of its performance under Sections 13(i), (j) and (m) of the Guarantee.
3. Each of the Borrower and Guarantor hereby (a) reaffirms and admits the
validity, enforceability and continuation of the Agreement and the Guarantee,
and (b) agrees and admits that as of the date hereof it has no valid defenses to
or offsets against any of its obligations thereunder.
4. This Amendment may be executed in any number of counterparts, each of
which shall be an original and all of which shall together constitute one
agreement. It shall not be necessary in making proof of this Amendment to
produce or account for more than one counterpart signed by the party to be
charged.
5. This Amendment shall be governed by and interpreted in accordance with
the laws of Japan and hereby incorporates the provisions of Sections 16(a) and
16(b) of the Guarantee.
The parties have caused this Amendment No. 1 to be duly executed as of the
date first above written.
TIFFANY & CO.
By:_____________________________________
Name:___________________________________
Title:__________________________________
Page 2 of 3
<PAGE> 3
TIFFANY & CO. JAPAN INC., JAPAN BRANCH
By:_____________________________________
Name:___________________________________
Title:__________________________________
AMERICAN FAMILY LIFE ASSURANCE OF
COLUMBUS, JAPAN BRANCH
By:_____________________________________
Name:___________________________________
Title:__________________________________
Page 3 of 3
<PAGE> 1
- --------------------------------------------------------------------------------
Exhibit 10.126
Tiffany & CO.
Report on Form 10-K
Fiscal 1998
================================================================================
Note Purchase Agreement
----------
TIFFANY & CO
DATED AS OF DECEMBER 30, 1998
$60,000,000 6.90% SERIES A SENIOR NOTES DUE DECEMBER 30, 2008
$40,000,000 7.05% SERIES B SENIOR NOTES DUE DECEMBER 30, 2010
GUARANTIED BY
TIFFANY AND COMPANY
TIFFANY & CO. INTERNATIONAL
TIFFANY & CO. JAPAN INC.
- --------------------------------------------------------------------------------
TIFFANY & CO. i NOTE PURCHASE AGREEMENT
================================================================================
<PAGE> 2
TABLE OF CONTENTS
PAGE
----
1. AUTHORIZATION OF NOTES............................................... 1
2. SALE AND PURCHASE OF NOTES........................................... 1
3. CLOSING.............................................................. 2
4. CONDITIONS TO CLOSING................................................ 2
4.1 Representations and Warranties................................. 2
4.2 Performance; No Default........................................ 2
4.3 Compliance Certificates........................................ 2
4.4 Opinions of Counsel............................................ 3
4.5 Purchase Permitted By Applicable Law, etc...................... 3
4.6 Sale of Other Notes............................................ 3
4.7 Guaranty Agreement............................................. 4
4.8 Credit Agreement............................................... 4
4.9 Payment of Special Counsel Fees................................ 4
4.10 Private Placement Numbers...................................... 4
4.11 Changes in Corporate Structure................................. 4
4.12 Proceedings and Documents...................................... 4
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................ 5
5.1 Organization; Power and Authority.............................. 5
5.2 Authorization, etc............................................. 5
5.3 Disclosure..................................................... 5
5.4 Organization and Ownership of Shares of Subsidiaries;
Affiliates..................................................... 6
5.5 Financial Statements........................................... 6
5.6 Compliance with Laws, Other Instruments, etc................... 7
5.7 Governmental Authorizations, etc............................... 7
5.8 Litigation; Observance of Agreements, Statutes and Orders...... 7
5.9 Taxes.......................................................... 7
5.10 Title to Property; Leases...................................... 8
5.11 Licenses, Permits, etc......................................... 8
5.12 Compliance with ERISA.......................................... 8
5.13 Private Offering by the Company................................ 10
5.14 Use of Proceeds; Margin Regulations............................ 10
5.15 Existing Indebtedness; Future Liens............................ 10
5.16 Foreign Assets Control Regulations, etc........................ 11
5.17 Status under Certain Statutes.................................. 11
5.18 Environmental Matters.......................................... 11
5.19 Year 2000 Problem.............................................. 12
6. REPRESENTATIONS OF THE PURCHASER..................................... 12
6.1 Purchase for Investment........................................ 12
6.2 Source of Funds................................................ 12
7. INFORMATION AS TO COMPANY............................................ 14
7.1 Financial and Business Information............................. 14
7.2 Officer's Certificate.......................................... 16
TIFFANY & CO. NOTE PURCHASE AGREEMENT
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TABLE OF CONTENTS(cont.)
PAGE
----
7.3 Inspection..................................................... 17
8. PAYMENT OF THE NOTES................................................. 17
8.1 No Required Prepayments; Payment at Maturity................... 17
8.2 Optional Prepayments with Make-Whole Amount.................... 18
8.3 Allocation of Partial Prepayments.............................. 18
8.4 Maturity; Surrender, etc....................................... 18
8.5 No Other Optional Prepayments or Purchase of Notes............. 18
8.6 Make-Whole Amount.............................................. 19
9. AFFIRMATIVE COVENANTS................................................ 20
9.1 Compliance with Law............................................ 20
9.2 Insurance...................................................... 20
9.3 Maintenance of Properties...................................... 20
9.4 Payment of Taxes and Claims.................................... 21
9.5 Corporate Existence, etc....................................... 21
9.6 Compliance Regarding Year 2000................................. 21
9.7 Credit Agreement............................................... 21
10. NEGATIVE COVENANTS................................................... 22
10.1 Transactions with Affiliates................................... 22
10.2 Line of Business............................................... 22
10.3 Maintenance of Consolidated Net Worth.......................... 22
10.4 Fixed Charge Coverage.......................................... 22
10.5 Limitation on Debt............................................. 23
10.6 Liens.......................................................... 23
10.7 Merger, Consolidation, etc..................................... 27
10.8 Sale of Assets................................................. 28
11. EVENTS OF DEFAULT.................................................... 31
12. REMEDIES ON DEFAULT, ETC............................................. 34
12.1 Acceleration................................................... 34
12.2 Other Remedies................................................. 34
12.3 Rescission..................................................... 35
12.4 No Waivers or Election of Remedies, Expenses, etc.............. 35
13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES........................ 35
13.1 Registration of Notes.......................................... 35
13.2 Transfer and Exchange of Notes................................. 36
13.3 Replacement of Notes........................................... 36
14. PAYMENTS ON NOTES.................................................... 36
14.1 Place of Payment............................................... 36
14.2 Home Office Payment............................................ 37
15. EXPENSES, ETC........................................................ 37
15.1 Transaction Expenses........................................... 37
15.2 Survival....................................................... 37
TIFFANY & CO. NOTE PURCHASE AGREEMENT
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TABLE OF CONTENTS(cont.)
PAGE
----
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT......... 38
17. AMENDMENT AND WAIVER................................................. 38
17.1 Requirements................................................... 38
17.2 Solicitation of Holders of Notes............................... 38
17.3 Binding Effect, etc............................................ 39
17.4 Notes held by Company, etc..................................... 39
18. NOTICES.............................................................. 39
19. REPRODUCTION OF DOCUMENTS............................................ 40
20. CONFIDENTIAL INFORMATION............................................. 40
21. SUBSTITUTION OF PURCHASER............................................ 42
22. MISCELLANEOUS........................................................ 42
22.1 Successors and Assigns......................................... 42
22.2 Payments Due on Non-Business Days ............................. 42
22.3 Severability .................................................. 42
22.4 Construction................................................... 42
22.5 Counterparts................................................... 43
22.6 Governing Law.................................................. 43
TIFFANY & CO NOTE PURCHASE AGREEMENT
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SCHEDULES & EXHIBITS
SCHEDULE A -- Information Relating to Purchasers
SCHEDULE B -- Defined Terms
SCHEDULE 3 -- Payment Instructions
SCHEDULE 4.11 -- Changes in Corporate Structure
SCHEDULE 5.3 -- Disclosure Materials
SCHEDULE 5.4 -- Subsidiaries of the Company and Ownership of Subsidiary
Stock
SCHEDULE 5.5 -- Financial Statements
SCHEDULE 5.11 -- Patents, etc.
SCHEDULE 5.12 -- ERISA Affiliates
SCHEDULE 5.14 -- Use of Proceeds
SCHEDULE 5.15 -- Existing Indebtedness and Liens
EXHIBIT 1A -- Form of 6.90% Series A Senior Note due December 30, 2008
EXHIBIT 1B -- Form of 7.05% Series B Senior Note Due December 30, 2010
EXHIBIT 4.4(a) -- Form of Opinion of Special Counsel for the Company and
the Guarantors
EXHIBIT 4.4(b) -- Form of Opinion of General Counsel for the Company and
the Guarantors
EXHIBIT 4.4(c) -- Form of Opinion of Special Counsel for the Purchasers
EXHIBIT 4.7 -- Form of Guaranty Agreement
TIFFANY & CO. NOTE PURCHASE AGREEMENT
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<PAGE> 6
TIFFANY & CO.
727 Fifth Avenue
New York, New York 10022
$60,000,000 6.90% SERIES A SENIOR NOTES DUE DECEMBER 30, 2008
$40,000,000 7.05% SERIES B SENIOR NOTES DUE DECEMBER 30, 2010
Dated as of December 30, 1998
To the Purchaser Named on
the Signature Page Hereto
Ladies and Gentlemen:
TIFFANY & CO., a Delaware corporation (together with its successors and
assigns, the "Company"), agrees with you as follows:
1. AUTHORIZATION OF NOTES.
The Company will authorize the issue and sale of
(a) $60,000,000 aggregate principal amount of its 6.90% Series A
Senior Notes due December 30, 2008 (the "Series A Notes," such term to
include any such notes issued in substitution therefor pursuant to Section
13 of this Agreement or the Other Agreements (as hereinafter defined)),
and
(b) $40,000,000 aggregate principal amount of its 7.05% Series B
Senior Notes due December 30, 2010 (the "Series B Notes," such term to
include any such notes issued in substitution therefor pursuant to Section
13 of this Agreement or the Other Agreements.
The Series A Notes shall be substantially in the form set out in Exhibit 1A and
the Series B Notes shall be substantially in the form set out in Exhibit 1B, in
each case, with such changes therefrom, if any, as may be approved by you and
the Company. The Series A Notes and the Series B Notes are herein referred to
collectively as the "Notes," and individually as a "Note." Certain capitalized
terms used in this Agreement are defined in Schedule B; references to a
"Schedule" or an "Exhibit" are, unless otherwise specified, to a Schedule or an
Exhibit attached to this Agreement; and references to a "Section" are, unless
otherwise specified, references to a Section of this Agreement.
2. SALE AND PURCHASE OF NOTES.
Subject to the terms and conditions of this Agreement, the Company will
issue and sell to you and you will purchase from the Company, at the Closing
provided for in Section 3, Notes of the Series and in the principal amounts
specified below your name in Schedule A at the purchase price of 100% of the
principal amount thereof. Contemporaneously with entering into this Agreement,
the Company is entering into separate Note Purchase Agreements (the "Other
Agreements") identical with this Agreement with each of the other purchasers
named in Schedule A (the "Other Purchasers"), providing for the sale at such
Closing to each of the Other Purchasers of Notes of the Series and in the
principal amounts specified below its name in Schedule A. Your obligation
hereunder and the obligations of the Other Purchasers under the Other Agreements
are several and not joint obligations and you shall have no obligation under any
Other Agreement and no liability to any Person for the performance or
non-performance by any Other Purchaser thereunder.
TIFFANY & CO NOTE PURCHASE AGREEMENT
<PAGE> 7
3. CLOSING.
The sale and purchase of the Notes to be purchased by you and the Other
Purchasers shall occur at the offices of Hebb & Gitlin, One State Street,
Hartford, Connecticut 06103, at 10:00 a.m., local time, at a closing (the
"Closing") on December 30, 1998. At the Closing the Company will deliver to you
the Notes to be purchased by you in the form of a single Note (or such greater
number of Notes in denominations of at least $100,000 as you may request), dated
the date of the Closing and registered in your name (or in the name of your
nominee), as indicated in Schedule A, against payment by federal funds wire
transfer in immediately available funds of the amount of the purchase price
therefor as directed by the Company in Schedule 3. If at the Closing the Company
shall fail to tender such Notes to you as provided above in this Section 3, or
any of the conditions specified in Section 4 shall not have been fulfilled to
your satisfaction, you shall, at your election, be relieved of all further
obligations under this Agreement, without thereby waiving any rights you may
have by reason of such failure or such nonfulfillment.
4. CONDITIONS TO CLOSING.
Your obligation to purchase and pay for the Notes to be sold to you at the
Closing is subject to the fulfillment to your satisfaction, prior to or at the
Closing, of the following conditions:
4.1 Representations and Warranties.
The representations and warranties of the Company in this Agreement shall
be correct when made and at the time of the Closing.
4.2 Performance; No Default.
The Company and each of the Guarantors shall have performed and complied
with all agreements and conditions contained in the Financing Documents required
to be performed or complied with by the Company or such Guarantors prior to or
at the Closing and after giving effect to the issue and sale of the Notes (and
the application of the proceeds thereof as contemplated by Schedule 5.14) no
Default or Event of Default shall have occurred and be continuing. Neither the
Company nor any Subsidiary shall have entered into any transaction since the
date of the Memorandum that would have been prohibited by any of Sections 10.1,
10.5, 10.6 or 10.8 had such Sections applied since such date.
4.3 Compliance Certificates.
(a) Officer's Certificate. The Company shall have delivered to you
an Officer's Certificate, dated the date of the Closing, certifying that
the conditions specified in Sections 4.1, 4.2 and 4.11 have been
fulfilled.
(b) Company Secretary's Certificate. The Company shall have
delivered to you a certificate, signed on its behalf by its Secretary or
one of its Assistant Secretaries, dated the date of the Closing,
certifying as to the resolutions attached thereto and other corporate
proceedings relating to the authorization, execution and delivery of the
Notes, this Agreement and the Other Agreements.
(c) Guarantor Secretary's Certificates. Each of the Guarantors shall
have delivered to you a certificate, signed on its behalf by its Secretary
or one of its Assistant Secretaries, dated the date of the Closing,
certifying as to the resolutions attached thereto and
TIFFANY & CO. NOTE PURCHASE AGREEMENT
2
<PAGE> 8
other corporate proceedings relating to the authorization, execution and
delivery of the Guaranty Agreement.
4.4 Opinions of Counsel.
You shall have received opinions in form and substance reasonably
satisfactory to you, dated the date of the Closing, from
(a) Gibson, Dunn & Crutcher, counsel for the Company and the
Guarantors, substantially in the form set out in Exhibit 4.4(a) and
covering such other matters incident to the transactions contemplated
hereby as you or your counsel may reasonably request (and the Company
hereby instructs such counsel to deliver such opinion to you), and
(b) Patrick B. Dorsey, Esq., Senior Vice President and General
Counsel of the Company and the Guarantors, substantially in the form set
out in Exhibit 4.4(b) and covering such other matters incident to the
transactions contemplated hereby as you or your counsel may reasonably
request (and the Company hereby instructs such counsel to deliver such
opinion to you), and
(c) Hebb & Gitlin, your special counsel, substantially in the form
set out in Exhibit 4.4(c) and covering such other matters incident to the
transactions contemplated hereby as you may reasonably request.
4.5 Purchase Permitted By Applicable Law, etc.
On the date of the Closing your purchase of Notes shall (a) be permitted
by the laws and regulations of each jurisdiction to which you are subject,
without recourse to provisions (such as section 1405(a)(8) of the New York
Insurance Law) permitting limited investments by insurance companies without
restriction as to the character of the particular investment, (b) not violate
any applicable law or regulation (including, without limitation, Regulation T, U
or X of the Board of Governors of the Federal Reserve System) and (c) not
subject you to any tax, penalty or liability under or pursuant to any applicable
law or regulation. If requested by you, you shall have received an Officer's
Certificate certifying as to such matters of fact as you may reasonably specify
to enable you to determine whether such purchase is so permitted.
4.6 Sale of Other Notes.
Contemporaneously with the Closing the Company shall sell to the Other
Purchasers and the Other Purchasers shall purchase the Notes to be purchased by
them at the Closing as specified in Schedule A.
4.7 Guaranty Agreement.
You shall have received a counterpart of the Guaranty Agreement, duly
executed and delivered by each of the Guarantors, substantially in the form of
Exhibit 4.7 (as amended or supplemented from time to time, the "Guaranty
Agreement"), and the Guaranty Agreement shall be in full force and effect.
4.8 Credit Agreement.
The Credit Agreement shall have been amended to permit, or the lenders
under the Credit Agreement shall have validly waived any provision of the Credit
Agreement that would prohibit, the
TIFFANY & CO. NOTE PURCHASE AGREEMENT
3
<PAGE> 9
execution and delivery of this Agreement by the Company and the Guaranty
Agreement by all of the Guarantors, and a copy of such amendment or waiver,
certified as true and correct by a Responsible Officer on behalf of the Company,
shall have been delivered to you.
4.9 Payment of Special Counsel Fees.
Without limiting the provisions of Section 15.1, the Company shall have
paid on or before the Closing the reasonable fees, charges and disbursements of
your special counsel referred to in Section 4.4(c) to the extent reflected in a
statement of such counsel rendered to the Company at least one Business Day
prior to the date of the Closing.
4.10 Private Placement Numbers.
A Private Placement Number issued by Standard & Poor's CUSIP Service
Bureau (in cooperation with the Securities Valuation Office of the National
Association of Insurance Commissioners) shall have been obtained for each Series
of Notes.
4.11 Changes in Corporate Structure.
Except as specified in Schedule 4.11, the Company shall not have changed
its jurisdiction of incorporation or been a party to any merger or consolidation
and shall not have succeeded to all or any substantial part of the liabilities
of any other entity, at any time following the date of the most recent financial
statements referred to in Schedule 5.5.
4.12 Proceedings and Documents.
All corporate and other proceedings in connection with the transactions
contemplated by this Agreement and all documents and instruments incident to
such transactions shall be satisfactory to you and your special counsel, and you
and your special counsel shall have received all such counterpart originals or
certified or other copies of such documents as you or they may reasonably
request.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to you that:
5.1 Organization; Power and Authority.
The Company is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation, and is duly
qualified as a foreign corporation and is in good standing in each jurisdiction
in which such qualification is required by law, other than those jurisdictions
as to which the failure to be so qualified or in good standing could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. The Company has the corporate power and authority to own or hold
under lease the properties it purports to own or hold under lease, to transact
the business it transacts and proposes to transact, to execute and deliver this
Agreement and the Other Agreements and the Notes and to perform the provisions
hereof and thereof.
5.2 Authorization, etc.
The Financing Documents have been duly authorized by all necessary
corporate action on the part of the Company and each of the Guarantors, and each
of this Agreement and the Other Agreements constitutes, and upon execution and
delivery thereof each Note and the Guaranty Agreement will
TIFFANY & CO. NOTE PURCHASE AGREEMENT
4
<PAGE> 10
constitute, a legal, valid and binding obligation of each Obligor party thereto,
enforceable against each such Obligor in accordance with its terms, except as
may be limited by (a) applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors' rights
generally and (b) general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
5.3 Disclosure.
The Company, through its agents, ING Baring Furman Selz LLC and Chase
Securities Inc., has delivered to you and each Other Purchaser a copy of a
Private Placement Memorandum, dated November 1998 (the "Memorandum"), relating
to the transactions contemplated hereby. The Memorandum and the Company's Annual
Report to Stockholders for the Fiscal Year ended January 31, 1998, Proxy
Statement dated April 9, 1998, Annual Report on Form 10-K for the Fiscal Year
ended January 31, 1998 and Quarterly Report on Form 10-Q for the fiscal quarter
ended July 31, 1998 attached as exhibits to the Memorandum (collectively with
the Memorandum and referred to as the "Disclosure Documents"), taken as a whole,
fairly describe, in all material respects, the general nature of the business
and principal properties of the Company and its Subsidiaries. Except as
disclosed in Schedule 5.3, the Financing Documents, the Disclosure Documents,
the documents, certificates or other writings delivered to you by or on behalf
of the Company in connection with the transactions contemplated by the Financing
Documents and the financial statements listed in Schedule 5.5, taken as a whole,
do not contain any untrue statement of a material fact or omit to state any
material fact necessary to make the statements herein or therein not misleading
in light of the circumstances under which they were made. Except as disclosed in
the Memorandum or as expressly described in Schedule 5.3, or in one of the
documents, certificates or other writings identified herein or therein, or in
the financial statements listed in Schedule 5.5, since January 31, 1998, there
has been no change in the financial condition, operations, business, properties
or prospects of the Company or any Subsidiary except changes that individually
or in the aggregate could not reasonably be expected to have a Material Adverse
Effect. There is no fact known to the Company that could reasonably be expected
to have a Material Adverse Effect that has not been set forth herein or in the
Memorandum or in the other documents, certificates and other writings delivered
to you by or on behalf of the Company specifically for use in connection with
the transactions contemplated hereby.
5.4 Organization and Ownership of Shares of Subsidiaries; Affiliates.
(a) Schedule 5.4 contains (except as noted therein) complete and
correct lists of (i) the Company's Subsidiaries, showing, as to each
Subsidiary, the correct name thereof, the jurisdiction of its
organization, and the percentage of shares of each class of its Capital
Stock outstanding owned by the Company and each other Subsidiary and (ii)
the Company's Affiliates, other than Subsidiaries.
(b) All of the outstanding shares of Capital Stock of each
Subsidiary shown in Schedule 5.4 as being owned by the Company or its
Subsidiaries have been validly issued, are fully paid and nonassessable
and are owned by the Company or another Subsidiary free and clear of any
Lien (except as otherwise disclosed in Schedule 5.4).
(c) Each Subsidiary identified in Schedule 5.4 is a corporation or
other legal entity duly organized, validly existing and in good standing
under the laws of its jurisdiction of organization, and is duly qualified
as a foreign corporation or other legal entity and is in good standing in
each jurisdiction in which such qualification is required by law, other
than those jurisdictions as to which the failure to be so qualified or in
good standing could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. Each such
TIFFANY & CO. NOTE PURCHASE AGREEMENT
5
<PAGE> 11
Subsidiary has the corporate or other power and authority to own or hold
under lease the properties it purports to own or hold under lease, to
transact the business it transacts and proposes to transact, to execute
and deliver the Financing Documents to which it is a party and to perform
its obligations thereunder.
(d) No Subsidiary is a party to, or otherwise subject to any legal
restriction or any agreement (other than this Agreement, the Other
Agreements, the agreements listed in Schedule 5.4 and customary
limitations imposed by corporate law statutes) restricting the ability of
such Subsidiary to pay dividends out of profits or make any other similar
distributions of profits to the Company or any of its Subsidiaries that
owns outstanding shares of Capital Stock of such Subsidiary.
5.5 Financial Statements.
The Company has delivered to you and each Other Purchaser copies of the
consolidated financial statements of the Company and its Subsidiaries listed in
Schedule 5.5. All of said consolidated financial statements and the consolidated
financial statements set forth in its Quarterly Report on Form 10-Q for the
fiscal quarter ended October 31, 1998 (including in each case the related
schedules and notes) fairly present in all material respects the consolidated
financial position of the Company and its Subsidiaries as of the respective
dates specified in such Schedule and the consolidated results of their
operations and cash flows for the respective periods so specified and have been
prepared in accordance with GAAP consistently applied throughout the periods
involved except as set forth in the notes thereto (subject, in the case of any
interim financial statements, to normal year-end adjustments).
5.6 Compliance with Laws, Other Instruments, etc.
The execution, delivery and performance (i) by the Company of this
Agreement and the Notes, and (ii) by each of the Guarantors of the Guaranty
Agreement, will not
(a) contravene, result in any breach of, or constitute a default
under, or result in the creation of any Lien in respect of any property of
the Company or any Subsidiary under, any indenture, mortgage, deed of
trust, loan, purchase or credit agreement, lease, corporate charter or
by-laws, or any other agreement or instrument to which the Company or any
Subsidiary is bound or by which the Company or any Subsidiary or any of
their respective properties may be bound or affected,
(b) conflict with or result in a breach of any of the terms,
conditions or provisions of any order, judgment, decree, or ruling of any
court, arbitrator or Governmental Authority applicable to the Company or
any Subsidiary, or
(c) violate any provision of any statute or other rule or regulation
of any Governmental Authority applicable to the Company or any Subsidiary.
5.7 Governmental Authorizations, etc.
No consent, approval or authorization of, or registration, filing or
declaration with, any Governmental Authority is required to be obtained by the
Company or any of the Guarantors in connection with the execution, delivery or
performance (a) by the Company of this Agreement or the Notes, or (b) by each of
the Guarantors of the Guaranty Agreement.
TIFFANY & CO. NOTE PURCHASE AGREEMENT
6
<PAGE> 12
5.8 Litigation; Observance of Agreements, Statutes and Orders.
(a) There are no actions, suits or proceedings pending or, to the
knowledge of the Company, threatened against or affecting the Company or
any Subsidiary or any property of the Company or any Subsidiary in any
court or before any arbitrator of any kind or before or by any
Governmental Authority that, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.
(b) Neither the Company nor any Subsidiary is in default under any
term of any agreement or instrument to which it is a party or by which it
is bound, or any order, judgment, decree or ruling of any court,
arbitrator or Governmental Authority or is in violation of any applicable
law, ordinance, rule or regulation (including, without limitation,
Environmental Laws) of any Governmental Authority, which default or
violation, individually or in the aggregate, could reasonably be expected
to have a Material Adverse Effect.
5.9 Taxes.
The Company and its Subsidiaries have filed all tax returns that are
required to have been filed in any jurisdiction, and have paid all taxes shown
to be due and payable on such returns and all other taxes and assessments levied
upon them or their properties, assets, income or franchises, to the extent such
taxes and assessments have become due and payable and before they have become
delinquent, except for any taxes and assessments (a) the amount of which is not
individually or in the aggregate Material or (b) the amount, applicability or
validity of which is currently being contested in good faith by appropriate
proceedings and with respect to which the Company or a Subsidiary, as the case
may be, has established adequate reserves in accordance with GAAP. The Company
knows of no basis for any other tax or assessment that could reasonably be
expected to have a Material Adverse Effect. The charges, accruals and reserves
on the books of the Company and its Subsidiaries in respect of Federal, state or
other taxes for all fiscal periods are adequate. The Federal income tax
liabilities of the Company and its Subsidiaries subject to United States income
taxes have been determined by the Internal Revenue Service and paid for all
fiscal years up to and including the fiscal year ended January 31, 1993.
5.10 Title to Property; Leases.
The Company and its Subsidiaries have good and sufficient title to their
respective properties that individually or in the aggregate are Material,
including all such properties reflected in the most recent audited balance sheet
referred to in Section 5.5 or purported to have been acquired by the Company or
any Subsidiary after said date (except as sold or otherwise disposed of in the
ordinary course of business), in each case free and clear of Liens prohibited by
this Agreement. All leases that individually or in the aggregate are Material
are valid and subsisting and are in full force and effect in all material
respects.
5.11 Licenses, Permits, etc.
Except as disclosed in Schedule 5.11,
(a) the Company and its Subsidiaries own or possess all licenses,
permits, franchises, authorizations, patents, copyrights, service marks,
trademarks and trade names, or rights thereto, that individually or in the
aggregate are Material, without known conflict with the rights of others;
TIFFANY & CO. NOTE PURCHASE AGREEMENT
7
<PAGE> 13
(b) to the best knowledge of the Company, no product or practice of
the Company or any Subsidiary infringes in any material respect any
license, permit, franchise, authorization, patent, copyright, service
mark, trademark, trade name or other right owned by any other Person; and
(c) to the best knowledge of the Company, there is no Material
violation by any Person of any right of the Company or any of its
Subsidiaries with respect to any patent, copyright, service mark,
trademark, trade name or other right owned or used by the Company or any
of its Subsidiaries.
5.12 Compliance with ERISA.
(a) The Company and each ERISA Affiliate have operated and
administered each Plan in compliance with all applicable laws except for
such instances of noncompliance as have not resulted in and could not
reasonably be expected to result in a Material Adverse Effect. Neither the
Company nor any ERISA Affiliate has incurred any liability pursuant to
Title I or IV of ERISA or the penalty or excise tax provisions of the Code
relating to employee benefit plans (as defined in section 3 of ERISA), and
no event, transaction or condition has occurred or exists that could
reasonably be expected to result in the incurrence of any such liability
by the Company or any ERISA Affiliate, or in the imposition of any Lien on
any of the rights, properties or assets of the Company or any ERISA
Affiliate, in either case pursuant to Title I or IV of ERISA or to such
penalty or excise tax provisions or to section 401(a)(29) or 412 of the
Code, other than such liabilities or Liens as would not be individually or
in the aggregate Material.
(b) The present value of the aggregate benefit liabilities under
each of the Plans (other than Multiemployer Plans), determined as of the
end of such Plan's most recently ended plan year on the basis of the
actuarial assumptions specified for funding purposes in such Plan's most
recent actuarial valuation report, did not exceed the aggregate current
value of the assets of such Plan allocable to such benefit liabilities by
more than $2,000,000. The term "benefit liabilities" has the meaning
specified in section 4001 of ERISA and the terms "current value" and
"present value" have the meaning specified in section 3 of ERISA.
(c) The Company and the ERISA Affiliates have not incurred
withdrawal liabilities (and are not subject to contingent withdrawal
liabilities) under section 4201 or 4204 of ERISA in respect of
Multiemployer Plans that individually or in the aggregate are Material.
(d) The expected postretirement benefit obligation (determined as of
the last day of the Company's most recently ended fiscal year in
accordance with Financial Accounting Standards Board Statement No. 106,
without regard to liabilities attributable to continuation coverage
mandated by section 4980B of the Code) of the Company and its Subsidiaries
is not Material.
(e) The execution and delivery of the Financing Documents and the
issuance and sale of the Notes hereunder will not involve any transaction
that is subject to the prohibitions of section 406 of ERISA or in
connection with which a tax could be imposed pursuant to section
4975(c)(1)(A)-(D) of the Code. The representation by the Company in the
first sentence of this Section 5.12(e) is made in reliance upon and
subject to the accuracy of your representation in Section 6.2 as to the
Sources used to pay the purchase price of the Notes to be purchased by
you.
(f) Schedule 5.12 sets forth all ERISA Affiliates and all "employee
benefit plans"
TIFFANY & CO. NOTE PURCHASE AGREEMENT
8
<PAGE> 14
maintained by the Company (or any "affiliate" thereof) or in respect of
which the Notes could constitute an "employer security" ("employee benefit
plan" has the meaning specified in section 3 of ERISA, "affiliate" has the
meaning specified in section 407(d) of ERISA and section V of the
Department of Labor Prohibited Transaction Exemption 95-60 (60 FR 35925,
July 12, 1995) and "employer security" has the meaning specified in
section 407(d) of ERISA).
(g) All Foreign Pension Plans have been established, operated,
administered and maintained in compliance with all laws, regulations and
orders applicable thereto except for such failures to comply, in the
aggregate for all such failures, that could not reasonably be expected to
have a Material Adverse Effect. All premiums, contributions and any other
amounts required by applicable Foreign Pension Plan documents or
applicable laws have been paid or accrued as required, except for
premiums, contributions and amounts that, in the aggregate for all such
obligations, could not reasonably be expected to have a Material Adverse
Effect.
5.13 Private Offering by the Company.
Neither the Company nor anyone acting on its behalf has offered the Notes
or any similar securities for sale to, or solicited any offer to buy any of the
same from, or otherwise approached or negotiated in respect thereof with, any
Person other than you, the Other Purchasers and not more than 51 other
Institutional Investors, each of which has been offered the Notes at a private
sale for investment. Neither the Company nor anyone acting on its behalf has
taken, or will take, any action that would subject the issuance or sale of the
Notes to the registration requirements of section 5 of the Securities Act. For
purposes of this Section 5.13 only, each reference to the Notes shall be deemed
to include a reference to the Guaranty Agreement. The Company's representations
and warranties in this Section 5.13 are made in reliance upon similar
representations and warranties made to the Company by ING Baring Furman Selz LLC
and Chase Securities Inc. The Company believes that its reliance upon such
representations and warranties is reasonable under the circumstances and that it
is justified in relying thereon.
5.14 Use of Proceeds; Margin Regulations.
The Company will apply the proceeds of the sale of the Notes as set forth
in Schedule 5.14. No part of the proceeds from the sale of the Notes hereunder
will be used, directly or indirectly, for the purpose of buying or carrying any
margin stock within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System (12 CFR 221), or for the purpose of buying or carrying or
trading in any securities under such circumstances as to involve the Company in
a violation of Regulation X of said Board (12 CFR 224) or to involve any broker
or dealer in a violation of Regulation T of said Board (12 CFR 220). Margin
stock does not constitute more than 25% of the value of the consolidated assets
of the Company and its Subsidiaries and the Company does not have any present
intention that margin stock will constitute more than 25% of the value of such
assets. As used in this Section, the terms "margin stock" and "purpose of buying
or carrying" shall have the meanings assigned to them in said Regulation U.
TIFFANY & CO. NOTE PURCHASE AGREEMENT
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5.15 Existing Indebtedness; Future Liens.
(a) Except as described therein, Schedule 5.15 sets forth a complete
and correct list of all outstanding Indebtedness of the Company and its
Subsidiaries as of the dates specified in such Schedule (and specifying,
as to each such Indebtedness, the collateral, if any, securing such
Indebtedness), since which date there has been no Material change in the
amounts, interest rates, sinking funds, instalment payments or maturities
of the Indebtedness of the Company or its Subsidiaries. Neither the
Company nor any Subsidiary is in default and no waiver of default is
currently in effect, in the payment of any principal or interest on any
Indebtedness of the Company or such Subsidiary and no event or condition
exists with respect to any Indebtedness of the Company or any Subsidiary
that would permit (or that with notice or the lapse of time, or both,
would permit) one or more Persons to cause such Indebtedness to become due
and payable before its stated maturity or before its regularly scheduled
dates of payment.
(b) Except as disclosed in Schedule 5.15, neither the Company nor
any Subsidiary 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 by Section 10.6.
5.16 Foreign Assets Control Regulations, etc.
Neither the sale of the Notes by the Company hereunder nor its use of the
proceeds thereof will violate the Trading with the Enemy Act, as amended, or any
of the foreign assets control regulations of the United States Treasury
Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling
legislation or executive order relating thereto.
5.17 Status under Certain Statutes.
Neither the Company nor any Subsidiary is subject to regulation under the
Investment Company Act of 1940, as amended, the Public Utility Holding Company
Act of 1935, as amended, the Transportation Acts (49 U.S.C.), as amended, or the
Federal Power Act, as amended.
5.18 Environmental Matters.
Neither the Company nor any Subsidiary has knowledge of any claim or has
received any notice of any claim, and no proceeding has been instituted raising
any claim against the Company or any of its Subsidiaries or any of their
respective real properties now or formerly owned, leased or operated by any of
them or other assets, alleging any damage to the environment or violation of any
Environmental Laws, except, in each case, such as could not reasonably be
expected to result in a Material Adverse Effect. Except as otherwise disclosed
to you in writing,
(a) neither the Company nor any Subsidiary has knowledge of any
facts which would give rise to any claim, public or private, of violation
of Environmental Laws or damage to the environment emanating from,
occurring on or in any way related to real properties now or formerly
owned, leased or operated by any of them or to other assets or their use,
except, in each case, such as could not reasonably be expected to result
in a Material Adverse Effect;
(b) neither the Company nor any of its Subsidiaries has stored any
Hazardous Materials on real properties now or formerly owned, leased or
operated by any of them or disposed of any Hazardous Materials in a manner
contrary to any Environmental Laws in each
TIFFANY & CO. NOTE PURCHASE AGREEMENT
10
<PAGE> 16
case in any manner that could reasonably be expected to result in a
Material Adverse Effect; and
(c) all buildings on all real properties now owned, leased or
operated by the Company or any of its Subsidiaries are in compliance with
applicable Environmental Laws, except where failure to comply could not
reasonably be expected to result in a Material Adverse Effect.
5.19 Year 2000 Problem.
The Company has reviewed the areas within the business and operations of
the Company and its Subsidiaries which could be adversely affected by the risk
(such risk herein referred to as the "Year 2000 Problem") that computer
applications, as well as embedded microchips in non-computing devices, used by
the Company and its Subsidiaries may be unable to recognize and perform properly
date-sensitive functions involving certain dates prior to and any date after
December 31, 1999. Since July 31, 1998, there have been no changes or
developments with respect to the matters set forth in either the disclosures
made in the Company's Annual Report on Form 10-Q for the fiscal quarter ended
July 31, 1998, or in the NAIC Questionnaire-based Disclosure, in each case in
respect of the Year 2000 Problem, which would cause the Company to reasonably
believe, based upon current information, that its Year 2000 Problem will result
in a Material Adverse Effect. As used herein, "NAIC Questionnaire-based
Disclosure" means the Company's written disclosure delivered to the Purchasers
relating to the Year 2000 Problem responsive to questions promulgated by the
Securities Valuation Office of the National Association of Insurance
Commissioners as part of its credit assessment procedures for not-rated
securities.
6. REPRESENTATIONS OF THE PURCHASER
6.1 Purchase for Investment
You represent that you are purchasing the Notes for your own account or
for one or more separate accounts maintained by you or for the account of one or
more pension or trust funds and not with a view to the distribution thereof,
provided that the disposition of your or their property shall at all times be
within your or their control. You understand that the Notes have not been
registered under the Securities Act and may be resold only if registered
pursuant to the provisions of the Securities Act or if an exemption from
registration is available, except under circumstances where neither such
registration nor such an exemption is required by law, and that the Company is
not required to register the Notes.
6.2 Source of Funds
You represent that at least one of the following statements is an accurate
representation as to each source of funds (a "Source") to be used by you to pay
the purchase price of the Notes to be purchased by you hereunder:
(a) the Source is an "insurance company general account" as defined
in United States Department of Labor Prohibited Transaction Exemption
("PTE") 95-60 (60 FR 35925, July 12, 1995) and in respect thereof you
represent that there is no "employee benefit plan" (as defined in section
3(3) of ERISA and section 4975(e)(1) of the Code, treating as a single
plan all plans maintained by the same employer or employee organization or
affiliate thereof) with respect to which the amount of the general account
reserves and liabilities of all contracts held by or on behalf of such
plan exceeds 10% of the total reserves and liabilities of such general
account (exclusive of separate account liabilities) plus surplus, as set
forth in the National Association of Insurance Commissioners' Annual
Statement filed with your state of domicile; or
TIFFANY & CO. NOTE PURCHASE AGREEMENT
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<PAGE> 17
(b) if you are an insurance company, the Source does not include
assets allocated to any separate account maintained by you in which any
employee benefit plan (or its related trust) has any interest, other than
a separate account that is maintained solely in connection with your fixed
contractual obligations under which the amounts payable, or credited, to
such plan and to any participant or beneficiary of such plan (including
any annuitant) are not affected in any manner by the investment
performance of the separate account; or
(c) the Source is either (i) an insurance company pooled separate
account, within the meaning of PTE 90-1 (issued January 29, 1990), or (ii)
a bank collective investment fund, within the meaning of the PTE 91-38
(issued July 12, 1991) and, except as you have disclosed to the Company in
writing pursuant to this paragraph (c), no employee benefit plan or group
of plans maintained by the same employer or employee organization
beneficially owns more than 10% of all assets allocated to such pooled
separate account or collective investment fund; or
(d) the Source constitutes assets of an "investment fund" (within
the meaning of part V of PTE 84-14 (the "QPAM Exemption")) managed by a
"qualified professional asset manager" or "QPAM" (within the meaning of
part V of the QPAM Exemption), no employee benefit plan's assets that are
included in such investment fund, when combined with the assets of all
other employee benefit plans established or maintained by the same
employer or by an affiliate (within the meaning of section V(c)(1) of the
QPAM Exemption) of such employer or by the same employee organization and
managed by such QPAM, exceed 20% of the total client assets managed by
such QPAM, the conditions of part I(c) and (g) of the QPAM Exemption are
satisfied, neither the QPAM nor a person controlling or controlled by the
QPAM (applying the definition of "control" in section V(e) of the QPAM
Exemption) owns a 5% or more interest in the Company and
(i) the identity of such QPAM and
(ii) the names of all employee benefit plans whose assets are
included in such investment fund
have been disclosed to the Company in writing pursuant to this
paragraph (d); or
(e) the Source is a governmental plan; or
(f) the Source is one or more employee benefit plans, or a separate
account or trust fund comprised of one or more employee benefit plans,
each of which has been identified to the Company in writing pursuant to
this paragraph (f); or
(g) the Source does not include assets of any employee benefit plan,
other than a plan exempt from the coverage of ERISA.
As used in this Section 6.2, the terms "employee benefit plan", "governmental
plan" and "separate account" shall have the respective meanings assigned to such
terms in section 3 of ERISA.
TIFFANY & CO. NOTE PURCHASE AGREEMENT
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7. INFORMATION AS TO COMPANY
7.1 Financial and Business Information
The Company shall deliver to each holder of Notes that is an Institutional
Investor:
(a) Quarterly Statements -- within 60 days after the end of each
quarterly fiscal period in each fiscal year of the Company (other than the
last quarterly fiscal period of each such fiscal year), duplicate copies
of,
(i) a consolidated balance sheet of the Company and its
Subsidiaries as at the end of such quarter, and
(ii) consolidated statements of earnings, stockholders' equity
and cash flows of the Company and its Subsidiaries, for such quarter
and (in the case of the second and third quarters) for the portion
of the fiscal year ending with such quarter,
setting forth in each case in comparative form the figures for the
corresponding periods in the previous fiscal year, all in reasonable
detail, prepared in accordance with GAAP applicable to quarterly financial
statements generally, and certified on behalf of the Company by a Senior
Financial Officer as fairly presenting, in all material respects, the
consolidated financial position of the companies being reported on and
their consolidated results of operations and cash flows, subject to
changes resulting from year-end adjustments, provided that delivery within
the time period specified above of copies of the Company's Quarterly
Report on Form 10-Q (including copies of each exhibit filed therewith)
prepared in compliance with the requirements therefor and filed with the
Securities and Exchange Commission shall be deemed to satisfy the
requirements of this Section 7.1(a) so long as such Report includes each
of the financial statements (and the comparative historical figures)
referred to above;
(b) Annual Statements -- within 105 days after the end of each
fiscal year of the Company, duplicate copies of,
(i) a consolidated balance sheet of the Company and its
Subsidiaries, as at the end of such year, and
(ii) consolidated statements of earnings, stockholders' equity
and cash flows of the Company and its Subsidiaries, for such year,
setting forth in each case in comparative form the figures for the
previous fiscal year, all in reasonable detail, prepared in accordance
with GAAP, and accompanied by
(A) an opinion thereon of independent certified public
accountants of recognized national standing, which opinion
shall state that such financial statements present fairly, in
all material respects, the consolidated financial position of
the companies being reported upon and their consolidated
results of operations and 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, and
TIFFANY & CO. NOTE PURCHASE AGREEMENT
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<PAGE> 19
(B) a certificate of such accountants stating that they
have reviewed this Agreement and stating further whether, in
making their audit, they have become aware of any condition or
event that then constitutes a Default or an Event of Default,
and, if they are aware that any such condition or event then
exists, specifying the nature and period of the existence
thereof (it being understood that such accountants shall not
be liable, directly or indirectly, for any failure to obtain
knowledge of any Default or Event of Default unless such
accountants should have obtained knowledge thereof in making
an audit in accordance with generally accepted auditing
standards or did not make such an audit),
provided that the delivery within the time period specified above of the
Company's Annual Report on Form 10-K (including copies of each exhibit
filed therewith) for such fiscal year prepared in accordance with the
requirements therefor and filed with the Securities and Exchange
Commission, together with the accountant's certificate described in clause
(B) above, shall be deemed to satisfy the requirements of this Section
7.1(b), so long as such Report includes each of the financial statements
(and the comparative historical figures) referred to above;
(c) SEC and Other Reports -- promptly upon their becoming available,
one copy of (i) each financial statement, report (including, without
limitation, the Company's annual report to shareholders, if any, prepared
pursuant to Rule 14a-3 under the Exchange Act), notice or proxy statement
sent by the Company or any Subsidiary to public securities holders
generally, and (ii) each regular or periodic report, each registration
statement (without exhibits except as expressly requested by such holder),
and each prospectus and all amendments thereto filed by the Company or any
Subsidiary with the Securities and Exchange Commission and of all press
releases and other statements made available generally by the Company or
any Subsidiary to the public concerning developments that are Material;
(d) Notice of Default or Event of Default -- promptly, and in any
event within five days after a Responsible Officer becoming aware of the
existence of any Default or Event of Default or that any Person has given
any notice or taken any action with respect to a claimed default hereunder
or that any Person has given any notice or taken any action with respect
to a claimed default of the type referred to in Section 11(f), a written
notice specifying the nature and period of existence thereof and what
action the Company is taking or proposes to take with respect thereto;
(e) ERISA Matters -- promptly, and in any event within five days
after a Responsible Officer becoming aware of any of the following, a
written notice setting forth the nature thereof and the action, if any,
that the Company or an ERISA Affiliate proposes to take with respect
thereto:
(i) with respect to any Plan, any reportable event, as defined
in section 4043(c) of ERISA and the regulations thereunder, for
which notice thereof has not been waived pursuant to such
regulations as in effect on the date of the Closing; or
(ii) the taking by the PBGC of steps to institute, or the
threatening by the PBGC of the institution of, proceedings under
section 4042 of ERISA for the termination of, or the appointment of
a trustee to administer, any Plan, or the receipt by the Company or
any ERISA Affiliate of a notice from a Multiemployer Plan that such
action has been taken by the PBGC with respect to such Multiemployer
Plan; or
TIFFANY & CO. NOTE PURCHASE AGREEMENT
14
<PAGE> 20
(iii) any event, transaction or condition that could result in
the incurrence of any liability by the Company or any ERISA
Affiliate pursuant to Title I or IV of ERISA or the penalty or
excise tax provisions of the Code relating to employee benefit
plans, or in the imposition of any Lien on any of the rights,
properties or assets of the Company or any ERISA Affiliate pursuant
to Title I or IV of ERISA or such penalty or excise tax provisions,
if such liability or Lien, taken together with any other such
liabilities or Liens then existing, could reasonably be expected to
have a Material Adverse Effect;
(f) Notices from Governmental Authority -- promptly, and in any
event within 30 days of receipt thereof, copies of any notice to the
Company or any Subsidiary from any Federal or state Governmental Authority
relating to any order, ruling, statute or other law or regulation that
could reasonably be expected to have a Material Adverse Effect; and
(g) Requested Information -- with reasonable promptness, such other
data and information relating to the business, operations, affairs,
financial condition, assets or properties of the Company or any of its
Subsidiaries or relating to the ability of the Obligors to perform their
obligations under the Financing Documents as from time to time may be
reasonably requested by any such holder of Notes, or such information
regarding the Company required to satisfy the requirements of 17 C.F.R.
ss.230.144A, as amended from time to time, in connection with any
contemplated transfer of the Notes.
7.2 Officer's Certificate
Each set of financial statements delivered to a holder of Notes pursuant
to Section 7.1(a) or Section 7.1(b) hereof shall be accompanied by an Officer's
Certificate signed by a Senior Financial Officer setting forth:
(a) Covenant Compliance -- the information (including detailed
calculations) required in order to establish whether the Company was in
compliance with the requirements of Sections 10.3 through 10.8, inclusive,
during the quarterly or annual period covered by the statements then being
furnished (including with respect to each such Section, where applicable,
the calculations of the maximum or minimum amount, ratio or percentage, 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 such officer has reviewed
the relevant terms hereof and has made, or caused to be made, under his or
her supervision, a review of the transactions and conditions of the
Company and its Subsidiaries from the beginning of the quarterly or annual
period covered by the statements then being furnished to the date of the
certificate and that such review has not 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
(including, without limitation, any such event or condition resulting from
the failure of the Company or any Subsidiary to comply with any
Environmental Law), specifying the nature and period of existence thereof
and what action the Company shall have taken or proposes to take with
respect thereto.
TIFFANY & CO. NOTE PURCHASE AGREEMENT
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<PAGE> 21
7.3 Inspection
The Company shall permit the representatives of each holder of Notes that
is an Institutional Investor:
(a) No Default -- if no Default or Event of Default then exists, at
the expense of such holder and upon reasonable prior notice to the
Company, to visit the principal executive office of the Company, to
discuss the affairs, finances and accounts of the Company and its
Subsidiaries with the Company's officers, and (with the consent of the
Company, which consent will not be unreasonably withheld) its independent
public accountants, and (with the consent of the Company, which consent
will not be unreasonably withheld) to visit the other offices and
properties of the Company and each Subsidiary, all at such reasonable
times and as often as may be reasonably requested in writing; and
(b) Default -- if a Default or Event of Default then exists, at the
expense of the Company, to visit and inspect any of the offices or
properties of the Company or any Subsidiary, 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 and independent
public accountants (and by this provision the Company authorizes said
accountants to discuss the affairs, finances and accounts of the Company
and its Subsidiaries), all at such times and as often as may be requested.
8. PAYMENT OF THE NOTES
8.1 No Required Prepayments; Payment at Maturity
(a) Series A Notes Prepayments. There are no required prepayments in
respect of the Series A Notes. The entire principal amount of the Series A
Notes outstanding on December 30, 2008, together with accrued unpaid
interest thereon, shall be due and payable on such date.
(b) Series B Notes Prepayments. There are no required prepayments in
respect of the Series B Notes. The entire principal amount of the Series B
Notes outstanding on December 30, 2010, together with accrued unpaid
interest thereon, shall be due and payable on such date.
TIFFANY & CO. NOTE PURCHASE AGREEMENT
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8.2 Optional Prepayments with Make-Whole Amount
The Company may, at its option, upon notice as provided below, prepay at
any time all, or from time to time any part of, the Notes (but if in part, in an
amount not less than $10,000,000 or such lesser amount as shall then be
outstanding), at 100% of the principal amount so prepaid, together with accrued
unpaid interest on such amount, plus the Make-Whole Amount determined for the
prepayment date with respect to such principal amount. The Company will give
each holder of Notes written notice of each optional prepayment under this
Section 8.2 not less than 30 days and not more than 60 days prior to the date
fixed for such prepayment. Each such notice shall specify such prepayment date
(which shall be a Business Day), the aggregate principal amount of the Notes to
be prepaid on such date, the principal amount of each Note held by such holder
to be prepaid (determined in accordance with Section 8.3), and the interest to
be paid on the prepayment date with respect to such principal amount being
prepaid, and shall be accompanied by an Officer's Certificate signed by a Senior
Financial Officer as to the estimated Make-Whole Amount due in connection with
such prepayment (calculated as if the date of such notice were the date of the
prepayment), setting forth the details of such computation. Two Business Days
prior to such prepayment, the Company shall deliver to each holder of Notes an
Officer's Certificate signed by a Senior Financial Officer specifying the
calculation of such Make-Whole Amount as of the specified prepayment date.
8.3 Allocation of Partial Prepayments
In the case of each partial prepayment of the Notes, the principal amount
of the Notes to be prepaid shall be allocated among all of the Notes (without
regard to Series) at the time outstanding in proportion, as nearly as
practicable, to the respective unpaid principal amounts thereof not theretofore
called for prepayment.
8.4 Maturity; Surrender, etc.
In the case of each prepayment of Notes pursuant to this Section 8, the
principal amount of each Note to be prepaid shall mature and become due and
payable on the date fixed for such prepayment, together with interest on such
principal amount accrued to such date and the applicable Make-Whole Amount, if
any. From and after such date, unless the Company shall fail to pay such
principal amount when so due and payable, together with the interest and
Make-Whole Amount, if any, as aforesaid, interest on such principal amount shall
cease to accrue. Any Note paid or prepaid in full shall be surrendered to the
Company and cancelled and shall not be reissued, and no Note shall be issued in
lieu of any prepaid principal amount of any Note.
8.5 No Other Optional Prepayments or Purchase of Notes
The Company will not, and will not permit any Affiliate to, prepay
(whether directly or indirectly by purchase, redemption or other acquisition)
any of the outstanding Notes except upon the payment or prepayment of the Notes
in accordance with the terms of this Section 8. The Company will promptly cancel
all Notes acquired by it or any Affiliate pursuant to any payment, prepayment or
purchase of Notes pursuant to any provision of this Section 8 and no Notes may
be issued in substitution or exchange for any such Notes.
TIFFANY & CO. NOTE PURCHASE AGREEMENT
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<PAGE> 23
8.6 Make-Whole Amount
The term "Make-Whole Amount" means, with respect to any Note, an amount
equal to the excess, if any, of the Discounted Value of the Remaining Scheduled
Payments with respect to the Called Principal of such Note over the amount of
such Called Principal, provided that the Make-Whole Amount may in no event be
less than zero. For the purposes of determining the Make-Whole Amount, the
following terms have the following meanings:
"Called Principal" means, with respect to any Note, the principal of
such Note that is to be prepaid pursuant to Section 8.2 or has become or
is declared to be immediately due and payable pursuant to Section 12.1, as
the context requires.
"Discounted Value" means, with respect to the Called Principal of
any Note, the amount obtained by discounting all Remaining Scheduled
Payments with respect to such Called Principal from their respective
scheduled due dates to the Settlement Date with respect to such Called
Principal, in accordance with accepted financial practice and at a
discount factor (applied on the same periodic basis as that on which
interest on the Notes is payable) equal to the Reinvestment Yield with
respect to such Called Principal.
"Reinvestment Yield" means, with respect to the Called Principal of
any Note, the sum of 0.50% per annum plus the yield to maturity implied by
(a) the yields reported, as of 10:00 A.M. (New York City time) on the
second Business Day preceding the Settlement Date with respect to such
Called Principal, on the display designated as Page "PX1" on the Bloomberg
Financial Market Service (or such other display as may replace Page "PX1"
on the Bloomberg Financial Market Service) for actively traded U.S.
Treasury securities having a maturity equal to the Remaining Average Life
of such Called Principal as of such Settlement Date, or (b) if such yields
are not reported as of such time or the yields reported as of such time
are not ascertainable (including by way of interpolation), the Treasury
Constant Maturity Series Yields reported, for the latest day for which
such yields have been so reported as of the second Business Day preceding
the Settlement Date with respect to such Called Principal, in Federal
Reserve Statistical Release H.15 (519) (or any comparable successor
publication) for actively traded U.S. Treasury securities having a
constant maturity equal to the Remaining Average Life of such Called
Principal as of such Settlement Date. Such implied yield will be
determined, if necessary, by (i) converting U.S. Treasury bill quotations
to bond-equivalent yields in accordance with accepted financial practice
and (ii) interpolating linearly between (1) the actively traded U.S.
Treasury security with the maturity closest to and greater than the
Remaining Average Life and (2) the actively traded U.S. Treasury security
with the maturity closest to and less than the Remaining Average Life.
"Remaining Average Life" means, with respect to any Called
Principal, the number of years (calculated to the nearest one-twelfth
year) obtained by dividing (a) such Called Principal into (b) the sum of
the products obtained by multiplying (i) the principal component of each
Remaining Scheduled Payment with respect to such Called Principal by (ii)
the number of years (calculated to the nearest one-twelfth year) that will
elapse between the Settlement Date with respect to such Called Principal
and the scheduled due date of such Remaining Scheduled Payment.
"Remaining Scheduled Payments" means, with respect to the Called
Principal of any Note, all payments of such Called Principal and interest
thereon that would be due after the Settlement Date with respect to such
Called Principal if no payment of such Called Principal were made prior to
its scheduled due date, provided that if such Settlement Date is not a
date on
TIFFANY & CO. NOTE PURCHASE AGREEMENT
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<PAGE> 24
which interest payments are due to be made under the terms of such Note,
then the amount of the next succeeding scheduled interest payment will be
reduced by the amount of interest accrued to such Settlement Date and
required to be paid on such Settlement Date pursuant to Section 8.2 or
12.1.
"Settlement Date" means, with respect to the Called Principal of any
Note, the date on which such Called Principal is to be prepaid pursuant to
Section 8.2 or has become or is declared to be immediately due and payable
pursuant to Section 12.1, as the context requires.
9. AFFIRMATIVE COVENANTS
The Company covenants that so long as any of the Notes are outstanding:
9.1 Compliance with Law
The Company will and will cause each of its Subsidiaries to comply with
all laws, ordinances or governmental rules or regulations to which each of them
is subject, including, without limitation, Environmental Laws, and will obtain
and maintain in effect all licenses, certificates, permits, franchises and other
governmental authorizations necessary to the ownership of their respective
properties or to the conduct of their respective businesses, in each case to the
extent necessary to ensure that non-compliance with such laws, ordinances or
governmental rules or regulations or failures to obtain or maintain in effect
such licenses, certificates, permits, franchises and other governmental
authorizations could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
9.2 Insurance
The Company will and will cause each of its Subsidiaries to maintain, with
financially sound and reputable insurers, insurance with respect to their
respective properties and businesses against such casualties and contingencies,
of such types, on such terms and in such amounts (including deductibles,
co-insurance and self-insurance, if adequate reserves are maintained with
respect thereto) as is customary in the case of entities of established
reputations engaged in the same or a similar business and similarly situated.
9.3 Maintenance of Properties
The Company will and will cause each of its Subsidiaries to maintain and
keep, or cause to be maintained and kept, their respective properties in good
repair, working order and condition (other than ordinary wear and tear), so that
the business carried on in connection therewith may be properly conducted at all
times, provided that this Section shall not prevent the Company or any
Subsidiary from discontinuing the operation and the maintenance of any of its
properties if the Company has concluded that such discontinuance is desirable in
the conduct of its business and that such discontinuance could not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect.
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9.4 Payment of Taxes and Claims
The Company will and will cause each of its Subsidiaries to file all tax
returns required to be filed in any jurisdiction and to pay and discharge all
taxes shown to be due and payable on such returns and all other taxes,
assessments, governmental charges, or levies imposed on them or any of their
properties, assets, income or franchises, to the extent such taxes, assessments,
charges or levies have become due and payable and before they have become
delinquent and all claims for which sums have become due and payable that have
or might become a Lien on properties or assets of the Company or any Subsidiary,
provided that neither the Company nor any Subsidiary need pay any such tax or
assessment or claims if (a) the amount, applicability or validity thereof is
contested by the Company or such Subsidiary on a timely basis in good faith and
in appropriate proceedings, and the Company or a Subsidiary has established
adequate reserves therefor in accordance with GAAP on the books of the Company
or such Subsidiary or (b) the nonpayment of all such taxes, assessments, charges
and levies in the aggregate could not reasonably be expected to have a Material
Adverse Effect.
9.5 Corporate Existence, etc.
Subject to Section 10.7(c), the Company will at all times preserve and
keep in full force and effect its corporate existence. Subject to Sections 10.7
and 10.8, the Company will at all times preserve and keep in full force and
effect the corporate existence of each of its Subsidiaries (unless merged into
the Company or a Subsidiary) and all rights and franchises of the Company and
its Subsidiaries unless, in the good faith judgment of the Company, the
termination of or failure to preserve and keep in full force and effect such
corporate existence, right or franchise could not, individually or in the
aggregate, have a Material Adverse Effect.
9.6 Compliance Regarding Year 2000
The Company will, and will cause each of its Subsidiaries to, use its
commercially reasonable efforts to assure that, not later than December 31,
1999, the computer-based and other systems of the Company and its Subsidiaries
are able to effectively process data, including dates prior to and any date
after December 31, 1999, without experiencing any Year 2000 Problem that could
cause a Material Adverse Effect.
9.7 Credit Agreement.
The Company will, in connection with any extension or renewal of the
commitment of the banks under the Credit Agreement, or in connection with any
replacement of the credit facility provided by the Credit Agreement, use
commercially reasonable efforts to cause the lenders participating in the Credit
Agreement, or replacement credit facility, as the case may be, to enter into an
agreement reasonably satisfactory to the Required Holders, whereby the holders
of the Notes and such lenders would agree that upon the occurrence of certain
specified material defaults or similar events, all payments thereafter received
by any holder of a Note or any such lender from the Company or any Subsidiary
would be shared pro rata (on the basis of the outstanding principal amounts
owing by the Company and its Subsidiaries to the holders of the Notes and such
lenders) with each other holder of any Note and each other such lender.
TIFFANY & CO. NOTE PURCHASE AGREEMENT
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10. NEGATIVE COVENANTS
The Company covenants that so long as any of the Notes are outstanding:
10.1 Transactions with Affiliates
The Company will not, and will not permit any Subsidiary to, enter into
directly or indirectly any transaction or group of related transactions
(including, without limitation, the purchase, lease, sale or exchange of
properties of any kind or the rendering of any service) with any Affiliate
(other than the Company or another Subsidiary), except in the ordinary course
and pursuant to the reasonable requirements of the Company's or such
Subsidiary's business and upon fair and reasonable terms no less favorable to
the Company or such Subsidiary than would be obtainable in a comparable
arm's-length transaction with a Person not an Affiliate.
10.2 Line of Business
The Company will not, and will not permit any of its Subsidiaries to,
engage in any business if, as a result, the general nature of the business in
which the Company and its Subsidiaries, taken as a whole, would then be engaged
would be substantially changed from the general nature of the business in which
the Company and its Subsidiaries, taken as a whole, are engaged on the date of
this Agreement as described in the Memorandum.
10.3 Maintenance of Consolidated Net Worth
The Company will not, at any time, permit Consolidated Net Worth to be
less than the sum of
(a) $300,000,000 plus
(b) an aggregate amount equal to 25% of Consolidated Net Income
(but, in each case, only if a positive number) for each fiscal quarter of
the Company ended after the date of the Closing and prior to such time.
10.4 Fixed Charge Coverage
The Company will not at any time permit the ratio of
(a) Consolidated Operating Cash Flow plus Consolidated Adjusted
Lease Expense, in each case for the period of four consecutive fiscal
quarters of the Company most recently ended at such time to
(b) Consolidated Interest Expense plus Consolidated Adjusted Lease
Expense, in each case for such period,
to be less than 2.0 to 1.0.
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10.5 Limitation on Debt
(a) Incurrence of Debt. The Company will not, and will not permit
any Subsidiary to, directly or indirectly, create, incur, assume,
guarantee, or otherwise become directly or indirectly liable with respect
to, any Debt, unless on the date the Company or such Subsidiary becomes
liable with respect to any such Debt and immediately after giving effect
thereto and the concurrent retirement of any other Debt,
(i) no Default or Event of Default would exist, and
(ii) Consolidated Total Debt would not exceed 60% of
Consolidated Total Capitalization.
(b) Incurrence of Priority Debt. The Company will not, and will not
permit any Subsidiary to, directly or indirectly, create, incur, assume,
guarantee, or otherwise become directly or indirectly liable with respect
to, any Priority Debt, unless on the date the Company or such Subsidiary
becomes liable with respect to any such Priority Debt and immediately
after giving effect thereto and the concurrent retirement of any other
Priority Debt,
(i) no Default or Event of Default would exist; and
(ii) Priority Debt would not exceed 20% of Consolidated Net
Worth.
(c) Deemed Incurrence. For the purposes of this Section 10.5, any
Person becoming a Subsidiary after the date hereof shall be deemed, at the
time it becomes a Subsidiary, to have incurred all of its then outstanding
Debt, and any Person extending, renewing or refunding any Debt shall be
deemed to have incurred such Debt at the time of such extension, renewal
or refunding.
10.6 Liens
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly create, assume, incur or suffer to be created, assumed or
incurred or to exist, any Lien on or with respect to any property or asset
(including, without limitation, any document or instrument in respect of goods
or accounts receivable) of the Company or any such Subsidiary, whether now owned
or held or hereafter acquired, or any income or profits therefrom, or assign or
otherwise convey any right to receive income or profits (unless it makes, or
causes to be made, effective provision whereby the Notes will be equally and
ratably secured with any and all other obligations thereby secured, pursuant to
an agreement or agreements reasonably satisfactory to the Required Holders and,
in any such case, the Notes shall have the benefit, to the fullest extent that,
and with such priority as, the holders of the Notes may be entitled under
applicable law, of an equitable Lien on such property), except:
(a) Taxes, etc. -- Liens for taxes, assessments or other
governmental charges that are not yet due and payable or the payment of
which is not at the time required by Section 9.4;
TIFFANY & CO. NOTE PURCHASE AGREEMENT
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(b) Legal Proceedings -- Liens
(i) arising from judicial attachments and judgments,
(ii) securing appeal bonds, supersedeas bonds, and
(iii) arising in connection with court proceedings (including,
without limitation, surety bonds and letters of credit or any other
instrument serving a similar purpose),
provided that the execution or other enforcement of such Liens is
effectively stayed and the claims secured thereby are being actively
contested in good faith and by appropriate proceedings, and in respect of
which adequate reserves shall have been established on the books of the
Company and its Subsidiaries in accordance with GAAP;
(c) Ordinary Course Liens -- Liens incidental to the normal conduct
of the business of the Company or any Subsidiary or the ownership of their
properties or assets which are not incurred in connection with the
incurrence of Debt and which do not in the aggregate materially impair the
use of such properties in the operation of the business of the Company and
its Subsidiaries taken as a whole or materially impair the value of such
properties for the purpose of such business, including, without
limitation, Liens
(i) in connection with workers' compensation, unemployment
insurance, social security and other like laws,
(ii) to secure (or to obtain letters of credit that secure)
the performance of tenders, statutory obligations, surety and
performance bonds (of a type other than set forth in Section
10.6(b)), bids, leases (other than Capital Leases), purchase,
construction or sales contracts and other similar obligations, in
each case not incurred or made in connection with the borrowing of
money, the obtaining of advances or credit or the payment of the
deferred purchase price of property,
(iii) to secure the claims or demands of materialmen,
mechanics, carriers, warehousemen, vendors, repairmen, landlords,
lessors and other like Persons, arising in the ordinary course of
business, and
(iv) in the nature of reservations, exceptions, encroachments,
easements, rights-of-way, covenants, conditions, restrictions,
leases and other similar title exceptions or encumbrances affecting
real property,
provided that any amounts secured by such Liens are not overdue;
(d) (i) Existing Liens -- Liens in existence as of the date of the
Closing securing Debt and listed in Schedule 5.15, and
(ii) Renewals -- Liens securing renewals, extensions (as to
time) and refinancings of Debt secured by the Liens listed in
Schedule 5.15, provided that (A) the amount of Debt secured by each
such Lien is not increased in excess of the amount of Debt
outstanding on the date of such renewal, extension or refinancing,
(B) none of such Liens is extended to include any additional
property of the Company or any Subsidiary,
TIFFANY & CO. NOTE PURCHASE AGREEMENT
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and (C) immediately after giving effect thereto, no Default or Event
of Default would exist;
(e) Intra-Group Liens -- Liens on property of the Company or any of
its Subsidiaries securing Debt owing to the Company or to any of its
Subsidiaries;
(f) Purchase Money Liens -- Liens on tangible property (or any
improvement thereon) acquired or constructed by the Company or any
Subsidiary after the date of the Closing to secure Debt of the Company or
such Subsidiary incurred in connection with such acquisition or
construction, provided that
(i) no such Lien shall extend to or cover any property other
than the property (or improvement thereon) being acquired or
constructed,
(ii) the amount of Debt secured by any such Lien shall not
exceed an amount equal to the lesser of (A) the cost to the Company
or such Subsidiary of the property (or improvement thereon) being
acquired or constructed or (B) the Fair Market Value (as determined
in good faith by the Company) of such property, determined at the
time of such acquisition or at the time of substantial completion of
such construction, and
(iii) such Lien shall be created concurrently with or within
120 days after such acquisition or the substantial completion of
such construction;
(g) Acquisition Liens -- Liens existing on property of a Person
immediately prior to its being consolidated with or merged into the
Company or a Subsidiary or its becoming a Subsidiary, or any Lien existing
on any property acquired by the Company or any Subsidiary at the time such
property is so acquired (whether or not the Debt secured thereby shall
have been assumed), provided that
(i) no such Lien shall have been created or assumed in
contemplation of such consolidation or merger or such Person's
becoming a Subsidiary or such acquisition of property,
(ii) each such Lien shall extend solely to the item or items
of property so acquired and, if required by the terms of the
instrument originally creating such Lien, other property which is an
improvement to or is acquired for specific use in connection with
such acquired property, and
(iii) the principal amount of the Debt secured by any such
Lien shall at no time exceed an amount equal to the lesser of (A)
the cost to the Company or such Subsidiary of the property (or
improvement thereon) so acquired and (B) the Fair Market Value (as
determined in good faith by the board of directors of the Company or
such Subsidiary) of such property (or improvement thereon) at the
time of such transaction;
(h) Company Headquarters Mortgage Note Liens -- Liens on the Company
Headquarters Mortgage Notes purchased by the Company or any Guarantor
after the date of the Closing to secure Debt of the Company or such
Guarantor incurred to finance such purchase, provided that
(i) such Liens shall not extend to or cover any property other
than such Company Headquarters Mortgage Notes,
TIFFANY & CO. NOTE PURCHASE AGREEMENT
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(ii) the amount of Debt secured by such Liens shall not exceed
an amount equal to the lesser of (A) the cost to the Company or such
Guarantor of purchasing the Company Headquarters Mortgage Notes or
(B) the Fair Market Value (as determined by a nationally recognized
independent appraiser) of the Premises, determined at the time of
the purchase of the Company Headquarters Mortgage Notes, and
(iii) within 36 months following the creation of any such
Liens, such Liens shall have been either (A) extinguished, or (B)
replaced by a Lien on the Premises permitted by clause (f) of this
Section 10.6;
(i) Consignment Liens -- Liens incurred in the ordinary course of
business not securing Debt in favor of Persons supplying the Company or
any Subsidiary with precious metals, precious gems or jewelry on a
consignment basis, provided that such Liens cover only the following
property of the Company or such Subsidiary which shall have been supplied
by such Persons:
(i) gold and silver bullion, gold and silver granule and
other gold, silver, platinum or precious metals and precious gems or
jewelry in whatever form including all substitutions, replacements
and products in which any gold, silver, platinum or precious metals
and precious gems or jewelry are incorporated or into which gold,
silver, platinum or precious metals and precious gems or jewelry are
processed or converted, whether now or hereafter owned or acquired
by the Company or such Subsidiary or in which the Company or such
Subsidiary now or hereafter acquires an interest, and all proceeds
and products of and accessions to the foregoing, and
(ii) all inventory now or hereafter owned by the Company or
such Subsidiary or in which the Company or such Subsidiary now or
hereafter acquires an interest, including all merchandise, returned
and repossessed goods, raw materials, goods in process, finished
goods and proceeds therefor, and all accounts of the Company or such
Subsidiary including all accounts receivable, notes, drafts,
acceptances and other forms of obligations and receivables now owned
or hereafter arising from such inventory sold or otherwise disposed
of by the Company or such Subsidiary and proceeds thereof and all
contract rights and proceeds of the foregoing; and
(j) Other Liens -- Liens securing Debt of the Company or any
Subsidiary and not otherwise permitted by clauses (a) through (i),
inclusive, of this Section 10.6, but only to the extent that the Debt
secured by each such Lien is, at the time of the incurrence of such Debt,
permitted to be incurred under Section 10.5(a) and Section 10.5(b).
10.7 Merger, Consolidation, etc.
The Company will not, and will not permit any Subsidiary to, directly or
indirectly, consolidate with, or merge into, any other Person or permit any
other Person to consolidate with, or merge into, it, or convey, transfer or
lease substantially all of its assets in a single transaction or series of
transactions to any Person, except that
(a) any Subsidiary (other than a Guarantor) may consolidate with, or
merge into, the Company or another Subsidiary if, immediately after, and
after giving effect to, such transaction, no Default or Event of Default
shall exist;
(b) any Subsidiary (other than a Guarantor) may consolidate with, or
merge into,
TIFFANY & CO. NOTE PURCHASE AGREEMENT
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any other Person, or allow any other Person to consolidate with, or merge
into, it, if
(i) in the case of any consolidation or merger in which the
successor or surviving corporation is a Subsidiary, immediately
after, and after giving effect to, such transaction,
(A) no Default or Event of Default would exist, and
(B) the successor or surviving corporation would be
permitted to incur at least $1.00 of additional Debt by the
provisions of Section 10.5(a) and at least $1.00 of additional
Priority Debt by the provisions of Section 10.5(b) (in each
case, other than Debt owing to the Company or a Subsidiary),
and
(ii) in the case of any consolidation or merger in which the
successor or surviving corporation is not a Subsidiary, such
transaction would be permitted under the provisions of Section
10.8(a)(iii) (deeming such consolidation or merger to be a Transfer
of all of the assets and liabilities of such Subsidiary) and
immediately after, and after giving effect to, such transaction, no
Default or Event of Default would exist; and
(c) the Company or any Guarantor may consolidate with, or merge
into, any other Person, or permit any other Person to consolidate with, or
merge into, it, if
(i) the successor or surviving corporation (the "Successor
Corporation") shall be a solvent corporation organized under the
laws of any state of the United States of America,
(ii) the Successor Corporation, if not the Company or such
Guarantor, shall have executed and delivered to each holder of any
Notes its assumption of the due and punctual performance and
observance of the obligations of the Company under this Agreement,
the Other Agreements and the Notes, or of such Guarantor under the
Guaranty Agreement, as the case may be, including, without
limitation, all covenants herein and therein contained, and the
Company shall cause to be delivered to each holder of a Note an
opinion of outside counsel (such counsel to be reasonably
satisfactory to the Required Holders) confirming the enforceability
of such assumption, and
(iii) immediately after, and after giving effect to, such
transaction,
(A) no Default or Event of Default would exist, and
(B) the Successor Corporation would be permitted to
incur at least $1.00 of additional Debt by the provisions of
Section 10.5(a) and at least $1.00 of additional Priority Debt
by the provisions of Section 10.5(b) (in each case, other than
Debt owing to the Company or a Subsidiary).
10.8 Sale of Assets
(a) Sale of Assets. The Company will not, and will not permit any of
its Subsidiaries to, make any Transfer, provided that the foregoing
restriction does not apply to a Transfer if:
(i) the property that is the subject of such Transfer
constitutes either (A)
TIFFANY & CO. NOTE PURCHASE AGREEMENT
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inventory held for sale, or (B) equipment, fixtures, supplies or
materials no longer required, in the opinion of the Company or such
Subsidiary, in the operation of the business of the Company or such
Subsidiary or that is obsolete, and, in the case of any Transfer
described in clause (A) or clause (B), such Transfer is in the
ordinary course of business (an "Ordinary Course Transfer"); or
(ii) either
(A) such Transfer is from a Subsidiary to the Company, a
Wholly-Owned Subsidiary or another Subsidiary as to which the
Company owns, directly or indirectly, the same or a higher
percentage of the shares of each class of the Capital Stock
than it owns of the transferring Subsidiary, or
(B) such Transfer is from the Company to a Wholly-Owned
Subsidiary;
so long as immediately before and immediately after the
consummation of such transaction, and after giving effect thereto,
(I) no Default or Event of Default exists or would
exist, and
(II) the Company would be permitted to incur at
least $1.00 of additional Debt by the provisions of
Section 10.5(a) and at least $1.00 of additional
Priority Debt by the provisions of Section 10.5(b) (in
each case other than Debt owing to the Company or a
Subsidiary)
(each such Transfer, collectively with any Ordinary Course
Transfers, "Excluded Transfers"); or
(iii) such Transfer is not an Excluded Transfer and does not
involve a Substantial Portion of the property of the Company and its
Subsidiaries, so long as immediately before and immediately after
the consummation of such transaction, and after giving effect
thereto, no Default or Event of Default exists or would exist.
(b) Debt Prepayment Applications and Reinvested Transfers.
(i) Notwithstanding the provisions of Section 10.8(a), the
determination of whether a Transfer involves a Substantial Portion
of the property of the Company and its Subsidiaries, as provided in
Section 10.8(a)(iii) and Section 10.8(c)(iii), shall be made without
taking into account the same proportion of the book value
attributable to the property subject to such Transfer as shall be
equal to the proportion (the "Designated Portion") of the Net Asset
Sale Proceeds Amount with respect to such Transfer to be applied to
either a Debt Prepayment Application with respect to such Transfer
or the acquisition of assets similar to the assets which were the
subject of such Transfer (a "Reinvested Transfer") within 365 days
of the consummation of such Transfer, as specified in an Officer's
Certificate delivered to each holder of Notes prior to, or
contemporaneously with, the consummation of such Transfer.
(ii) If, notwithstanding the certificate referred to in the
foregoing clause (i), the Company shall fail to apply the entire
amount of the Designated Portion as specified in such certificate
within the period stated in Section 10.8(b)(i), the computation of
whether such Transfer involved a Substantial Portion of the property
of the Company
TIFFANY & CO. NOTE PURCHASE AGREEMENT
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and its Subsidiaries shall be recomputed, as of the date of such
Transfer, by taking into account the same proportion of the book
value attributable to the property subject to such Transfer as shall
be equal to the proportion of the Net Asset Sale Proceeds Amount
actually applied to either a Debt Prepayment Application or a
Reinvested Transfer within such period. If, upon the recomputation
provided for in the preceding sentence, such Transfer involved a
Substantial Portion of the property of the Company and the
Restricted Subsidiaries, an Event of Default shall be deemed to have
existed as of the expiration of such period.
(c) Certain Definitions. The following terms have the following
meanings:
(i) "Debt Prepayment Application" means, with respect to any
Transfer of property by the Company or any Subsidiary, the
application by the Company or such Subsidiary of cash in an amount
equal to the Net Asset Sale Proceeds Amount with respect to such
Transfer to pay Senior Debt of the Company or such Subsidiary (other
than Senior Debt owing to any of the Subsidiaries or any Affiliate
and Senior Debt in respect of any revolving credit or similar
facility providing the Company or such Subsidiary with the right to
obtain loans or other extensions of credit from time to time, except
to the extent that in connection with such payment of Senior Debt
the availability of credit under such credit facility is permanently
reduced by an amount not less than the amount of such proceeds
applied to the payment of such Senior Debt), provided that in the
course of making such application the Company shall offer to prepay
each outstanding Note in accordance with Section 8.2 in a principal
amount that equals the Ratable Portion for such Note. A holder of
Notes may accept or reject such offer to prepay by causing a notice
of such acceptance or rejection to be delivered to the Company at
least two Business Days prior to the prepayment date specified by
the Company in such offer. If a holder of Notes has not responded to
such offer by a date which is at least two Business Days prior to
such specified prepayment date, such holder shall be deemed to have
accepted such offer of prepayment. If any holder of a Note rejects
such offer of prepayment, then, for purposes of the preceding
sentence only, the Company nevertheless will be deemed to have paid
Senior Debt in an amount equal to the Ratable Portion for such Note.
As used in this definition,
"Ratable Portion" means, for any Note, an amount equal to
the product of
(a) the Net Asset Sale Proceeds Amount being so offered
to be applied to the payment of Senior Debt, multiplied by
(b) a fraction the numerator of which is the outstanding
principal amount of such Note and the denominator of which is
the aggregate outstanding principal amount of Senior Debt of
the Company and its Subsidiaries, after eliminating all
offsetting debits and credits between the Company and its
Subsidiaries and all other items required to be eliminated in
the course of the preparation of consolidated financial
statements of the Company and its Subsidiaries in accordance
with GAAP.
(ii) "Disposition Value" means, at any time, with respect to
any Transfer of property,
TIFFANY & CO. NOTE PURCHASE AGREEMENT
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(A) in the case of property that does not constitute
Capital Stock of a Subsidiary, the book value thereof, valued
at the amount taken into account (or which would be taken into
account) in the consolidated balance sheet of the Company then
most recently required to have been delivered to the holders
pursuant to Section 7.1, and
(B) in the case of property that constitutes Capital
Stock of a Subsidiary, an amount equal to that percentage of
the book value of the assets of the Subsidiary that issued
such Capital Stock as is equal to the percentage that the book
value of such Capital Stock represents of the book value of
all of the outstanding Capital Stock of such Subsidiary
(assuming, in making such calculations, that all securities
convertible into such Capital Stock are so converted and
giving full effect to all transactions that would occur or be
required in connection with such conversion), determined as of
the date of the balance sheet referred to in the foregoing
clause (A).
(iii) "Substantial Portion" means, at any time, any property
subject to a Transfer if
(A) the Disposition Value of such property, when added
to the Disposition Value of all other property of the Company
and its Subsidiaries that shall have been the subject of a
Transfer (other than an Excluded Transfer and subject, with
respect to both such property and all such other property, to
the provisions of Section 10.8(b)) during the then current
fiscal year of the Company, exceeds an amount equal to 15% of
Consolidated Total Assets as reflected (or as would be
reflected) in the consolidated balance sheet of the Company
then most recently required to have been delivered to the
holders pursuant to Section 7.1, or
(B) the Disposition Value of such property, when added
to the Disposition Value of all other property of the Company
and its Subsidiaries that shall have been the subject of a
Transfer (other than an Excluded Transfer and subject, with
respect to both such property and all such other property, to
the provisions of Section 10.8(b)) during the period beginning
on the date of the Closing and ending on and including the
date of the consummation of such Transfer, exceeds an amount
equal to 30% of Consolidated Total Assets as reflected (or as
would be reflected) in the consolidated balance sheet of the
Company then most recently required to have been delivered to
the holders pursuant to Section 7.1.
(iv) "Transfer" means, with respect to any Person, any
transaction in which such Person sells, conveys, transfers or leases
(as lessor) any of its property, including, without limitation,
Capital Stock of any other Person, but does not include any such
transaction subject to the provisions of Section 10.7 (other than
Section 10.7(b)(ii)).
11. EVENTS OF DEFAULT
An "Event of Default" shall exist if any of the following conditions or
events shall occur and be continuing:
(a) the Company defaults in the payment of any principal or
Make-Whole Amount, if any, on any Note when the same becomes due and
payable, whether at maturity or at a date
TIFFANY & CO. NOTE PURCHASE AGREEMENT
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fixed for prepayment or by declaration or otherwise; or
(b) the Company defaults in the payment of any interest on any Note
for more than five Business Days after the same becomes due and payable;
or
(c) the Company defaults in the performance of or compliance with
any term contained in any of Sections 10.3 through Section 10.8,
inclusive, or Section 7.1(d); or
(d) the Company defaults in the performance of or compliance with
any term contained herein (other than those referred to in paragraphs (a),
(b) and (c) of this Section 11) and such default is not remedied within 30
days after the earlier of (i) a Responsible Officer obtaining actual
knowledge of such default and (ii) the Company receiving written notice of
such default from any holder of a Note; or
(e) any representation or warranty made in writing by or on behalf
of the Company or any Guarantor or by any officer of the Company or any
Guarantor in this Agreement or the Guaranty Agreement or in any writing
furnished in connection with the transactions contemplated hereby proves
to have been false or incorrect in any material respect on the date as of
which made; or
(f) (i) the Company or any Subsidiary is in default (as principal or
as guarantor or other surety) in the payment of any principal of or
premium or make-whole amount or interest on any Indebtedness (other
than Indebtedness under this Agreement and the Notes) beyond any
period of grace provided with respect thereto, that individually or
together with such other Indebtedness as to which any such default
exists has an aggregate outstanding principal amount of at least
$10,000,000, or
(ii) the Company or any Subsidiary is in default in the
performance of or compliance with any term of any evidence of any
Indebtedness (other than Indebtedness under this Agreement and the
Notes), that individually or together with such other Indebtedness
as to which any such default exists has an aggregate outstanding
principal amount of at least $15,000,000, or of any mortgage,
indenture or other agreement relating thereto or any other condition
exists, and as a consequence of such default or condition such
Indebtedness has become, or has been declared (or one or more
Persons are entitled to declare such Indebtedness to be), due and
payable before its stated maturity or before its regularly scheduled
dates of payment, or
(iii) as a consequence of the occurrence or continuation of
any event or condition (other than the passage of time or the right
of the holder of Indebtedness to convert such Indebtedness into
equity interests), (x) the Company or any Subsidiary has become
obligated to purchase or repay Indebtedness before its regular
maturity or before its regularly scheduled dates of payment in an
aggregate outstanding principal amount of at least $10,000,000, or
(y) one or more Persons have the right to require the Company or any
Subsidiary so to purchase or repay such Indebtedness; or
(g) the Company or any Subsidiary (i) is generally not paying, or
admits in writing its inability to pay, its debts as they become due, (ii)
files, or consents by answer or otherwise to the filing against it of, a
petition for relief or reorganization or arrangement or any other petition
in bankruptcy, for liquidation or to take advantage of any bankruptcy,
insolvency, reorganization, moratorium or other similar law of any
jurisdiction, (iii) makes an assignment for the benefit of its creditors,
(iv) consents to the appointment of a custodian, receiver, trustee or
other officer with similar powers with respect to it or with respect to
any substantial part of its property, (v) is
TIFFANY & CO. NOTE PURCHASE AGREEMENT
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adjudicated as insolvent or to be liquidated, or (vi) takes corporate
action for the purpose of any of the foregoing; or
(h) a court or governmental authority of competent jurisdiction
enters an order appointing, without consent by the Company or any
Subsidiary, a custodian, receiver, trustee or other officer with similar
powers with respect to the Company or any Subsidiary or with respect to
any substantial part of the property of the Company or any Subsidiary, or
constituting an order for relief or approving a petition for relief or
reorganization or any other petition in bankruptcy or for liquidation or
to take advantage of any bankruptcy or insolvency law of any jurisdiction,
or ordering the dissolution, winding-up or liquidation of the Company or
any Subsidiary, or any such petition shall be filed against the Company or
any Subsidiary and such petition shall not be dismissed within 60 days; or
(i) a final judgment or judgments for the payment of money
aggregating in excess of $15,000,000 are rendered against one or more of
the Company and its Subsidiaries and which judgments are not, within 45
days after entry thereof, bonded, discharged or stayed pending appeal, or
are not discharged within 45 days after the expiration of such stay; or
(j) (i) the Guaranty Agreement shall cease to be in full force and
effect or shall be declared by a court or governmental authority of
competent jurisdiction to be void, voidable or unenforceable against
any Guarantor, or
(ii) the validity or enforceability of the Guaranty Agreement
against any Guarantor shall be contested by such Guarantor or the
Company, or
(iii) any Guarantor or the Company shall deny that such
Guarantor has any further liability or obligation under the Guaranty
Agreement; or
(k) if (i) any Plan shall fail to satisfy the minimum funding
standards of ERISA or the Code for any plan year or part thereof or
a waiver of such standards or extension of any amortization period
is sought or granted under section 412 of the Code,
(ii) a notice of intent to terminate any Plan shall have been
or is reasonably expected to be filed with the PBGC or the PBGC
shall have instituted proceedings under ERISA section 4042 to
terminate or appoint a trustee to administer any Plan or the PBGC
shall have notified the Company or any ERISA Affiliate that a Plan
may become a subject of any such proceedings,
(iii) the aggregate "amount of unfunded benefit liabilities"
(within the meaning of section 4001(a)(18) of ERISA) under all
Plans, determined in accordance with Title IV of ERISA, shall exceed
$5,000,000,
(iv) the Company or any ERISA Affiliate shall have incurred or
is reasonably expected to incur any liability pursuant to Title I or
IV of ERISA or the penalty or excise tax provisions of the Code
relating to employee benefit plans,
(v) the Company or any ERISA Affiliate withdraws from any
Multiemployer Plan, or
(vi) the Company or any Subsidiary establishes or amends any
employee welfare benefit plan that provides post-employment welfare
benefits in a manner that would increase the liability of the
Company or any Subsidiary thereunder;
TIFFANY & CO. NOTE PURCHASE AGREEMENT
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and any such event or events described in clauses (i) through (vi) above,
either individually or together with any other such event or events, could
reasonably be expected to have a Material Adverse Effect.
As used in Section 11(k), the terms "employee benefit plan" and "employee
welfare benefit plan" shall have the respective meanings assigned to such terms
in section 3 of ERISA.
12. REMEDIES ON DEFAULT, ETC.
12.1 Acceleration
(a) If an Event of Default with respect to the Company described in
paragraph (g) or paragraph (h) of Section 11 (other than an Event of
Default described in clause (i) of paragraph (g) or described in clause
(vi) of paragraph (g) by virtue of the fact that such clause encompasses
clause (i) of paragraph (g)) has occurred, all the Notes then outstanding
shall automatically become immediately due and payable.
(b) If any other Event of Default has occurred and is continuing,
any holder or holders of more than 50% in principal amount of the Notes at
the time outstanding may at any time at its or their option, by notice or
notices to the Company, declare all the Notes then outstanding to be
immediately due and payable.
(c) If any Event of Default described in paragraph (a) or (b) of
Section 11 has occurred and is continuing, any holder or holders of Notes
at the time outstanding affected by such Event of Default may at any time,
at its or their option, by notice or notices to the Company, declare all
the Notes held by it or them to be immediately due and payable.
Upon any Notes becoming due and payable under this Section 12.1, whether
automatically or by declaration, such Notes will forthwith mature and the entire
unpaid principal amount of such Notes, plus (x) all accrued and unpaid interest
thereon and (y) the Make-Whole Amount determined in respect of such principal
amount (to the full extent permitted by applicable law), shall all be
immediately due and payable, in each and every case without presentment, demand,
protest or further notice, all of which are hereby waived. The Company
acknowledges, and the parties hereto agree, that each holder of a Note has the
right to maintain its investment in the Notes free from repayment by the Company
(except as herein specifically provided for) and that the provision for payment
of a Make-Whole Amount by the Company in the event that the Notes are prepaid or
are accelerated as a result of an Event of Default, is intended to provide
compensation for the deprivation of such right under such circumstances.
12.2 Other Remedies
If any Default or Event of Default has occurred and is continuing, and
irrespective of whether any Notes have become or have been declared immediately
due and payable under Section 12.1, the holder of any Note at the time
outstanding may proceed to protect and enforce the rights of such holder by an
action at law, suit in equity or other appropriate proceeding, whether for the
specific performance of any agreement contained in any Financing Document, or
for an injunction against a violation of any of the terms thereof, or in aid of
the exercise of any power granted thereby or by law or otherwise.
TIFFANY & CO. NOTE PURCHASE AGREEMENT
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12.3 Rescission.
At any time after any Notes have been declared due and payable pursuant to
clause (b) or clause (c) of Section 12.1, the holders of not less than 66-_% in
principal amount of the Notes then outstanding, by written notice to the
Company, may rescind and annul any such declaration and its consequences if (a)
the Company has paid all overdue interest on the Notes, all principal of and
Make-Whole Amount, if any, due and payable on any Notes other than by reason of
such declaration, and all interest on such overdue principal and Make-Whole
Amount, if any, and (to the extent permitted by applicable law) any overdue
interest in respect of the Notes, at the Default Rate, (b) all Events of Default
and Defaults, other than non-payment of amounts that have become due solely by
reason of such declaration, have been cured or have been waived pursuant to
Section 17, and (c) no judgment or decree has been entered for the payment of
any monies due pursuant hereto or to the Notes. No rescission and annulment
under this Section 12.3 will extend to or affect any subsequent Event of Default
or Default or impair any right consequent thereon.
12.4 No Waivers or Election of Remedies, Expenses, etc.
No course of dealing and no delay on the part of any holder of any Note in
exercising any right, power or remedy shall operate as a waiver thereof or
otherwise prejudice such holder's rights, powers or remedies. No right, power or
remedy conferred by any Financing Document upon any holder of any Note shall be
exclusive of any other right, power or remedy referred to herein or therein or
now or hereafter available at law, in equity, by statute or otherwise. Without
limiting the obligations of the Company under Section 15, the Company will pay
to the holder of each Note on demand such further amount as shall be sufficient
to cover all costs and expenses of such holder incurred in any enforcement or
collection under this Section 12, including, without limitation, reasonable
attorneys' fees, expenses and disbursements.
13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.
13.1 Registration of Notes.
The Company shall keep at its principal executive office a register for
the registration and registration of transfers of Notes. The name and address of
each holder of one or more Notes, each transfer thereof and the name and address
of each transferee of one or more Notes shall be registered in such register.
Prior to due presentment for registration of transfer, the Person in whose name
any Note shall be registered shall be deemed and treated as the owner and holder
thereof for all purposes hereof, and the Company shall not be affected by any
notice or knowledge to the contrary. The Company and you acknowledge and agree
that the Notes are not "negotiable instruments" within the meaning of ss.3-104
of the Uniform Commercial Code as adopted in the State of New York. The Company
shall give to any holder of a Note that is an Institutional Investor promptly
upon request therefor, a complete and correct copy of the names and addresses of
all registered holders of Notes.
TIFFANY & CO. NOTE PURCHASE AGREEMENT
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13.2 Transfer and Exchange of Notes.
Upon surrender of any Note at the principal executive office of the
Company for registration of transfer or exchange (and in the case of a surrender
for registration of transfer, duly endorsed or accompanied by a written
instrument of transfer duly executed by the registered holder of such Note or
his attorney duly authorized in writing and accompanied by the address for
notices of each transferee of such Note or part thereof), the Company shall
execute and deliver, at the Company's expense (except as provided below), one or
more new Notes (as requested by the holder thereof) in exchange therefor, in an
aggregate principal amount equal to the unpaid principal amount of the
surrendered Note. Each such new Note shall be payable to such Person as such
holder may request and shall be substantially in the form of Exhibit 1A or
Exhibit 1B, as the case may be. Each such new Note shall be dated and bear
interest from the date to which interest shall have been paid on the surrendered
Note or dated the date of the surrendered Note if no interest shall have been
paid thereon. The Company may require payment of a sum sufficient to cover any
stamp tax or governmental charge imposed in respect of any such transfer of
Notes. Notes shall not be transferred in denominations of less than $100,000,
provided that if necessary to enable the registration of transfer by a holder of
its entire holding of Notes, one Note may be in a denomination of less than
$100,000. Any transferee, by its acceptance of a Note registered in its name (or
the name of its nominee), shall be deemed to have made the representation set
forth in Section 6.2.
13.3 Replacement of Notes.
Upon receipt by the Company of evidence reasonably satisfactory to it of
the ownership of and the loss, theft, destruction or mutilation of any Note
(which evidence shall be, in the case of an Institutional Investor, notice from
such Institutional Investor of such ownership and such loss, theft, destruction
or mutilation), and
(a) in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to it (provided that if the holder of such Note
is, or is a nominee for, an original purchaser or a Qualified
Institutional Buyer, such Person's own unsecured agreement of indemnity
shall be deemed to be satisfactory), or
(b) in the case of mutilation, upon surrender and cancellation
thereof,
the Company at its own expense shall execute and deliver, in lieu thereof, a new
Note, dated and bearing interest from the date to which interest shall have been
paid on such lost, stolen, destroyed or mutilated Note or dated the date of such
lost, stolen, destroyed or mutilated Note if no interest shall have been paid
thereon.
14. PAYMENTS ON NOTES.
14.1 Place of Payment.
Subject to Section 14.2, payments of principal, Make-Whole Amount, if any,
and interest becoming due and payable on the Notes shall be made in New York,
New York at the principal office of the Company in such jurisdiction. The
Company may at any time, by notice to each holder of a Note, change the place of
payment of the Notes so long as such place of payment shall be either the
principal office of the Company in such jurisdiction or the principal office of
a bank or trust company in such jurisdiction.
TIFFANY & CO. NOTE PURCHASE AGREEMENT
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14.2 Home Office Payment.
So long as you or your nominee shall be the holder of any Note, and
notwithstanding anything contained in Section 14.1 or in such Note to the
contrary, the Company will pay all sums becoming due on such Note for principal,
Make-Whole Amount, if any, and interest by the method and at the address
specified for such purpose below your name in Schedule A, or by such other
method or at such other address as you shall have from time to time specified to
the Company in writing for such purpose, without the presentation or surrender
of such Note or the making of any notation thereon, except that upon payment or
prepayment in full of any Note, you shall promptly surrender such Note for
cancellation to the Company at its principal executive office or at the place of
payment most recently designated by the Company pursuant to Section 14.1. Prior
to any sale or other disposition of any Note held by you or your nominee you
will, at your election, either endorse thereon the amount of principal paid
thereon and the last date to which interest has been paid thereon or surrender
such Note to the Company in exchange for a new Note or Notes pursuant to Section
13.2. The Company will afford the benefits of this Section 14.2 to any Qualified
Institutional Buyer or Institutional Investor that is the direct or indirect
transferee of any Note purchased by you under this Agreement and that has made
the same agreement relating to such Note as you have made in this Section 14.2.
15. EXPENSES, ETC.
15.1 Transaction Expenses.
Whether or not the transactions contemplated hereby are consummated, the
Company will pay all costs and expenses (including reasonable attorneys' fees of
one special counsel for all Purchasers and holders of Notes and, if reasonably
required, one local counsel in each jurisdiction where such counsel is so
required) incurred by you and each Other Purchaser or holder of a Note in
connection with such transactions and in connection with any amendments, waivers
or consents under or in respect of the Financing Documents (whether or not such
amendment, waiver or consent becomes effective), including, without limitation:
(a) the costs and expenses incurred in enforcing or defending (or determining
whether or how to enforce or defend) any rights under the Financing Documents or
in responding to any subpoena or other legal process or informal investigative
demand issued in connection with the Financing Documents, or by reason of being
a holder of any Note, and (b) the costs and expenses, including financial
advisors' fees, incurred in connection with the insolvency or bankruptcy of the
Company or any Subsidiary or in connection with any work-out or restructuring of
the transactions contemplated by the Financing Documents. The Company will pay,
and will save you and each other holder of a Note harmless from, all claims in
respect of any fees, costs or expenses if any, of brokers and finders (other
than those retained by you).
15.2 Survival.
The obligations of the Company under this Section 15 will survive the
payment or transfer of any Note, the enforcement, amendment or waiver of any
provision of any Financing Document, and the termination of any Financing
Document.
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.
All representations and warranties contained in any Financing Document
shall survive the execution and delivery of this Agreement and the Notes and the
purchase or transfer by you of any Note or portion thereof or interest therein,
and may be relied upon by any subsequent holder of a Note, regardless of any
investigation made at any time by or on behalf of you or any other holder of a
Note. All
TIFFANY & CO. NOTE PURCHASE AGREEMENT
35
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statements contained in any certificate or other instrument or writing delivered
by or on behalf of the Company pursuant to any Financing Document shall be
deemed representations and warranties of the Company under this Agreement.
Subject to the preceding sentence, the Financing Documents embody the entire
agreement and understanding between you and the Obligors and supersede all prior
agreements and understandings relating to the subject matter hereof.
17. AMENDMENT AND WAIVER.
17.1 Requirements.
This Agreement and the Notes may be amended, and the observance of any
term hereof or of the Notes may be waived (either retroactively or
prospectively), with (and only with) the written consent of the Company and the
Required Holders, except that (a) no amendment or waiver of any of the
provisions of any of Sections 1, 2, 3, 4, 5, 6 and 21, or any defined term (as
it is used therein), will be effective as to you unless consented to by you in
writing, and (b) no such amendment or waiver may, without the written consent of
the holder of each Note at the time outstanding affected thereby, (i) subject to
the provisions of Section 12 relating to acceleration or rescission, change the
amount or time of any prepayment or payment of principal of, or reduce the rate
or change the time of payment or method of computation of interest or of the
Make-Whole Amount on, the Notes, (ii) change the percentage of the principal
amount of the Notes the holders of which are required to consent to any such
amendment or waiver, or (iii) amend any of Sections 8, 11(a), 11(b), 12, 14.2,
17 and 20.
17.2 Solicitation of Holders of Notes.
(a) Solicitation. The Company will provide each holder of the Notes
(irrespective of the amount of Notes then owned by it) with sufficient
information, sufficiently far in advance of the date a decision is
required, to enable such holder to make an informed and considered
decision with respect to any proposed amendment, waiver or consent in
respect of any of the provisions hereof or of the Notes. The Company will
deliver executed or true and correct copies of each amendment, waiver or
consent effected pursuant to the provisions of this Section 17 to each
holder of outstanding Notes promptly following the date on which it is
executed and delivered by, or receives the consent or approval of, the
requisite holders of Notes.
(b) Payment. The Company will not directly or indirectly pay or
cause to be paid any remuneration, whether by way of supplemental or
additional interest, fee or otherwise, or grant any security, to any
holder of Notes as consideration for or as an inducement to the entering
into by any holder of Notes of any waiver or amendment of any of the terms
and provisions hereof unless such remuneration is concurrently paid, or
security is concurrently granted, on the same terms, ratably to each
holder of Notes then outstanding even if such holder did not consent to
such waiver or amendment.
(c) Consent in Contemplation of Transfer. Any consent made pursuant
to this Section 17 by a holder of Notes that has transferred or has agreed
to transfer its Notes to the Company, any Subsidiary or any Affiliate of
the Company and has provided or has agreed to provide such written consent
as a condition to such transfer shall be void and of no force or effect
except solely as to such holder, and any amendments effected or waivers
granted or to be effected or granted that would not have been or would not
be so effected or granted but for such consent (and the consents of all
other holders of Notes that were acquired under the same or similar
conditions) shall be void and of no force or effect except solely as to
such holder.
TIFFANY & CO. NOTE PURCHASE AGREEMENT
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17.3 Binding Effect, etc.
Any amendment or waiver consented to as provided in this Section 17
applies equally to all holders of Notes and is binding upon them and upon each
future holder of any Note and upon the Company without regard to whether such
Note has been marked to indicate such amendment or waiver. No such amendment or
waiver will extend to or affect any obligation, covenant, agreement, Default or
Event of Default not expressly amended or waived or impair any right consequent
thereon. No course of dealing between the Company and the holder of any Note nor
any delay in exercising any rights hereunder or under any Note shall operate as
a waiver of any rights of any holder of such Note. As used herein, the term
"this Agreement" and references thereto shall mean this Agreement as it may from
time to time be amended or supplemented.
17.4 Notes held by Company, etc.
Solely for the purpose of determining whether the holders of the requisite
percentage of the aggregate principal amount of Notes then outstanding approved
or consented to any amendment, waiver or consent to be given under any of the
Financing Documents, or have directed the taking of any action provided in any
of the Financing Documents to be taken upon the direction of the holders of a
specified percentage of the aggregate principal amount of Notes then
outstanding, Notes directly or indirectly owned by the Company or any of its
Affiliates shall be deemed not to be outstanding.
18. NOTICES.
All notices and communications provided for hereunder shall be in writing
and sent (a) by telecopy if the sender on the same day sends a confirming copy
of such notice by a recognized overnight delivery service (charges prepaid), or
(b) by registered or certified mail with return receipt requested (postage
prepaid), or (c) by a recognized overnight delivery service (with charges
prepaid). Any such notice must be sent:
(i) if to you or your nominee, to you or it at the address specified
for such communications in Schedule A, or at such other address as you or
it shall have specified to the Company in writing,
(ii) if to any other holder of any Note, to such holder at such
address as such other holder shall have specified to the Company in
writing, or
(iii) if to the Company, to the Company at its address set forth at
the beginning hereof to the attention of the Chief Financial Officer,
telecopier: (212) 605-4465, or at such other address as the Company shall
have specified to the holder of each Note in writing.
Notices under this Section 18 will be deemed given only when actually received.
19. REPRODUCTION OF DOCUMENTS.
This Agreement and all documents relating hereto, including, without
limitation, (a) consents, waivers and modifications that may hereafter be
executed, (b) documents received by you at the Closing (except the Notes
themselves), and (c) financial statements, certificates and other information
previously or hereafter furnished to you, may be reproduced by you by any
photographic, photostatic, microfilm, microcard, miniature photographic or other
similar process and you may destroy any original document so reproduced. The
Company agrees and stipulates that, to the extent permitted by applicable law,
any such reproduction shall be admissible in evidence as the original itself in
any judicial or administrative
TIFFANY & CO. NOTE PURCHASE AGREEMENT
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<PAGE> 43
proceeding (whether or not the original is in existence and whether or not such
reproduction was made by you in the regular course of business) and any
enlargement, facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence. This Section 19 shall not prohibit the
Company or any other holder of Notes from contesting any such reproduction to
the same extent that it could contest the original, or from introducing evidence
to demonstrate the inaccuracy of any such reproduction.
20. CONFIDENTIAL INFORMATION.
For the purposes of this Section 20, "Confidential Information" means
information delivered to you by or on behalf of the Company or any Subsidiary in
connection with the transactions contemplated by or otherwise pursuant to this
Agreement that is proprietary in nature and that was clearly marked or labeled
or otherwise adequately identified when received by you as being confidential
information of the Company or such Subsidiary, provided that such term does not
include information that
(a) was publicly known or otherwise known to you prior to the time
of such disclosure,
(b) subsequently becomes publicly known through no act or omission
by you or any person acting on your behalf,
(c) otherwise becomes known to you other than through disclosure by
the Company or any Subsidiary, or
(d) constitutes financial statements delivered to you under Section
7.1 that are otherwise publicly available.
You will maintain the confidentiality of such Confidential Information in
accordance with procedures adopted by you in good faith to protect confidential
information of third parties delivered to you, provided that you may deliver or
disclose Confidential Information to:
(i) your directors, officers, trustees, employees, agents, attorneys
and affiliates (to the extent such disclosure reasonably relates to the
administration of the investment represented by your Notes),
(ii) your financial advisors and other professional advisors who
agree to hold confidential the Confidential Information substantially in
accordance with the terms of this Section 20,
(iii) any other holder of any Note,
(iv) any Institutional Investor to which you sell or offer to sell
such Note or any part thereof or any participation therein (if such Person
has agreed in writing prior to its receipt of such Confidential
Information to be bound by the provisions of this Section 20),
(v) any Person from which you offer to purchase any security of the
Company (if such Person has agreed in writing prior to its receipt of such
Confidential Information to be bound by the provisions of this Section
20),
(vi) any federal or state regulatory authority having jurisdiction
over you,
(vii) the National Association of Insurance Commissioners or any
similar organization, or any nationally recognized rating agency that
requires access to information
TIFFANY & CO. NOTE PURCHASE AGREEMENT
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about your investment portfolio or
(viii) any other Person to which such delivery or disclosure may be
necessary or appropriate
(A) to effect compliance with any law, rule, regulation or
order applicable to you,
(B) in response to any subpoena or other legal process,
(C) in connection with any litigation to which you are a
party, or
(D) if an Event of Default has occurred and is continuing, to
the extent you may reasonably determine such delivery and disclosure
to be necessary or appropriate in the enforcement or for the
protection of the rights and remedies under the Financing Documents.
Each holder of a Note, by its acceptance of a Note, will be deemed to have
agreed to be bound by and to be entitled to the benefits of this Section 20 as
though it were a party to this Agreement. On reasonable request by the Company
in connection with the delivery to any holder of a Note of information required
to be delivered to such holder under this Agreement or requested by such holder
(other than a holder that is a party to this Agreement or its nominee), such
holder will enter into an agreement with the Company embodying the provisions of
this Section 20.
21. SUBSTITUTION OF PURCHASER.
You shall have the right to substitute any one of your Affiliates as the
purchaser of the Notes that you have agreed to purchase hereunder, by written
notice to the Company, which notice shall be signed by both you and such
Affiliate, shall contain such Affiliate's agreement to be bound by this
Agreement and shall contain a confirmation by such Affiliate of the accuracy
with respect to it of the representations set forth in Section 6. Upon receipt
of such notice, wherever the word "you" is used in this Agreement (other than in
this Section 21), such word shall be deemed to refer to such Affiliate in lieu
of you. In the event that such Affiliate is so substituted as a purchaser
hereunder and such Affiliate thereafter transfers to you all of the Notes then
held by such Affiliate, upon receipt by the Company of notice of such transfer,
wherever the word "you" is used in this Agreement (other than in this Section
21), such word shall no longer be deemed to refer to such Affiliate, but shall
refer to you, and you shall have all the rights of an original holder of the
Notes under this Agreement.
22. MISCELLANEOUS.
22.1 Successors and Assigns.
All covenants and other agreements contained in this Agreement by or on
behalf of any of the parties hereto bind and inure to the benefit of their
respective successors and assigns (including, without limitation, any subsequent
holder of a Note) whether so expressed or not.
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22.2 Payments Due on Non-Business Days.
Anything in this Agreement or the Notes to the contrary notwithstanding,
any payment of principal of or Make-Whole Amount or interest on any Note that is
due on a date other than a Business Day shall be made on the next succeeding
Business Day without including the additional days elapsed in the computation of
the interest payable on such next succeeding Business Day.
22.3 Severability.
Any provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall (to the full extent permitted by law) not invalidate or
render unenforceable such provision in any other jurisdiction.
22.4 Construction.
Each covenant contained herein shall be construed (absent express
provision to the contrary) as being independent of each other covenant contained
herein, so that compliance with any one covenant shall not (absent such an
express contrary provision) be deemed to excuse compliance with any other
covenant. Where any provision herein refers to action to be taken by any Person,
or which such Person is prohibited from taking, such provision shall be
applicable whether such action is taken directly or indirectly by such Person.
22.5 Counterparts.
This Agreement may be executed in any number of counterparts, each of
which shall be an original but all of which together shall constitute one
instrument. Each counterpart may consist of a number of copies hereof, each
signed by less than all, but together signed by all, of the parties hereto.
22.6 Governing Law.
THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE
RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF NEW YORK
EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE
THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE.
[Remainder of page intentionally blank. Next page is signature page.]
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If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to the
Company, whereupon the foregoing shall become a binding agreement between you
and the Company.
Very truly yours,
TIFFANY & CO.
By
-------------------------------
Name:
Title:
The foregoing is hereby
agreed to as of the
date thereof.
[PURCHASER]
By
------------------------------
Name:
Title:
TIFFANY & CO. NOTE PURCHASE AGREEMENT
<PAGE> 47
SCHEDULE B
DEFINED TERMS
As used herein, the following terms have the respective meanings set forth
below or set forth in the Section hereof following such term:
"Affiliate" means at any time, and with respect to any Person,
(a) any other Person that at such time directly or indirectly
through one or more intermediaries Controls, or is Controlled by, or is
under common Control with, such first Person, and
(b) any Person beneficially owning or holding, directly or
indirectly, 10% or more of any class of voting or equity interests of the
Company or any Subsidiary or any corporation of which the Company and its
Subsidiaries beneficially own or hold, in the aggregate, directly or
indirectly, 10% or more of any class of voting or equity interests;
provided that Mitsukoshi Limited shall not be deemed to be an "Affiliate"
pursuant to this clause (b) so long as it does not beneficially own or
hold, directly or indirectly, 15% or more of any class of voting or equity
interests of the Company or any Subsidiary and neither the Company nor any
Subsidiary beneficially owns or holds, in the aggregate, directly or
indirectly, 15% or more of any class of voting or equity interests of
Mitsukoshi Limited or any of its subsidiaries.
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. Unless the context otherwise clearly requires, any
reference to an "Affiliate" is a reference to an Affiliate of the Company.
"Agreement, this" is defined in Section 17.3.
"Business Day" means (a) for the purposes of Section 8.6 only, any day
other than a Saturday, a Sunday or a day on which commercial banks in New York
City are required or authorized to be closed, and (b) for the purposes of any
other provision of this Agreement, any day other than a Saturday, a Sunday or a
day on which commercial banks in New York City are required or authorized to be
closed.
"Capital Lease" means a lease with respect to which the lessee is required
concurrently to recognize the acquisition of an asset and the incurrence of a
liability in accordance with GAAP.
"Capital Stock" means any class of capital stock, share capital or similar
equity interest of a Person.
"Closing" is defined in Section 3.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and the rules and regulations promulgated thereunder from time to time.
"Company" is defined in the introductory sentence of this Agreement.
"Company Headquarters Mortgage Notes" means all mortgage notes that are
secured by mortgages on the Premises as of the date of the Closing.
"Confidential Information" is defined in Section 20.
"Consolidated Adjusted Lease Expense" means, for any period, an amount
equal to 33-_% of Consolidated Lease Rentals for such period.
<PAGE> 48
"Consolidated Interest Expense" means, for any period, the sum of (i) the
aggregate amount of interest expense on Consolidated Total Debt (without giving
effect to any interest income), plus (ii) without duplication, that portion of
Capital Lease obligations of the Company and its Subsidiaries representing the
interest factor for such period, less (iii) amortization of non-cash debt
issuance costs.
"Consolidated Lease Rentals" means, for any period, the aggregate amount
of lease expense of the Company and its Subsidiaries for such period, as
determined in accordance with GAAP.
"Consolidated Net Income" means, for any period, the net income (or loss)
of the Company and its Subsidiaries for such period (taken as a cumulative
whole), as determined in accordance with GAAP, after eliminating all offsetting
debits and credits between the Company and its Subsidiaries and all other items
required to be eliminated in the course of the preparation of consolidated
financial statements of the Company and its Subsidiaries in accordance with
GAAP.
"Consolidated Net Worth" means, at any time,
(a) the sum, without duplication, of (i) the par value (or value
stated on the books of the corporation) of the Capital Stock (but
excluding treasury stock and Capital Stock subscribed and unissued, and
any Preferred Stock that is mandatorily redeemable on or prior to December
30, 2010) of the Company and its Subsidiaries, plus (ii) the amount of the
paid-in capital and retained earnings of the Company and its Subsidiaries,
in each case as such amounts (excluding the effect of all foreign currency
translation adjustments) would be shown on a consolidated balance sheet of
the Company and its Subsidiaries as of such time prepared in accordance
with GAAP, minus
(b) to the extent included in clause (a), all amounts properly
attributable to minority interests, if any, in the stock and surplus of
Subsidiaries.
"Consolidated Operating Cash Flow" means, for any period, the sum of
(a) Consolidated Net Income for such period, plus
(b) the aggregate amount of Consolidated Interest Expense, income
taxes, depreciation, amortization and any other noncash expenses or
charges of any nature accrued for such period by the Company and its
Subsidiaries (to the extent, but only to the extent, such aggregate amount
was reflected in the computation of Consolidated Net Income for such
period).
"Consolidated Total Assets" means, at any time, the total assets of the
Company and its Subsidiaries which would be shown as assets on a consolidated
balance sheet of the Company and its Subsidiaries as of such time prepared in
accordance with GAAP, after eliminating all amounts properly attributable to
minority interests, if any, in the stock and surplus of Subsidiaries.
"Consolidated Total Capitalization" means, at any time, the sum of (a)
Consolidated Total Debt at such time plus (b) Consolidated Net Worth at such
time.
"Consolidated Total Debt" means, as of any date of determination, the
total of all Debt of the Company and its Subsidiaries outstanding on such date,
after eliminating all offsetting debits and credits between the Company and its
Subsidiaries and all other items required to be eliminated in the course of the
preparation of consolidated financial statements of the Company and its
Subsidiaries in accordance with GAAP.
"Credit Agreement" means the Credit Agreement dated as of June 26, 1995,
as amended, by and among the Company, certain Subsidiaries of the Company, the
banks that are parties thereto, and The Bank of New York, as issuing bank, swing
line lender, arranging agent and administrative agent.
<PAGE> 49
"Debt" means, with respect to any Person, without duplication,
(a) its liabilities for borrowed money and its redemption
obligations in respect of mandatorily redeemable Preferred Stock;
(b) its liabilities for the deferred purchase price of property
acquired by such Person (excluding accounts payable arising in the
ordinary course of business but including, without limitation, all
liabilities created or arising under any conditional sale or other title
retention agreement with respect to any such property);
(c) all liabilities appearing on its balance sheet in accordance
with GAAP in respect of Capital Leases;
(d) all liabilities for borrowed money secured by any Lien with
respect to any property owned by such Person (whether or not it has
assumed or otherwise become liable for such liabilities); and
(e) any Guaranty of such Person with respect to liabilities of a
type described in any of clauses (a) through (d) hereof.
Without limitation of the foregoing, Debt of any Person shall include all
obligations of such Person of the character described in clauses (a) through (e)
to the extent such Person or its property remains legally liable in respect
thereof notwithstanding that any such obligation is deemed to be extinguished
under GAAP.
"Debt Prepayment Application" is defined in Section 10.8(c)(i).
"Default" means an event or condition the occurrence or existence of which
would, with the lapse of time or the giving of notice or both, become an Event
of Default.
"Default Rate" means that rate of interest that is the greater of (i) 1.0%
per annum above the rate of interest stated in clause (a) of the first paragraph
of the relevant Series of Notes or (ii) 1.0% over the rate of interest publicly
announced from time to time by Morgan Guaranty Trust Company of New York in New
York City (or its successor) as its "base" or "prime" rate.
"Designated Portion" is defined in Section 10.8(b)(i).
"Disclosure Documents" are defined in Section 5.3.
"Disposition Value" is defined in Section 10.8(c)(ii).
"Environmental Laws" means any and all Federal, state, local, and foreign
statutes, laws, regulations, ordinances, rules, judgments, orders, decrees,
permits, concessions, grants, franchises, licenses, agreements or governmental
restrictions relating to pollution and the protection of the environment or the
release of any materials into the environment, including but not limited to
those related to hazardous substances or wastes, air emissions and discharges to
waste or public systems.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the rules and regulations promulgated thereunder
from time to time in effect.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) that is treated as a single employer together with the Company
under section 414 of the Code.
"Event of Default" is defined in Section 11.
<PAGE> 50
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time.
"Excluded Transfer" is defined in Section 10.8(a)(ii).
"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, respectively).
"Financing Documents" means, collectively, this Agreement, the Other
Agreements, the Notes and the Guaranty Agreement.
"Foreign Pension Plan" means any plan, fund or other similar program
(a) established or maintained outside of the United States of
America by any one or more of the Company or any of its Subsidiaries
primarily for the benefit of the employees (substantially all of whom are
aliens not residing in the United States of America) of the Company or its
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 or any state or other
political subdivision thereof, or
(ii) any jurisdiction in which the Company or any Subsidiary
conducts all or any part of its business, or that asserts
jurisdiction over any properties of the Company or any Subsidiary,
or
(b) any entity exercising executive, legislative, judicial,
regulatory or administrative functions of, or pertaining to, any such
government.
"Guarantors" means each of Tiffany and Company, a New York corporation,
Tiffany & Co. International, a Delaware corporation, Tiffany & Co. Japan Inc., a
Delaware corporation, and the successors and assigns of each of the foregoing
entities, and "Guarantor" means any one of such Persons.
"Guaranty" means, with respect to any Person, any obligation (except the
endorsement in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing any
indebtedness, dividend or other obligation of any other Person in any manner,
whether directly or indirectly, including, without limitation, obligations
incurred through an agreement, contingent or otherwise, by such Person:
(a) to purchase such indebtedness or obligation or any property
constituting security therefor;
(b) to advance or supply funds (i) for the purchase or payment of
such indebtedness
<PAGE> 51
or obligation, or (ii) to maintain any working capital or other balance
sheet condition or any income statement condition of any other Person or
otherwise to advance or make available funds for the purchase or payment
of such indebtedness or obligation;
(c) to lease properties or to purchase properties or services
primarily for the purpose of assuring the owner of such indebtedness or
obligation of the ability of any other Person to make payment of the
indebtedness or obligation; or
(d) otherwise to assure the owner of such indebtedness or obligation
against loss in respect thereof.
In any computation of the indebtedness or other liabilities of the obligor under
any Guaranty, the indebtedness or other obligations that are the subject of such
Guaranty shall be assumed to be direct obligations of such obligor.
"Guaranty Agreement" is defined in Section 4.7.
"Hazardous Material" means any and all pollutants, toxic or hazardous
wastes or any other substances that might pose a hazard to health or safety, the
removal of which may be required or the generation, manufacture, refining,
production, processing, treatment, storage, handling, transportation, transfer,
use, disposal, release, discharge, spillage, seepage, or filtration of which is
or shall be restricted, prohibited or penalized by any applicable law
(including, without limitation, asbestos, urea formaldehyde foam insulation and
polychlorinated biphenyls).
"holder" means, with respect to any Note, the Person in whose name such
Note is registered in the register maintained by the Company pursuant to Section
13.1.
"Indebtedness" means, with respect to any Person, without duplication,
(a) its liabilities for borrowed money and its redemption
obligations in respect of mandatorily redeemable Preferred Stock;
(b) its liabilities for the deferred purchase price of property
acquired by such Person (excluding accounts payable arising in the
ordinary course of business but including all liabilities created or
arising under any conditional sale or other title retention agreement with
respect to any such property);
(c) all liabilities appearing on its balance sheet in accordance
with GAAP in respect of Capital Leases;
(d) all liabilities for borrowed money secured by any Lien with
respect to any property owned by such Person (whether or not it has
assumed or otherwise become liable for such liabilities);
(e) all its liabilities in respect of letters of credit or
instruments serving a similar function issued or accepted for its account
by banks and other financial institutions (whether or not representing
obligations for borrowed money);
(f) Swaps of such Person; and
(g) any Guaranty of such Person with respect to liabilities of a
type described in any of clauses (a) through (f) hereof.
Without limitation of the foregoing, Indebtedness of any Person shall include
all obligations of such Person of the character described in clauses (a) through
(g) to the extent such Person or its property
<PAGE> 52
remains legally liable in respect thereof notwithstanding that any such
obligation is deemed to be extinguished under GAAP.
"Institutional Investor" means (a) any original purchaser of a Note, (b)
any holder of a Note holding more than 5% of the aggregate principal amount of
the Notes then outstanding, and (c) any bank, trust company, savings and loan
association or other financial institution, any pension plan, any investment
company, any insurance company, any broker or dealer, or any other similar
financial institution or entity, regardless of legal form.
"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 or asset of such Person (including in the case of
stock, stockholder agreements, voting trust agreements and all similar
arrangements).
"Make-Whole Amount" is defined in Section 8.6.
"Material" means material in relation to the business, operations,
affairs, financial condition, assets, properties or prospects of the Company and
its Subsidiaries taken as a whole.
"Material Adverse Effect" means a material adverse effect on (a) the
business, operations, affairs, financial condition, assets or properties of the
Company and its Subsidiaries taken as a whole, or (b) the ability of the
Obligors to perform their obligations under the Financing Documents, or (c) the
validity or enforceability of any of the Financing Documents.
"Memorandum" is defined in Section 5.3.
"Multiemployer Plan" means any Plan that is a "multiemployer plan" (as
such term is defined in section 4001(a)(3) of ERISA).
"NAIC Questionnaire-based Disclosure" is defined in Section 5.19.
"Net Asset Sale 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.
"Notes" is defined in Section 1.
"Obligors" means the Company and each Guarantor, and "Obligor" means any
one of such Persons.
"Officer's Certificate" means a certificate of the Company executed on its
behalf by a Senior Financial Officer or any other officer of the Company whose
responsibilities extend to the subject matter of such certificate.
"Ordinary Course Transfer" is defined in Section 10.8(a)(i).
"Other Agreements" is defined in Section 2.
<PAGE> 53
"Other Purchasers" is defined in Section 2.
"PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA or any successor thereto.
"Person" means an individual, partnership, corporation, limited liability
company, association, trust, unincorporated organization, or a government or
agency or political subdivision thereof.
"Plan" means an "employee benefit plan" (as defined in section 3(3) of
ERISA) that is or, within the preceding five years, has been established or
maintained, or to which contributions are or, within the preceding five years,
have been made or required to be made, by the Company or any ERISA Affiliate or
with respect to which the Company or any ERISA Affiliate may have any liability.
"Preferred Stock" means any class of Capital Stock of a Person that is
preferred over any other class of Capital Stock of such Person as to the payment
of dividends or other equity distributions or the payment of any amount upon
liquidation or dissolution of such Person.
"Premises" means the building and land located at 727 Fifth Avenue, New
York, New York.
"Priority Debt" means, at any time, without duplication, the sum of
(a) all then outstanding Debt of the Company or any Guarantor
secured by any Lien on any property of the Company or any Subsidiary,
other than any such Debt secured by Liens permitted by any one or more of
clauses (a) through (i), inclusive, of Section 10.6, plus
(b) all then outstanding Debt of Subsidiaries (other than Debt of
any Guarantor); provided that Priority Debt shall not include
(i) Debt of any Subsidiary
(A) owing solely to the Company or another Subsidiary,
or
(B) under any Guaranty by a Subsidiary which is a party
to the Guaranty Agreement of the Debt of the Company or any
other Subsidiary; and
(ii) Debt of any Subsidiary in respect of the existing lease
of the Company's New Jersey Customer Service Center resulting from
any requirement that such lease be reflected as a Capital Lease on
the balance sheet of the Company in accordance with GAAP.
"property" or "properties" means, unless otherwise specifically limited,
real or personal property of any kind, tangible or intangible, choate or
inchoate.
"PTE" is defined in Section 6.2(a).
"QPAM Exemption" is defined in Section 6.2(d).
"Qualified Institutional Buyer" means any Person who is a "qualified
institutional buyer" within the meaning of such term as set forth in Rule
144A(a)(1) under the Securities Act.
"Reinvested Transfer" is defined in Section 10.8(b)(i).
"Required Holders" means, at any time, the holder or holders of at least
66-_% in principal amount of the Notes at the time outstanding (exclusive of
Notes then owned by the Company or any of
<PAGE> 54
its Affiliates).
"Responsible Officer" means any Senior Financial Officer and any other
officer of the Company with responsibility for the administration of the
relevant portion of this Agreement.
"Securities Act" means the Securities Act of 1933, as amended from time to
time.
"Senior Debt" means the Notes and any Debt of the Company or its
Subsidiaries that by its terms is not in any manner subordinated in right of
payment to any other unsecured Debt of the Company or any Subsidiary.
"Senior Financial Officer" means the chief financial officer, principal
accounting officer or treasurer of the Company.
"Series" means any one or more of the series of Notes issued hereunder.
"Series A Notes" is defined in Section 1(a).
"Series B Notes" is defined in Section 1(b).
"Source" is defined in Section 6.2.
"Subsidiary" means, as to any Person, any corporation, association or
other business entity in which such Person or one or more of its Subsidiaries or
such Person and one or more of its Subsidiaries owns sufficient equity or voting
interests to enable it or them (as a group) ordinarily, in the absence of
contingencies, to elect a majority of the directors (or Persons performing
similar functions) of such entity, and any partnership or joint venture if more
than a 50% interest in the profits or capital thereof is owned by such Person or
one or more of its Subsidiaries or such Person and one or more of its
Subsidiaries (unless such partnership or joint venture can and does ordinarily
take major business actions without the prior approval of such Person or one or
more of its Subsidiaries). Unless the context otherwise clearly requires, any
reference to a "Subsidiary" is a reference to a Subsidiary of the Company.
"Substantial Portion" is defined in Section 10.8(c)(iii).
"Successor Corporation" is defined in Section 10.7(c).
"Swaps" means, with respect to any Person, payment obligations with
respect to interest rate swaps, currency swaps and similar obligations
obligating such Person to make payments, whether periodically or upon the
happening of a contingency. For the purposes of this Agreement, the amount of
the obligation under any Swap shall be the amount determined in respect thereof
as of the end of the then most recently ended fiscal quarter of such Person,
based on the assumption that such Swap had terminated at the end of such fiscal
quarter, and in making such determination, if any agreement relating to such
Swap provides for the netting of amounts payable by and to such Person
thereunder or if any such agreement provides for the simultaneous payment of
amounts by and to such Person, then in each such case, the amount of such
obligation shall be the net amount so determined.
"Transfer" is defined in Section 10.8(c)(iv).
"Wholly-Owned Subsidiary" means, at any time, any Subsidiary 100% of all
of the equity interests (except directors' qualifying shares) and voting
interests of which are owned by any one or more of the Company and the Company's
other Wholly-Owned Subsidiaries at such time.
"Year 2000 Problem" is defined in Section 5.19.
<PAGE> 55
Schedule 5.14
Use of Proceeds
The Company will use the proceeds (i) to refinance a portion of
outstanding short-term yen-denominated and dollar-denominated indebtedness and
(ii) for working capital.
A portion of the proceeds received by the Company upon the sale of the
Notes will be distributed as follows: $10,000,000 to Tiffany & Co. International
as a capital contribution, which will be invested by such corporation in Tiffany
& Co. Japan Inc. as a contribution to its capital, which will be used by such
corporation to repay a portion of its outstanding yen-denominated Indebtedness
under the Credit Agreement and for working capital; and $90,000,000 to Tiffany
and Company as an intercompany loan to be used by such corporation to repay a
portion of its outstanding Indebtedness under the Credit Agreement and for other
general corporate purposes.
TIFFANY & CO. NOTE PURCHASE AGREEMENT
Schedule 5.14-1
<PAGE> 56
Schedule 5.15
Existing Indebtedness and Liens*
1. Indebtedness under the Credit Agreement of up to $160,000,000 which may be
incurred by the Company and those of its direct and indirect subsidiaries
that are or become parties thereto (unsecured; $117,060,519 outstanding).
2. Guaranties provided by each of the Guarantors of the Indebtedness
described in Item 1 above (unsecured).
3. $51,500,000 7.52% Senior Notes Due 2003 issued by the Company to certain
purchasers thereof (unsecured; $51,500,000 outstanding).
4. Guaranties provided by each of the Guarantors of the Indebtedness
described in Item 3 above (unsecured).
5. (yen)5,000,000,000,000 Yen Loan Due 2011 provided to Tiffany & Co. Japan
Inc., Japan Branch, by American Family Life Assurance Company of Columbus,
Japan Branch (unsecured; (yen)5,000,000,000,000 outstanding).
6. Guaranty provided by the Company of the Indebtedness described in Item 5
above (unsecured).
7. $10,000,000 uncommitted line of credit provided to Tiffany and Company by
The Bank of New York (unsecured; $317,000 outstanding).
8. Forward exchange yen contracts, including those arising under that certain
Foreign Exchange and Options Master Agreement dated as of March 28, 1997,
by and between The Bank of New York and Tiffany and Company ("FEOMA-1")
and that certain Foreign Exchange and Options Master Agreement dated as of
March 28, 1997, by and between The Bank of New York and Tiffany & Co.
International ("FEOMA-2") (unsecured; $37,821,784 outstanding as of
November 30, 1998).
9. Guaranty provided by Tiffany & Co. International of the Indebtedness
arising under FEOMA-1 (unsecured).
10. Guaranty provided by Tiffany and Company of the Indebtedness arising under
FEOMA-2 (unsecured).
11. Consignment Lien in favor of Fleet Precious Metals Inc. under a certain
Consignment Agreement dated July 24, 1998, between Fleet Precious Metals
Inc. and Tiffany and Company.
*Stated principal amounts outstanding are as of December 18, 1998, unless
otherwise noted.
FORM OF SERIES A NOTE
<PAGE> 57
EXHIBIT 1A
FORM OF SERIES A NOTE
TIFFANY & CO.
6.90% SERIES A SENIOR NOTE DUE DECEMBER 30, 2008
No. RA-___ [Date]
$______ PPN: 886547 A* 9
FOR VALUE RECEIVED, the undersigned, TIFFANY & CO. (herein called the
"Company"), a corporation organized and existing under the laws of the State of
Delaware, hereby promises to pay to ___________________, or registered assigns,
the principal sum of ________ DOLLARS ($_______) on December 30, 2008, with
interest (computed on the basis of a 360-day year of twelve 30-day months) (a)
on the unpaid balance thereof at the rate of 6.90% per annum from the date
hereof, payable semiannually on the 30th day of June and December in each year,
commencing with the June 30 or December 30 next succeeding the date hereof,
until the principal hereof shall have become due and payable, and (b) to the
extent permitted by law on any overdue payment (including any overdue
prepayment) of principal, any overdue payment of interest and any overdue
payment of any Make-Whole Amount (as defined in the Note Purchase Agreements
referred to below), payable semiannually as aforesaid (or, at the option of the
registered holder hereof, on demand), at a rate per annum from time to time
equal to the greater of (i) 7.90% or (ii) 1.0% over the rate of interest
publicly announced from time to time by Morgan Guaranty Trust Company of New
York in New York, New York (or its successor) as its "base" or "prime" rate.
Payments of principal of, interest on and any Make-Whole Amount with
respect to this Note are to be made in lawful money of the United States of
America at the address shown in the register maintained by the Company for such
purpose or at such other place as the Company shall have designated by written
notice to the holder of this Note as provided in the Note Purchase Agreements
referred to below.
This Note is one of the 6.90% Series A Senior Notes due December 30, 2008
(herein called the "Series A Notes") of the Company in the aggregate principal
amount of $60,000,000 issued pursuant to separate Note Purchase Agreements,
dated as of December 30, 1998 (as from time to time amended, the "Note Purchase
Agreements"), between the Company and the respective purchasers named therein
and under and pursuant to which the Company is also issuing $40,000,000
aggregate principal amount of its 7.05% Series B Senior Notes due December 30,
2010 (the "Series B Notes" and, together with the Series A Notes, the "Notes"),
and is entitled to the benefits thereof. Each holder of this Note will be
deemed, by its acceptance hereof, (i) to have agreed to the confidentiality
provisions set forth in Section 20 of the Note Purchase Agreements and (ii) to
have made the representation set forth in Section 6.2 of the Note Purchase
Agreements. Capitalized terms used herein, unless otherwise specified herein,
shall have the respective meanings specified in the Note Purchase Agreements.
FORM OF SERIES A NOTE
Exhibit 1A-1
<PAGE> 58
This Note is a registered Note and, as provided in the Note Purchase
Agreements, upon surrender of this Note for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed, by
the registered holder hereof or such holder's attorney duly authorized in
writing, a new Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving payment and
for all other purposes, and the Company will not be affected by any notice to
the contrary. This Note is not a "negotiable instrument" within the meaning of
ss.3-104 of the Uniform Commercial Code as adopted in the State of New York.
This Note and the holder hereof are entitled, equally and ratably with the
holders of all other Notes, to the benefits provided by the Guaranty Agreement,
as to which reference is hereby made for the statement thereof.
This Note is subject to optional prepayment, in whole or from time to time
in part, at the times and on the terms specified in the Note Purchase
Agreements, but not otherwise.
If an Event of Default, as defined in the Note Purchase Agreements, occurs
and is continuing, the principal of this Note may be declared or otherwise
become due and payable in the manner, at the price (including any applicable
Make-Whole Amount) and with the effect provided in the Note Purchase Agreements.
THIS NOTE AND THE NOTE PURCHASE AGREEMENTS ARE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, EXCLUDING CHOICE-OF-LAW
PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE THE APPLICATION OF THE
LAWS OF A JURISDICTION OTHER THAN SUCH STATE.
-----------------------------------
TIFFANY & CO.
By
Name:
Title:
FORM OF SERIES A NOTE
Exhibit 1A-2
<PAGE> 59
EXHIBIT 1B
FORM OF SERIES B NOTE
TIFFANY & CO.
7.05% SERIES B SENIOR NOTE DUE DECEMBER 30, 2010
No. RB-___ [Date]
$______ PPN: 886547 A@ 7
FOR VALUE RECEIVED, the undersigned, TIFFANY & CO. (herein called the
"Company"), a corporation organized and existing under the laws of the State of
Delaware, hereby promises to pay to __________________, or registered assigns,
the principal sum of _____________ DOLLARS ($___) on December 30, 2010, with
interest (computed on the basis of a 360-day year of twelve 30-day months) (a)
on the unpaid balance thereof at the rate of 7.05% per annum from the date
hereof, payable semiannually on the 30th day of June and December in each year,
commencing with the June 30 or December 30 next succeeding the date hereof,
until the principal hereof shall have become due and payable, and (b) to the
extent permitted by law on any overdue payment (including any overdue
prepayment) of principal, any overdue payment of interest and any overdue
payment of any Make-Whole Amount (as defined in the Note Purchase Agreements
referred to below), payable semiannually as aforesaid (or, at the option of the
registered holder hereof, on demand), at a rate per annum from time to time
equal to the greater of (i) 8.05% or (ii) 1.0% over the rate of interest
publicly announced from time to time by Morgan Guaranty Trust Company of New
York in New York, New York (or its successor) as its "base" or "prime" rate.
Payments of principal of, interest on and any Make-Whole Amount with
respect to this Note are to be made in lawful money of the United States of
America at the address shown in the register maintained by the Company for such
purpose or at such other place as the Company shall have designated by written
notice to the holder of this Note as provided in the Note Purchase Agreements
referred to below.
This Note is one of the 7.05% Series B Senior Notes due December 30, 2010
(herein called the "Series B Notes") of the Company in the aggregate principal
amount of $40,000,000 issued pursuant to separate Note Purchase Agreements,
dated as of December 30, 1998 (as from time to time amended, the "Note Purchase
Agreements"), between the Company and the respective purchasers named therein
and under and pursuant to which the Company is also issuing $60,000,000
aggregate principal amount of its 6.90% Series A Senior Notes due December 30,
2008 (the "Series A Notes" and, together with the Series B Notes, the "Notes"),
and is entitled to the benefits thereof. Each holder of this Note will be
deemed, by its acceptance hereof, (i) to have agreed to the confidentiality
provisions set forth in Section 20 of the Note Purchase Agreements and (ii) to
have made the representation set forth in Section 6.2 of the Note Purchase
Agreements. Capitalized terms used herein, unless otherwise specified herein,
shall have the respective meanings specified in the Note Purchase
FORM OF SERIES B NOTE
Exhibit B-1
<PAGE> 60
Agreements.
This Note is a registered Note and, as provided in the Note Purchase
Agreements, upon surrender of this Note for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed, by
the registered holder hereof or such holder's attorney duly authorized in
writing, a new Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving payment and
for all other purposes, and the Company will not be affected by any notice to
the contrary. This Note is not a "negotiable instrument" within the meaning of
ss.3-104 of the Uniform Commercial Code as adopted in the State of New York.
This Note and the holder hereof are entitled, equally and ratably with the
holders of all other Notes, to the benefits provided by the Guaranty Agreement,
as to which reference is hereby made for the statement thereof.
This Note is subject to optional prepayment, in whole or from time to time
in part, at the times and on the terms specified in the Note Purchase
Agreements, but not otherwise.
If an Event of Default, as defined in the Note Purchase Agreements, occurs
and is continuing, the principal of this Note may be declared or otherwise
become due and payable in the manner, at the price (including any applicable
Make-Whole Amount) and with the effect provided in the Note Purchase Agreements.
THIS NOTE AND THE NOTE PURCHASE AGREEMENTS ARE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, EXCLUDING CHOICE-OF-LAW
PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE THE APPLICATION OF THE
LAWS OF A JURISDICTION OTHER THAN SUCH STATE.
-----------------------------------
TIFFANY & CO.
By
Name:
Title:
FORM OF GUARANTY AGREEMENT
Annex 1-2
<PAGE> 61
EXHIBIT 4.7
FORM OF GUARANTY AGREEMENT
TIFFANY AND COMPANY
TIFFANY & CO. INTERNATIONAL
TIFFANY & CO. JAPAN INC.
----------------------
GUARANTY AGREEMENT
----------------------
DATED AS OF DECEMBER 30, 1998
$60,000,000 6.90% SERIES A SENIOR NOTES DUE DECEMBER 30, 2008
$40,000,000 7.05% SERIES B SENIOR NOTES DUE DECEMBER 30, 2010
ISSUED BY TIFFANY & CO.
FORM OF GUARANTY AGREEMENT
Annex 1-3
<PAGE> 62
TABLE OF CONTENTS
PAGE
1. PRELIMINARY STATEMENT................................................ 1
2. GUARANTY AND OTHER RIGHTS AND UNDERTAKINGS........................... 2
2.1 Guarantied Obligations......................................... 2
2.2 Performance Under the Note Purchase Agreement.................. 2
2.3 Releases....................................................... 3
2.4 Waivers........................................................ 3
2.5 Certain Waivers of Subrogation, Reimbursement and Indemnity.... 6
2.6 Indemnity...................................................... 6
2.7 Invalid Payments............................................... 6
2.8 Marshaling..................................................... 7
2.9 Subordination, Subrogation, Etc................................ 7
2.10 Subordination of Affiliate Obligations......................... 7
2.11 Set-off, Counterclaim or Other Deductions...................... 8
2.12 Election by Guarantors to Perform Obligations.................. 8
2.13 No Election of Remedies by Noteholders......................... 8
2.14 Separate Action; Other Enforcement Rights...................... 8
2.15 Noteholder Set-off............................................. 8
2.16 Delay or Omission; No Waiver................................... 9
2.17 Restoration of Rights and Remedies............................. 9
2.18 Cumulative Remedies............................................ 9
2.19 Notices in Respect of Payments................................. 9
2.20 Limitation on Guarantied Obligation............................ 9
2.21 Confirmation of Guaranty....................................... 10
3. INTERPRETATION OF THIS GUARANTY...................................... 10
3.1 Terms Defined.................................................. 10
3.2 Section Headings and Construction.............................. 10
4. WARRANTIES AND REPRESENTATIONS....................................... 11
5. GENERAL COVENANTS.................................................... 11
5.1 Undertakings in the Note Purchase Agreement.................... 11
5.2 Payment of Notes and Maintenance of Office..................... 11
5.3 Further Assurances............................................. 11
6. MISCELLANEOUS........................................................ 12
6.1 Successors and Assigns......................................... 12
6.2 Partial Invalidity............................................. 12
FORM OF GUARANTY AGREEMENT
<PAGE> 63
6.3 Communications................................................. 12
6.4 Governing Law.................................................. 12
6.5 Effective Date................................................. 13
6.6 Benefits of Guaranty Restricted to Noteholders................. 13
6.7 Survival of Representations and Warranties..................... 13
6.8 Expenses....................................................... 13
6.9 Amendment...................................................... 13
6.10 Survival....................................................... 14
6.11 Entire Agreement............................................... 14
6.12 Duplicate Originals............................................ 14
6.13 Waiver of Jury Trial; Consent to Jurisdiction; Etc............. 14
Annex 1 -- Addresses of Guarantors
FORM OF GUARANTY AGREEMENT
<PAGE> 64
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT, dated as of December 30, 1998 (as amended or
restated from time to time, this "Guaranty"), by Tiffany and Company, a New York
corporation, Tiffany & Co. International, a Delaware corporation and Tiffany &
Co. Japan Inc., a Delaware corporation (together with their respective
successors and assigns, the "Guarantors"), is in favor of each of the
Noteholders (as such term is hereinafter defined).
1. PRELIMINARY STATEMENT
(a) Tiffany & Co., a Delaware corporation (together with its
successors and assigns, the "Company"), has authorized the issuance of its
(i) 6.90% Series A Senior Notes due December 30, 2008 in the aggregate
principal amount of Sixty Million Dollars ($60,000,000) (the "Series A
Notes") and (ii) 7.05% Series B Senior Notes due December 30, 2010 in the
aggregate principal amount of Forty Million Dollars ($40,000,000)
(together with the Series A Notes, collectively, and as may be amended or
restated from time to time, the "Notes"), pursuant to separate Note
Purchase Agreements, of even date herewith (collectively, as may be
amended or restated from time to time, the "Note Purchase Agreement"),
between the Company and the respective purchasers listed on Schedule A
attached thereto (the "Purchasers").
(b) In order to induce the Purchasers to purchase the Notes from the
Company, the Company has agreed that it will cause each Guarantor to
guaranty unconditionally all of the obligations of the Company to pay
principal of and interest and Make-Whole Amount on the Notes and all other
amounts payable by the Company under of the Notes and the Note Purchase
Agreement pursuant to the terms and provisions hereof.
(c) Each Guarantor and the Company are operated as part of one
combined business group and are directly dependent upon each other for and
in connection with their respective business activities and their
respective financial resources. Each Guarantor will receive direct and
indirect economic, financial and other benefits from the indebtedness
incurred under the Note Purchase Agreement and the Notes by the Company,
and under this Guaranty by each Guarantor, and the incurrence of such
indebtedness is in the best interests of each Guarantor. The Company and
each Guarantor have induced the Purchasers to purchase the Notes based on
the consolidated financial condition of each Guarantor and the Company.
(d) All acts and proceedings required by law and by the certificate
of incorporation and bylaws of each Guarantor necessary to constitute this
Guaranty a valid and binding agreement for the uses and purposes set forth
herein in accordance with its terms have been done and taken, and the
execution and delivery hereof has been in all respects duly authorized.
FORM OF GUARANTY AGREEMENT
Exhibit 4.7-1
<PAGE> 65
2. GUARANTY AND OTHER RIGHTS AND UNDERTAKINGS
2.1 Guarantied Obligations.
Each Guarantor, in consideration of the execution and delivery of the Note
Purchase Agreement, the purchase of the Notes by the Purchasers and other
consideration, hereby irrevocably, unconditionally, absolutely, jointly and
severally guarantees, on a continuing basis, to each holder of Notes (each such
holder being referred to herein as a "Noteholder" and, collectively, as the
"Noteholders"), whether such Note has been issued, is being issued on the date
hereof or is hereafter issued in compliance with the provisions of the Note
Purchase Agreement, as and for each Guarantor's own debt, until final and
indefeasible payment has been made in cash:
(a) the due and punctual payment of the principal of and accrued and
unpaid interest (including, without limitation, interest which otherwise
may cease to accrue by operation of any insolvency law, rule, regulation
or interpretation thereof) and Make-Whole Amount, if any, and any other
fees and expenses, on the Notes at any time outstanding and the due and
punctual payment of all other amounts payable, and all other indebtedness
owing, by the Company to the Noteholders under the Note Purchase Agreement
and the Notes, in each case when and as the same shall become due and
payable, whether at maturity, pursuant to optional prepayment, by
acceleration or otherwise, all in accordance with the terms and provisions
hereof and thereof, including, without limitation, overdue interest,
indemnification payments and all reasonable costs and expenses incurred by
the Noteholders in connection with enforcing any obligations of the
Company under the Note Purchase Agreement and the Notes; it being the
intent of each Guarantor that the guaranty set forth herein shall be a
continuing guaranty of payment and not a guaranty of collection; and
(b) the prompt and complete payment, on demand, of any and all
reasonable costs and expenses incurred by the Noteholders in connection
with enforcing the obligations of such Guarantor hereunder, including,
without limitation, the reasonable fees and disbursements of the
Noteholders' special counsel.
All of the obligations set forth in clauses (a) and (b) of this Section 2.1 are
referred to herein as the "Guarantied Obligations" and the guaranty thereof
contained herein is referred to herein as the "Unconditional Guaranty." The
Unconditional Guaranty is a primary, original and immediate obligation of each
Guarantor and is an absolute, unconditional, continuing and irrevocable guaranty
of payment and performance and shall remain in full force and effect until the
full, final and indefeasible payment in cash of the Guarantied Obligations.
FORM OF GUARANTY AGREEMENT
Exhibit 4.7-2
<PAGE> 66
2.2 Performance Under the Note Purchase Agreement.
In the event the Company fails to pay, perform, keep, observe, or fulfill
any Guarantied Obligation specified in clause (a) of Section 2.1 in the manner
provided in the Notes or in the Note Purchase Agreement, each Guarantor shall
cause forthwith to be paid the moneys in respect of which such failure has
occurred in accordance with the terms and provisions of the Note Purchase
Agreement and the Notes. In furtherance of the foregoing, if an Event of Default
shall exist, the Guarantied Obligations shall, in the manner and subject to the
limitations provided in the Note Purchase Agreement for the acceleration of the
Notes, forthwith become due and payable without notice, regardless of whether
the acceleration of the Notes shall be stayed, enjoined, delayed or otherwise
prevented.
2.3 Releases.
Each Guarantor consents and agrees that, without notice to or by any
Guarantor and without impairing, releasing, abating, deferring, suspending,
reducing, terminating or otherwise affecting the obligations of each Guarantor
hereunder, each Noteholder, in the manner provided herein, by action or
inaction, may:
(a) compromise or settle, renew or extend the period of duration or
the time for the payment, or discharge the performance of, or may refuse
to, or otherwise not, enforce, or may, by action or inaction, release all
or any one or more parties to, any one or more of the Notes, the Note
Purchase Agreement, any other guaranty thereof or agreement or instrument
related thereto or hereto;
(b) assign, sell or transfer, or otherwise dispose of, any one or
more of the Notes;
(c) grant waivers, extensions, consents and other indulgences to the
Company or any other guarantors in respect of any one or more of the
Notes, the Note Purchase Agreement, any other guaranty thereof or any
agreement or instrument related thereto or hereto;
(d) amend, modify or supplement in any manner and at any time (or
from time to time) any one or more of the Notes, the Note Purchase
Agreement, any other guaranty thereof or any agreement or instrument
related hereto;
(e) release or substitute any one or more of the endorsers or
guarantors of the Guarantied Obligations whether parties hereto or not;
and
(f) sell, exchange, release, surrender or enforce, by action or
inaction, any property at any time pledged or granted as security in
respect of the Guarantied Obligations, whether so pledged or granted by
the Company, each Guarantor or
FORM OF GUARANTY AGREEMENT
Exhibit 4.7-3
<PAGE> 67
another guarantor of the Company's obligations under the Note Purchase
Agreement, the Notes, any other guaranty thereof or any agreement or
instrument related hereto.
2.4 Waivers.
To the fullest extent permitted by law, each Guarantor does hereby waive:
(a) any notice of:
(1) acceptance of the Unconditional Guaranty;
(2) any purchase of the Notes under the Note Purchase
Agreement, or the creation, existence or acquisition of any of the
Guarantied Obligations, or the amount of the Guarantied Obligations,
subject to each Guarantor' rights to make inquiry of each Noteholder
to ascertain the amount of the Guarantied Obligations owing to such
Noteholder at any reasonable time;
(3) any adverse change in the financial condition of the
Company or any other fact that might increase, expand or affect each
Guarantor's risk hereunder;
(4) presentment for payment, demand, protest, and notice
thereof as to the Notes or any other instrument;
(5) any Default or Event of Default; and
(6) any notice or demand of any kind or nature whatsoever to
which each Guarantor might otherwise be entitled (except if such
notice or demand is specifically otherwise required to be given to
such Guarantor pursuant to the terms of this Guaranty);
(b) any right, by statute or otherwise, to require any Noteholder to
institute suit against the Company or any other guarantor or to exhaust
the rights and remedies of any Noteholder against the Company or any other
guarantor, each Guarantor being bound to the payment of each and all
Guarantied Obligations, whether now existing or hereafter accruing, as
fully as if such Guarantied Obligations were directly owing to the
Noteholders by each Guarantor;
(c) the benefit of any stay (except in connection with a pending
appeal), valuation, appraisal, redemption or extension law now or at any
time hereafter in force which, but for this waiver, might be applicable to
any sale of property of any Guarantor made under any judgment, order or
decree based on this Guaranty, and each Guarantor covenants that it will
not at any time insist upon or plead, or in any manner claim or take the
benefit or advantage of, such law; and
FORM OF GUARANTY AGREEMENT
Exhibit 4.7-4
<PAGE> 68
(d) any defense or objection to the absolute, primary, continuing
nature, or the validity, enforceability or amount of the Unconditional
Guaranty, including, without limitation, any defense based on (and the
primary, continuing nature, and the validity, enforceability and amount of
the Unconditional Guaranty shall be unaffected by), any of the following:
(1) any change in future conditions;
(2) any change of law;
(3) any invalidity or irregularity with respect to the
issuance or assumption of any obligations (including, without
limitation, the Note Purchase Agreement, the Notes or any agreement
or instrument related hereto) by the Company or any other Person;
(4) the execution and delivery of any agreement at any time
hereafter (including, without limitation, the Note Purchase
Agreement, the Notes or any agreement or instrument related hereto)
of the Company or any other Person;
(5) the genuineness, validity, regularity or enforceability of
any of the Guarantied Obligations;
(6) any default, failure or delay, willful or otherwise, in
the performance of any obligations by the Company or any Guarantor;
(7) any creditors' rights, bankruptcy, receivership or other
insolvency proceeding of the Company or any Guarantor, or
sequestration or seizure of any property of the Company or any
Guarantor, or any merger, consolidation, reorganization,
dissolution, liquidation or winding up or change in corporate
constitution or corporate identity or loss of corporate identity of
the Company or any Guarantor;
(8) any disability or other defense of the Company or any
Guarantor to payment and performance of all Guarantied Obligations
other than the defense that the Guarantied Obligations shall have
been fully and finally performed and indefeasibly paid in cash;
(9) the cessation from any cause whatsoever of the liability
of the Company or any Guarantor in respect of the Guarantied
Obligations (other than as provided herein), and any other defense
that any Guarantor may otherwise have against the Company or any
Noteholder;
FORM OF GUARANTY AGREEMENT
Exhibit 4.7-5
<PAGE> 69
(10) impossibility or illegality of performance on the part of
the Company or any Guarantor under the Note Purchase Agreement, the
Notes or this Guaranty;
(11) any change of the circumstances of the Company, any
Guarantor or any other Person, whether or not foreseen or
foreseeable, whether or not imputable to the Company or any
Guarantor, including, without limitation, impossibility of
performance through fire, explosion, accident, labor disturbance,
floods, droughts, embargoes, wars (whether or not declared), civil
commotions, acts of God or the public enemy, delays or failure of
suppliers or carriers, inability to obtain materials, economic or
political conditions, or any other causes affecting performance, or
any other force majeure, whether or not beyond the control of the
Company or any Guarantor and whether or not of the kind hereinbefore
specified;
(12) any attachment, claim, demand, charge, Lien, order,
process, encumbrance or any other happening or event or reason,
similar or dissimilar to the foregoing, or any withholding or
diminution at the source, by reason of any taxes, assessments,
expenses, indebtedness, obligations or liabilities of any character,
foreseen or unforeseen, and whether or not valid, incurred by or
against any Person, or any claims, demands, charges, Liens or
encumbrances of any nature, foreseen or unforeseen, incurred by any
Person, or against any sums payable under the Note Purchase
Agreement or the Notes or any agreement or instrument related hereto
so that such sums would be rendered inadequate or would be
unavailable to make the payment as herein provided;
(13) any change in the ownership of the equity securities of
the Company, any Guarantor or any other Person liable in respect of
the Notes; or
(14) any other action, happening, event or reason whatsoever
that shall delay, interfere with, hinder or prevent, or in any way
adversely affect, the performance by the Company or any Guarantor of
any of their obligations under the Note Purchase Agreement, the
Notes or this Guaranty.
2.5 Certain Waivers of Subrogation, Reimbursement and Indemnity.
Each Guarantor hereby acknowledges and agrees that:
(a) no Guarantor shall have any right of subrogation, contribution,
reimbursement, or indemnity whatsoever in respect of the Guarantied
Obligations, and no right of recourse to or with respect to any assets or
property of the Company;
(b) no Guarantor will file any claims against the Company or the
estate of the Company in the course of any proceeding under any applicable
bankruptcy or
FORM OF GUARANTY AGREEMENT
Exhibit 4.7-6
<PAGE> 70
insolvency law in respect of the rights referred to in this Section 2.5;
and
(c) each holder of Notes may specifically enforce the provisions of
this Section
2.6 Indemnity.
As a separate, additional and continuing obligation, each Guarantor
unconditionally and irrevocably undertakes and agrees with the Noteholders that,
should the Guarantied Obligations not be recoverable from any Guarantor for any
reason whatsoever (including, without limitation, by reason of any provision of
the Note Purchase Agreement, the Notes or any other agreement or instrument
executed in connection therewith being or becoming void, unenforceable or
otherwise invalid under any applicable law) then, notwithstanding any knowledge
thereof by any Noteholder at any time, each Guarantor as sole, original and
independent obligor, upon demand by the Noteholders, will make payment of the
Guarantied Obligations to the Noteholders by way of a full indemnity in such
currency and otherwise in such manner as is provided in the Note Purchase
Agreement and the Notes.
2.7 Invalid Payments.
Each Guarantor further agrees that, to the extent the Company makes a
payment or payments to any Noteholder, which payment or payments or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside or required, for any of the foregoing reasons or for any other reason,
to be repaid or paid over to a custodian, trustee, receiver or any other party
or officer under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation law of any jurisdiction, state
or federal law, or any common law or equitable cause, then to the extent of such
payment or repayment, the obligation or part thereof intended to be satisfied
shall be revived and continued in full force and effect as if said payment had
not been made and each Guarantor shall be primarily liable for such obligation.
2.8 Marshaling.
Each Guarantor consents and agrees that each Noteholder, and each Person
acting for the benefit of each Noteholder, shall be under no obligation to
marshal any assets in favor of any Guarantor or against or in payment of any or
all of the Guarantied Obligations.
2.9 Subordination, Subrogation, Etc.
Each Guarantor agrees that any present or future indebtedness, obligations
or liabilities of the Company to any Guarantor shall be fully subordinate and
junior in right and priority of payment to any present or future indebtedness,
obligations or liabilities of the Company to the Noteholders. Each Guarantor
waives any right of subrogation to the rights of the Noteholders against the
Company or any other Person obligated for payment of the Guarantied Obligations
and any right of reimbursement, contribution or indemnity whatsoever (including,
without
FORM OF GUARANTY AGREEMENT
Exhibit 4.7-7
<PAGE> 71
limitation, any such right as against any other guarantor) arising or accruing
out of any payment that any Guarantor may make pursuant to this Guaranty, and
any right of recourse to security for the debts and obligations of the Company,
unless and until the entire amount of the Guarantied Obligations shall have been
paid in full.
2.10 Subordination of Affiliate Obligations.
In the event that, for any reason whatsoever, the Company or a Person
obligated in respect of the Guarantied Obligations pursuant to another guaranty,
is now or hereafter becomes indebted to any Guarantor in any manner (an
"Affiliate Obligation"), such Guarantor agrees that the amount of such Affiliate
Obligation, interest thereon, and all other amounts due with respect thereto,
shall, at all times during the existence of a Default or an Event of Default, be
subordinate as to time of payment and in all other respects to all the
Guarantied Obligations, and that such Guarantor shall not be entitled to enforce
or receive payment thereof until all sums then due and owing to the Noteholders
in respect of the Guarantied Obligations shall have been paid in full, except
that such Guarantor may enforce any obligations in respect of any such Affiliate
Obligation owing to such Guarantor from the Company or such indebted Person so
long as all proceeds in respect of any recovery from such enforcement, to the
extent of all amounts owing with respect to this Guaranty, shall be held by such
Guarantor in trust for the benefit of the Noteholders. If any other payment,
other than pursuant to the immediately preceding sentence, shall have been made
to any Guarantor by the Company or such indebted Person on any such Affiliate
Obligation during any time that a Default or an Event of Default exists and
there are Guarantied Obligations outstanding, such Guarantor shall hold in trust
all such payments, to the extent of all amounts owing with respect to this
Guaranty, for the benefit of the Noteholders.
2.11 Set-off, Counterclaim or Other Deductions.
Except as otherwise required by law, each payment by any Guarantor shall
be made without set-off, counterclaim or other deduction.
2.12 Election by Guarantors to Perform Obligations.
Any election by any Guarantor to pay or otherwise perform any of the
obligations of the Company under the Notes, the Note Purchase Agreement or any
agreement or instrument related hereto shall not release the Company, such
Guarantor or any other guarantor from such obligations or any of such Person's
other obligations under the Notes, the Note Purchase Agreement or any agreement
or instrument related hereto.
2.13 No Election of Remedies by Noteholders.
Each Noteholder shall, individually or collectively, have the right to
seek recourse against any Guarantor to the fullest extent provided for herein
for such Guarantor's obligations under this Guaranty in respect of the
Guarantied Obligations. No election to proceed in one
FORM OF GUARANTY AGREEMENT
Exhibit 4.7-8
<PAGE> 72
form of action or proceeding, or against any party, or on any obligation, shall
constitute a waiver of such Noteholder's right to proceed in any other form of
action or proceeding or against other parties unless such Noteholder has
expressly waived such right in writing. Specifically, but without limiting the
generality of the foregoing, no action or proceeding by any Noteholder against
the Company or any Guarantor under any document or instrument evidencing
obligations of the Company or any Guarantor to such Noteholder shall serve to
diminish the liability of any Guarantor under this Guaranty, except to the
extent that such Noteholder finally and unconditionally shall have realized
payment by such action or proceeding.
2.14 Separate Action; Other Enforcement Rights.
Each of the rights and remedies granted under this Guaranty to each
Noteholder in respect of the Notes held by such Noteholder may be exercised by
such Noteholder with notice by such Noteholder to, but without the consent of or
any other action by, any other Noteholder; provided, however, that the maturity
of the Notes may only be accelerated in accordance with the provisions of the
Note Purchase Agreement or operation of law. Each Noteholder may proceed to
protect and enforce the Unconditional Guaranty by suit or suits or proceedings
in equity, at law or in bankruptcy, and whether for the specific performance of
any covenant or agreement contained herein or in execution or aid of any power
herein granted or for the recovery of judgment for the obligations hereby
guarantied or for the enforcement of any other proper, legal or equitable remedy
available under applicable law.
2.15 Noteholder Set-off.
Each Noteholder shall have, to the fullest extent permitted by law and
this Guaranty, a right of set-off against any and all credits and any and all
other property of either or both of the Guarantors or any other Person, now or
at any time whatsoever, with or in the possession of, such Noteholder, or anyone
acting for such Noteholder, to ensure the full performance of any and all
obligations of each Guarantor hereunder.
2.16 Delay or Omission; No Waiver.
No course of dealing on the part of any Noteholder and no delay or failure
on the part of any such Person to exercise any right hereunder shall impair such
right or operate as a waiver of such right or otherwise prejudice such Person's
rights, powers and remedies hereunder. Every right and remedy given by the
Unconditional Guaranty or by law to any Noteholder may be exercised from time to
time as often as may be deemed expedient by such Person.
FORM OF GUARANTY AGREEMENT
Exhibit 4.7-9
<PAGE> 73
2.17 Restoration of Rights and Remedies.
If any Noteholder shall have instituted any proceeding to enforce any
right or remedy under the Unconditional Guaranty or under any Note held by such
Noteholder, and such proceeding shall have been dismissed, discontinued or
abandoned for any reason, or shall have been determined adversely to such
Noteholder, then and in every such case each such Noteholder, the Company and
each Guarantor shall, except as may be limited or affected by any determination
(including, without limitation, any determination in connection with any such
dismissal) in such proceeding, be restored severally and respectively to its
respective former positions hereunder and thereunder, and thereafter, subject as
aforesaid, the rights and remedies of such Noteholders shall continue as though
no such proceeding had been instituted.
2.18 Cumulative Remedies.
No remedy under this Guaranty, the Note Purchase Agreement or the Notes is
intended to be exclusive of any other remedy, but each and every remedy shall be
cumulative and in addition to any and every other remedy given pursuant to this
Guaranty, the Note Purchase Agreement or the Notes.
2.19 Notices in Respect of Payments.
If any Guarantor shall pay to any Noteholder any amount in respect of the
Guarantied Obligations, such Guarantor, within five (5) Business Days after
making such payment, shall provide notice of such payment to each other
Noteholder.
2.20 Limitation on Guarantied Obligation.
Notwithstanding anything in Section 2.1 or elsewhere in this Guaranty, the
Note Purchase Agreement or the Notes to the contrary, the obligations of each
Guarantor hereunder shall at each point in time be limited to an aggregate
amount equal to the greatest amount that would not result in such obligations
being subject to avoidance, or otherwise result in such obligations being
unenforceable, at such time under applicable law (including, without limitation,
to the extent, and only to the extent, applicable to each Guarantor, Section 548
of the Bankruptcy Code of the United States of America and any comparable
provisions of the law of any other jurisdiction, any capital preservation law of
any jurisdiction and any other law of any jurisdiction that at such time limits
the enforceability of the obligations of such Guarantor hereunder).
FORM OF GUARANTY AGREEMENT
Exhibit 4.7-10
<PAGE> 74
2.21 Confirmation of Guaranty.
Promptly following the request of any holder of Notes in connection with
any issuance of additional Notes pursuant to the terms of the Note Purchase
Agreement, each Guarantor agrees to confirm in writing that the Unconditional
Guaranty hereunder extends to the obligations of the Company evidenced by such
newly issued Notes, and that such Notes are Guarantied Obligations hereunder.
3. INTERPRETATION OF THIS GUARANTY
3.1 Terms Defined.
For purposes of this Guaranty, the following terms have the meanings
specified below or provided for in the Section of this Guaranty referred to
immediately following such term (such definitions to be equally applicable to
both the singular and plural forms of the terms defined). Capitalized terms used
herein and not otherwise defined herein have the meaning specified in the Note
Purchase Agreement.
Affiliate Obligation -- Section 2.10.
Company -- Section 1(a).
Guarantied Obligations -- Section 2.1.
Guarantors -- has the meaning assigned to such term in the introductory
paragraph hereof.
Note Purchase Agreement -- Section 1(a).
Noteholder -- Section 2.1.
Notes -- Section 1(a).
Person -- means an individual, partnership, corporation, limited liability
company, association, trust, unincorporated organization, or a government or
agency or political subdivision thereof.
Purchasers -- Section 1(a).
Series A Notes -- Section 1(a).
Unconditional Guaranty -- Section 2.1.
FORM OF GUARANTY AGREEMENT
Exhibit 4.7-11
<PAGE> 75
3.2 Section Headings and Construction.
(a) Section Headings, etc. The titles of the Sections 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 Guaranty 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.
4. WARRANTIES AND REPRESENTATIONS
Guarantors warrant and represent, as of the date hereof, that each of the
warranties and representations made by the Company in Section 5 of the Note
Purchase Agreement with respect to each Guarantor are true with respect to each
Guarantor on the date hereof.
5. GENERAL COVENANTS
Each Guarantor covenants and agrees that on and after the date hereof and
so long as any of the Guarantied Obligations shall be outstanding:
5.1 Undertakings in the Note Purchase Agreement.
Each Guarantor will comply with each of the undertakings of the Company in
the Note Purchase Agreement in respect of which the Company undertakes to cause
such Guarantor to comply with such undertakings, as if such undertakings (as
they apply to the Guarantors) were set forth at length herein as the
undertakings of such Guarantor.
5.2 Payment of Notes and Maintenance of Offices.
Each Guarantor will punctually pay, or cause to be paid, all of the
Guarantied Obligations when due and all other payment obligations required of it
hereunder and will maintain an office at its address as set forth pursuant to
Section 6.3 where notices, presentations and demands in respect of this Guaranty
may be made upon it. Such office will be maintained at such address until such
time as such Guarantor shall notify the Noteholders of any change of location of
such office.
FORM OF GUARANTY AGREEMENT
Exhibit 4.7-12
<PAGE> 76
5.3 Further Assurances.
Each Guarantor will cooperate with the Noteholders and execute such
further instruments and documents as the Noteholders shall reasonably request to
carry out, to the reasonable satisfaction of the Noteholders, the transactions
contemplated by the Note Purchase Agreement, the Notes and this Guaranty.
6. MISCELLANEOUS
6.1 Successors and Assigns.
(a) Whenever any Guarantor or any of the parties to the Note
Purchase Agreement is referred to, such reference shall be deemed to
include the successors and assigns of such party, and all the covenants,
promises and agreements contained in this Guaranty by or on behalf of such
Guarantor shall bind the successors and assigns of such Guarantor and
shall inure to the benefit of each of the Noteholders from time to time
whether so expressed or not and whether or not an assignment of the rights
hereunder shall have been delivered in connection with any assignment or
other transfer of Notes.
(b) Each Guarantor agrees to take such action as may be reasonably
requested by any Noteholder in connection with the purchase by such
Noteholder or the transfer of the Notes of such Noteholder in accordance
with the requirements of the Note Purchase Agreement in connection with
providing an executed copy of this Guaranty to the new Noteholder or
Noteholders of such Notes; provided, however, that no additional
obligations of such Guarantor shall thereby be created (beyond what is
provided by this Guaranty).
FORM OF GUARANTY AGREEMENT
Exhibit 4.7-13
<PAGE> 77
6.2 Partial Invalidity.
The unenforceability or invalidity of any provision or provisions hereof
shall not render any other provision or provisions contained herein
unenforceable or invalid.
6.3 Communications.
All communications hereunder shall be in writing, shall be delivered in
the manner required by the Note Purchase Agreement, and shall be addressed, if
to any Guarantor, at the applicable address set forth on Annex 1 hereto, and if
to any of the Noteholders:
(a) if such Noteholder is a Purchaser, at the address for such
Noteholder set forth on Schedule A to the Note Purchase Agreement, and
further including any parties referred to on such Schedule A which are
required to receive notices in addition to such Noteholder, and
(b) if such Noteholder is not a Purchaser, at the address for such
Noteholder set forth in the register for the registration and transfer of
Notes maintained pursuant to Section 13.1 of the Note Purchase Agreement,
or to any such party at such other address as such party may designate by notice
duly given in accordance with this Section 6.3. Notices shall be deemed given
only when actually received.
6.4 Governing Law.
THIS GUARANTY SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK.
6.5 Effective Date.
This Guaranty shall be effective as of the date first written above.
6.6 Benefits of Guaranty Restricted to Noteholders.
Nothing express or implied in this Guaranty is intended or shall be
construed to give to any Person other than each Guarantor and the Noteholders
any legal or equitable right, remedy or claim under or in respect hereof or any
covenant, condition or provision therein or herein contained; and all such
covenants, conditions and provisions are and shall be held to be for the sole
and exclusive benefit of each Guarantor and the Noteholders.
FORM OF GUARANTY AGREEMENT
Exhibit 4.7-14
<PAGE> 78
6.7 Survival of Representations and Warranties.
All representations and warranties contained herein or made in writing by
each Guarantor in connection herewith shall survive the execution and delivery
hereof.
6.8 Expenses.
(a) Each Guarantor shall pay when billed the reasonable costs and
expenses (including reasonable attorneys' fees) incurred by the
Noteholders in connection with the consideration, negotiation, preparation
or execution of any amendments, waivers, consents, standstill agreements
and other similar agreements with respect hereto (whether or not any such
amendments, waivers, consents, standstill agreements or other similar
agreements are executed).
(b) At any time when any of the Company or the Guarantors and the
Noteholders are conducting restructuring or workout negotiations in
respect hereof, or a Default or Event of Default exists, each Guarantor
shall pay when billed the reasonable costs and expenses (including
reasonable attorneys' fees of one firm of attorneys and the reasonable
fees of one firm of professional advisors) incurred by the Noteholders in
connection with the assessment, analysis or enforcement of any rights or
remedies that are or may be available to the Noteholders.
(c) If each Guarantor shall fail to pay when due any principal of,
or interest on, or any other amount due in respect of any Note, each
Guarantor shall pay to each Noteholder, to the extent permitted by law,
such amounts as shall be sufficient to cover the costs and expenses,
including but not limited to reasonable attorneys' fees, incurred by such
Noteholder in collecting any sums due on the Notes.
6.9 Amendment.
This Guaranty may be amended only in a writing executed by each Guarantor
and each Noteholder.
6.10 Survival.
So long as the Guarantied Obligations and all payment obligations of each
Guarantor hereunder shall not have been fully and finally performed and
indefeasibly paid, the obligations of each Guarantor hereunder shall survive the
transfer and payment of any Note and the payment in full of all the Notes.
FORM OF GUARANTY AGREEMENT
Exhibit 4.7-15
<PAGE> 79
6.11 Entire Agreement.
This Guaranty constitutes the final written expression of all of the terms
hereof and is a complete and exclusive statement of those terms.
6.12 Duplicate Originals.
Two or more duplicate counterpart 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.
6.13 Waiver of Jury Trial; Consent to Jurisdiction; Etc.
(a) Waiver of Jury Trial. THE PARTIES HERETO VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
GUARANTY OR ANY OF THE DOCUMENTS, AGREEMENTS OR TRANSACTIONS CONTEMPLATED
HEREBY.
(b) Consent to Jurisdiction. ANY SUIT, ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO THIS GUARANTY, OR ANY OF THE DOCUMENTS, AGREEMENTS
OR TRANSACTIONS CONTEMPLATED HEREBY OR ANY ACTION OR PROCEEDING TO EXECUTE
OR OTHERWISE ENFORCE ANY JUDGMENT IN RESPECT OF ANY BREACH UNDER THIS
GUARANTY OR ANY DOCUMENT OR AGREEMENT CONTEMPLATED HEREBY MAY BE BROUGHT
BY SUCH PARTY IN ANY FEDERAL DISTRICT COURT LOCATED IN NEW YORK CITY, NEW
YORK, OR ANY NEW YORK STATE COURT LOCATED IN NEW YORK CITY, NEW YORK AS
SUCH PARTY MAY IN ITS SOLE DISCRETION ELECT, AND BY THE EXECUTION AND
DELIVERY OF THIS GUARANTY, THE PARTIES HERETO IRREVOCABLY AND
UNCONDITIONALLY SUBMIT TO THE NON-EXCLUSIVE IN PERSONAM JURISDICTION OF
EACH SUCH COURT, AND EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES AND
AGREES NOT TO ASSERT IN ANY PROCEEDING BEFORE ANY TRIBUNAL, BY WAY OF
MOTION, AS A DEFENSE OR OTHERWISE, ANY CLAIM THAT IT IS NOT SUBJECT TO THE
IN PERSONAM JURISDICTION OF ANY SUCH COURT. IN ADDITION, EACH OF THE
PARTIES HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW,
ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE IN
ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY
OR ANY DOCUMENT, AGREEMENT OR TRANSACTION CONTEMPLATED HEREBY BROUGHT IN
ANY SUCH COURT, AND HEREBY IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH
SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN
AN INCONVENIENT FORUM.
FORM OF GUARANTY AGREEMENT
Exhibit 4.7-16
<PAGE> 80
(c) Service of Process. EACH PARTY HERETO IRREVOCABLY AGREES THAT
PROCESS PERSONALLY SERVED OR SERVED BY U.S. REGISTERED MAIL AT THE
ADDRESSES PROVIDED HEREIN FOR NOTICES SHALL CONSTITUTE, TO THE EXTENT
PERMITTED BY LAW, ADEQUATE SERVICE OF PROCESS IN ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY OR ANY DOCUMENT,
AGREEMENT OR TRANSACTION CONTEMPLATED HEREBY, OR ANY ACTION OR PROCEEDING
TO EXECUTE OR OTHERWISE ENFORCE ANY JUDGMENT IN RESPECT OF ANY BREACH
HEREUNDER OR UNDER ANY DOCUMENT OR AGREEMENT CONTEMPLATED HEREBY. RECEIPT
OF PROCESS SO SERVED SHALL BE CONCLUSIVELY PRESUMED AS EVIDENCED BY A
DELIVERY RECEIPT FURNISHED BY THE UNITED STATES POSTAL SERVICE OR ANY
COMMERCIAL DELIVERY SERVICE.
(d) Other Forums. NOTHING HEREIN SHALL IN ANY WAY BE DEEMED TO LIMIT
THE ABILITY OF ANY HOLDER OF NOTES TO SERVE ANY WRITS, PROCESS OR
SUMMONSES IN ANY MANNER PERMITTED BY APPLICABLE LAW OR TO OBTAIN
JURISDICTION OVER ANY GUARANTOR IN SUCH OTHER JURISDICTION, AND IN SUCH
OTHER MANNER, AS MAY BE PERMITTED BY APPLICABLE LAW.
[Remainder of page intentionally blank. Next page is signature page.]
FORM OF GUARANTY AGREEMENT
Exhibit 4.7-17
<PAGE> 81
IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be executed
on each Guarantor's behalf by a duly authorized officer of each such Guarantor.
TIFFANY AND COMPANY
By:
----------------------------------------
Name:
Title:
TIFFANY & CO. INTERNATIONAL
By:
----------------------------------------
Name:
Title:
TIFFANY & CO. JAPAN INC.
By:
----------------------------------------
Name:
Title:
FORM OF GUARANTY AGREEMENT
Exhibit 4.7-18
<PAGE> 82
ANNEX 1
ADDRESSES OF GUARANTORS
c/o Tiffany & Co.
727 Fifth Avenue
New York, New York 10022
Attn: Chief Financial Officer
Fax: (212) 605-4465
FORM OF GUARANTY AGREEMENT
Annex 1-1
<PAGE> 1
Exhibit 10.127
Tiffany & Co.
Report on Form 10-K
Fiscal 1998
[Tiffany & Co. Letterhead]
March 30, 1998
Michael J. Kowalski
727 Fifth Avenue
New York, NY 10022
Re: Retention Agreement
Dear Mike:
Tiffany and Company and Tiffany & Co. (respectively, "Employer" and
"Parent,") wish to take steps to retain key management, it being recognized that
future discussions concerning a Change of Control or a decision to cooperate in
or effect a Change of Control could result in the departure or distraction of
key management at a time when Parent and Employer Board would require the clear
and focused attention of experienced management, unafflicted with concerns for
personal financial and job security. Accordingly, in order to induce you to
remain in the employ of the Employer, Parent and Employer have determined to
enter into this letter agreement (this "Agreement") which addresses the terms
and conditions of your employment in the event of a Change of Control.
This Agreement will provide you with certain payments and benefits should
you incur an Involuntary Termination after a Change of Control Date.
An "Involuntary Termination" means (i) your termination of employment by
Employer during the Term without Cause or (ii) your resignation of employment
with the Employer during the Term for Good Reason. The terms "Change of Control
Date," "Term," "Cause," "Good Reason" and other initially capitalized words and
phrases used in this letter agreement shall have the meanings ascribed to them
in Appendix I attached. With respect to your specific situation, you would also
have "Good Reason" to resign from employment with Employer if any of the
following occurs after a Change of Control Date:
<PAGE> 2
(A) at any time you do not hold the position of chief executive
officer of the Successor Entity or the Controlling Entity;
(B) at any time you are not a member of the board of directors (or
comparable governing authority) of the Successor Entity or the
Controlling Entity;
(C) at any time you do not report directly to the board of
directors of the Controlling Entity or the chief executive
officer of the Controlling Entity;
(D) at any time you do not have regular direct access to the board
of directors of the Controlling Entity and the chief executive
officer of the Controlling Entity; and
(E) any similar adverse change on or after the Change in Control
Date in your title, position or reporting responsibilities.
1. Term of Employment Under This Agreement. The Term of your employment
under this Agreement shall not commence unless and until a Change in Control
Date occurs and shall continue thereafter until the third anniversary of the
Change in Control Date.
2. Cash Payments in the Event of Involuntary Termination During the Term.
In the event of your Involuntary Termination during the Term you will be paid
the following amounts in cash by the Employer:
(a) your Earned Compensation previously unpaid;
(b) a severance payment equal to the sum of (i) three times your
Reference Salary and (ii) three times your Reference Bonus;
and
(c) a Supplementary Pension Payment designed to provide you with
the present cash value of the added benefits you would have
received under the Defined Benefit Plans had you continued in
your employment for a Measuring Period of three years; and
(d) a Gross-Up Payment to defray your Excise Tax liability if,
following a Change in Control Date, it is determined that any
Payment(s) made to you is (are) subject to the Excise Tax.
Payments under subsections (a) and (b) will be made within five (5) days of your
Date of Termination and payment under subsection (c) will be made within
forty-five (45) days of your date of termination. All calculations necessary to
compute the Supplementary Pension Benefit Payment shall be done by the
Accounting Firm at Employer's expense. Appendix II sets forth the applicable
procedures relating to the Gross-Up Payment.
<PAGE> 3
3. Benefit Continuation in the Event of Involuntary Termination During the
Term. In the event of your Involuntary Termination during the Term Employer
shall maintain all Benefit Plans in full force and effect, for the continued
benefit of you and your eligible dependents for a maximum Benefits Continuation
Period of three years. Employer's obligation under this Section 3 is subject to
the following: (i) that your and your eligible dependent's continued
participation is possible under the general terms and provisions of such Benefit
Plans (and under the terms of any applicable funding media) and (ii) that you
continue to pay an amount equal to your regular contribution under such plans
for such participation. You and your eligible dependents continued participation
in such plans shall also be subject to the additional conditions stated in
Appendix III.
4. Notice of Termination. Any termination of your employment by Employer
or by you during the Term shall be communicated by a Notice of Termination to
the other parties hereto.
5. No Mitigation or Offset; Employer's Opportunity to Correct. You shall
not be required to mitigate the amount of any payment provided for in this
Agreement by seeking other employment or otherwise, nor shall the amount of any
payment or benefit provided for in this Agreement be reduced by any compensation
earned by you as the result of employment by another employer or by pension
benefits paid by Employer or Employer's plans after the Date of Termination or
otherwise, except as provided in the definition of "Benefit Continuation
Period." No event shall constitute Good Reason for your resignation unless your
claim to that effect is communicated by you to Employer in writing and is not
corrected by Employer or Parent in a manner which is reasonably satisfactory to
you (including full retroactive correction with respect to any monetary matter)
within ten (10) days of the Employer's receipt of such written notice from you.
6. Legal Fees and Expenses Necessary to Enforce Agreement. The Employer
shall pay or reimburse you on an after-tax basis for all costs and expenses
(including, without limitation, court costs and reasonable legal fees and
expenses which reflect common practice with respect to the matters involved)
incurred by you as a result of any claim, action or proceeding (i) contesting,
disputing or enforcing any right, benefits or obligations under this Agreement
or which you reasonably claim to have or to be owed to you by Employer or Parent
or (ii) arising out of or challenging the validity, advisability or
enforceability of this Agreement or any provision hereof; provided, however,
that the amount of the payments and reimbursements under this Section 5 shall
not exceed $100,000.
7. Employment During the Term. During the Term you shall be employed by
Employer on the terms and conditions on which you were employed immediately
prior to the Change in Control Date without any Substantial Change.
<PAGE> 4
8. Successors; Binding Agreement; Respective Responsibilities of Parent
and Employer.
(a) Assumption by Successor. Parent and Employer will each require
their respective successors (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business or
assets of either, to expressly assume and to agree to perform this Agreement for
your benefit in the same manner and to the same extent that the Parent or the
Employer, as the case may be, would be required to perform it if no such
succession had taken place; provided, however, that no such assumption shall
relieve either the Parent or the Employer of its obligations hereunder, and no
failure to expressly assume and agree to perform this Agreement shall relieve
any successor of its obligations under this Agreement by operation of law.
(b) Enforceability; Beneficiaries. This Agreement shall be binding
upon, inure to the benefit of and be enforceable by you (and your personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees) and the Parent and Employer and any
Person(s) which succeeds to substantially all of the business or assets of the
Parent or Employer, whether by means of merger, consolidation, acquisition of
all or substantially all of the assets of the Parent or Employer or otherwise,
including, without limitation, as a result of a Change in Control or by
operation of law.
(c) Joint and Several Liability. Parent shall be jointly and
severally liable with Employer for all Employer's obligations hereunder and
Employer shall be jointly and severally liable with Parent for all Parent's
obligations hereunder.
9. Notices. For the purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when hand-delivered or when mailed by United
States registered mail, return receipt requested, postage prepaid, addressed, if
to Parent or Employer, to the Boards of Directors, Tiffany & Co. and Tiffany and
Company, 727 Fifth Avenue, New York, NY 10022, Attn. Legal Department, or, if to
you, to you at the address set forth on the first page of this Agreement, or to
such other address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be effective
only upon receipt.
10. Miscellaneous.
(a) Amendments, Waivers, Etc. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing, No waiver by either party hereto any time of any breach by
the other party hereto of, or compliance with, any condition or provision of
this Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provision or conditions at the same or at any later or
subsequent time. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter here have been made by either party
which are not expressly set forth in this Agreement
<PAGE> 5
and this Agreement shall supersede all prior agreements, negotiations,
correspondence, undertakings and communications of the parties, oral or written,
with respect to the subject matter hereof.
(b) Validity. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
(c) Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
(d) No Contract of Employment. Nothing in this Agreement shall be
construed as giving you any right to be retained in the employ of Employer or
Parent nor shall it affect the terms and conditions of your employment with
Employer prior to the commencement of the Term hereof. Failing the occurrence of
a Change in Control Date your employment shall continue to be "at will," meaning
that either you or Employer may terminate your employment with or without cause,
for any reason or no reason, with or without notice.
(e) Withholding. Amounts paid to you hereunder shall be subject to
all applicable federal, state and local withholding taxes.
(f) Source of Payments. All payments provided under this Agreement,
other than payments made pursuant to a Benefit Plan which provides otherwise,
shall be paid in cash from the general funds of Employer or Parent, and no
special or separate fund shall be established, and no other segregation of
assets made, to assure payment. You will have no right, title or interest
whatsoever in or to any investments which Employer or Parent may make to aid it
in meeting its obligations hereunder. To the extent that any person acquires a
right to receive payments from Employer or Parent hereunder, such right shall be
no greater than the right of an unsecured creditor of Parent or Employer, as the
case may be.
(g) Headings. The headings contained in this Agreement are intended
solely for convenience of reference and shall not affect the rights of the
parties to this Agreement.
(h) Governing Law. The validity, interpretation, construction, and
performance of this Agreement shall be governed by the laws of the State of New
York applicable to contracts entered into and to be performed in this State.
<PAGE> 6
If this letter set forth our agreement on the subject matter hereof,
kindly sign and return to Employer the enclosed copy of this letter which will
then constitute the agreement among us on this subject.
Sincerely,
TIFFANY & CO. ("Parent")
By:
-------------------------------
Name: William R. Chaney
Title: Chairman
TIFFANY AND COMPANY ("Employer")
By:
-------------------------------
Name: William R. Chaney
Title: Chairman
Agreed to as of this _____ day of _______ 1999
- ------------------------------------
Michael J. Kowalski
Attachment: Appendices I through III
<PAGE> 7
[Tiffany & Co. Letterhead]
March 30, 1999
James E. Quinn
727 Fifth Avenue
New York, NY 10022
Re: Retention Agreement
Dear Jim:
Tiffany and Company and Tiffany & Co. (respectively, "Employer" and
"Parent,") wish to take steps to retain key management, it being recognized that
future discussions concerning a Change of Control or a decision to cooperate in
or effect a Change of Control could result in the departure or distraction of
key management at a time when Parent and Employer Board would require the clear
and focused attention of experienced management, unafflicted with concerns for
personal financial and job security. Accordingly, in order to induce you to
remain in the employ of the Employer, Parent and Employer have determined to
enter into this letter agreement (this "Agreement") which addresses the terms
and conditions of your employment in the event of a Change of Control.
This Agreement will provide you with certain payments and benefits should
you incur an Involuntary Termination after a Change of Control Date.
An "Involuntary Termination" means (i) your termination of employment by
Employer during the Term without Cause or (ii) your resignation of employment
with the Employer during the Term for Good Reason. The terms "Change of Control
Date," "Term," "Cause," "Good Reason" and other initially capitalized words and
phrases used in this letter agreement shall have the meanings ascribed to them
in Appendix I attached. With respect to your specific situation, you would also
have "Good Reason" to resign
<PAGE> 8
from employment with Employer if any of the following occurs after a Change of
Control Date:
(A) at any time you are not the executive officer responsible for
worldwide sales of the Successor Entity or the Controlling
Entity;
(B) at any time you are not a member of the board of directors (or
comparable governing authority) of the Successor Entity or the
Controlling Entity;
(C) at any time you do not report directly to the board of
directors of the Controlling Entity or the chief executive
officer of the Controlling Entity;
(D) at any time you do not have regular direct access to the board
of directors of the Controlling Entity and the chief executive
officer of the Controlling Entity; and
(E) any similar adverse change on or after the Change in Control
Date in your title, position or reporting responsibilities.
1. Term of Employment Under This Agreement. The Term of your employment
under this Agreement shall not commence unless and until a Change in Control
Date occurs and shall continue thereafter until the third anniversary of the
Change in Control Date.
2. Cash Payments in the Event of Involuntary Termination During the Term.
In the event of your Involuntary Termination during the Term you will be paid
the following amounts in cash by the Employer:
(a) your Earned Compensation previously unpaid;
(b) a severance payment equal to the sum of (i) three times your
Reference Salary and (ii) three times your Reference Bonus;
and
(c) a Supplementary Pension Payment designed to provide you with
the present cash value of the added benefits you would have
received under the Defined Benefit Plans had you continued in
your employment for a Measuring Period of three years; and
(d) a Gross-Up Payment to defray your Excise Tax liability if,
following a Change in Control Date, it is determined that any
Payment(s) made to you is (are) subject to the Excise Tax.
Payments under subsections (a) and (b) will be made within five (5) days of your
Date of Termination and payment under subsection (c) will be made within
forty-five (45) days of your date of termination. All calculations necessary to
compute the Supplementary
<PAGE> 9
Pension Benefit Payment shall be done by the Accounting Firm at Employer's
expense. Appendix II sets forth the applicable procedures relating to the
Gross-Up Payment.
3. Benefit Continuation in the Event of Involuntary Termination During the
Term. In the event of your Involuntary Termination during the Term Employer
shall maintain all Benefit Plans in full force and effect, for the continued
benefit of you and your eligible dependents for a maximum Benefits Continuation
Period of three years. Employer's obligation under this Section 3 is subject to
the following: (i) that your and your eligible dependent's continued
participation is possible under the general terms and provisions of such Benefit
Plans (and under the terms of any applicable funding media) and (ii) that you
continue to pay an amount equal to your regular contribution under such plans
for such participation. You and your eligible dependents continued participation
in such plans shall also be subject to the additional conditions stated in
Appendix III.
4. Notice of Termination. Any termination of your employment by Employer
or by you during the Term shall be communicated by a Notice of Termination to
the other parties hereto.
5. No Mitigation or Offset; Employer's Opportunity to Correct. You shall
not be required to mitigate the amount of any payment provided for in this
Agreement by seeking other employment or otherwise, nor shall the amount of any
payment or benefit provided for in this Agreement be reduced by any compensation
earned by you as the result of employment by another employer or by pension
benefits paid by Employer or Employer's plans after the Date of Termination or
otherwise, except as provided in the definition of "Benefit Continuation
Period." No event shall constitute Good Reason for your resignation unless your
claim to that effect is communicated by you to Employer in writing and is not
corrected by Employer or Parent in a manner which is reasonably satisfactory to
you (including full retroactive correction with respect to any monetary matter)
within ten (10) days of the Employer's receipt of such written notice from you.
6. Legal Fees and Expenses Necessary to Enforce Agreement. The Employer
shall pay or reimburse you on an after-tax basis for all costs and expenses
(including, without limitation, court costs and reasonable legal fees and
expenses which reflect common practice with respect to the matters involved)
incurred by you as a result of any claim, action or proceeding (i) contesting,
disputing or enforcing any right, benefits or obligations under this Agreement
or which you reasonably claim to have or to be owed to you by Employer or Parent
or (ii) arising out of or challenging the validity, advisability or
enforceability of this Agreement or any provision hereof; provided, however,
that the amount of the payments and reimbursements under this Section 5 shall
not exceed $100,000.
7. Employment During the Term. During the Term you shall be employed by
Employer on the terms and conditions on which you were employed immediately
prior to the Change in Control Date without any Substantial Change.
<PAGE> 10
8. Successors; Binding Agreement; Respective Responsibilities of Parent
and Employer.
(a) Assumption by Successor. Parent and Employer will each require
their respective successors (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business or
assets of either, to expressly assume and to agree to perform this Agreement for
your benefit in the same manner and to the same extent that the Parent or the
Employer, as the case may be, would be required to perform it if no such
succession had taken place; provided, however, that no such assumption shall
relieve either the Parent or the Employer of its obligations hereunder, and no
failure to expressly assume and agree to perform this Agreement shall relieve
any successor of its obligations under this Agreement by operation of law.
(b) Enforceability; Beneficiaries. This Agreement shall be binding
upon, inure to the benefit of and be enforceable by you (and your personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees) and the Parent and Employer and any
Person(s) which succeeds to substantially all of the business or assets of the
Parent or Employer, whether by means of merger, consolidation, acquisition of
all or substantially all of the assets of the Parent or Employer or otherwise,
including, without limitation, as a result of a Change in Control or by
operation of law.
(c) Joint and Several Liability. Parent shall be jointly and
severally liable with Employer for all Employer's obligations hereunder and
Employer shall be jointly and severally liable with Parent for all Parent's
obligations hereunder.
9. Notices. For the purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when hand-delivered or when mailed by United
States registered mail, return receipt requested, postage prepaid, addressed, if
to Parent or Employer, to the Boards of Directors, Tiffany & Co. and Tiffany and
Company, 727 Fifth Avenue, New York, NY 10022, Attn. Legal Department, or, if to
you, to you at the address set forth on the first page of this Agreement, or to
such other address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be effective
only upon receipt.
10. Miscellaneous.
(a) Amendments, Waivers, Etc. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing, No waiver by either party hereto any time of any breach by
the other party hereto of, or compliance with, any condition or provision of
this Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provision or conditions at the same or at any later or
subsequent time. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter here have been made by either party
which are not expressly set forth in this Agreement
<PAGE> 11
and this Agreement shall supersede all prior agreements, negotiations,
correspondence, undertakings and communications of the parties, oral or written,
with respect to the subject matter hereof.
(b) Validity. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
(c) Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
(d) No Contract of Employment. Nothing in this Agreement shall be
construed as giving you any right to be retained in the employ of Employer or
Parent nor shall it affect the terms and conditions of your employment with
Employer prior to the commencement of the Term hereof. Failing the occurrence of
a Change in Control Date your employment shall continue to be "at will," meaning
that either you or Employer may terminate your employment with or without cause,
for any reason or no reason, with or without notice.
(e) Withholding. Amounts paid to you hereunder shall be subject to
all applicable federal, state and local withholding taxes.
(f) Source of Payments. All payments provided under this Agreement,
other than payments made pursuant to a Benefit Plan which provides otherwise,
shall be paid in cash from the general funds of Employer or Parent, and no
special or separate fund shall be established, and no other segregation of
assets made, to assure payment. You will have no right, title or interest
whatsoever in or to any investments which Employer or Parent may make to aid it
in meeting its obligations hereunder. To the extent that any person acquires a
right to receive payments from Employer or Parent hereunder, such right shall be
no greater than the right of an unsecured creditor of Parent or Employer, as the
case may be.
(g) Headings. The headings contained in this Agreement are intended
solely for convenience of reference and shall not affect the rights of the
parties to this Agreement.
(h) Governing Law. The validity, interpretation, construction, and
performance of this Agreement shall be governed by the laws of the State of New
York applicable to contracts entered into and to be performed in this State.
<PAGE> 12
If this letter set forth our agreement on the subject matter hereof,
kindly sign and return to Employer the enclosed copy of this letter which will
then constitute the agreement among us on this subject.
Sincerely,
TIFFANY & CO. ("Parent")
By:
-------------------------------
Name: William R. Chaney
Title: Chairman
TIFFANY AND COMPANY ("Employer")
By:
-------------------------------
Name: William R. Chaney
Title: Chairman
Agreed to as of this _____ day of _______ 1999
- ------------------------------------
James E. Quinn
Attachment: Appendices I through III
<PAGE> 13
[Tiffany & Co. Letterhead]
March 30, 1999
James N. Fernandez
727 Fifth Avenue
New York, NY 10022
Re: Retention Agreement
Dear Jim:
Tiffany and Company and Tiffany & Co. (respectively, "Employer" and
"Parent,") wish to take steps to retain key management, it being recognized that
future discussions concerning a Change of Control or a decision to cooperate in
or effect a Change of Control could result in the departure or distraction of
key management at a time when Parent and Employer Board would require the clear
and focused attention of experienced management, unafflicted with concerns for
personal financial and job security. Accordingly, in order to induce you to
remain in the employ of the Employer, Parent and Employer have determined to
enter into this letter agreement (this "Agreement") which addresses the terms
and conditions of your employment in the event of a Change of Control.
This Agreement will provide you with certain payments and benefits should
you incur an Involuntary Termination after a Change of Control Date.
An "Involuntary Termination" means (i) your termination of employment by
Employer during the Term without Cause or (ii) your resignation of employment
with the Employer during the Term for Good Reason. The terms "Change of Control
Date," "Term," "Cause," "Good Reason" and other initially capitalized words and
phrases used in this letter agreement shall have the meanings ascribed to them
in Appendix I attached. With respect to your specific situation, you would also
have "Good Reason" to resign from employment with Employer if any of the
following occurs after a Change of Control Date:
<PAGE> 14
(A) at any time you are not the chief financial officer and
responsible for worldwide distribution operations of the
Successor Entity or the Controlling Entity;
(B) at any time you do not report directly to the board of
directors of the Successor Entity or the chief executive
officer of the Successor Entity;
(C) at any time you do not have regular direct access to the board
of directors of the Successor Entity and the chief executive
officer of the Successor Entity; and
(D) any similar adverse change on or after the Change in Control
Date in your title, position or reporting responsibilities.
1. Term of Employment Under This Agreement. The Term of your employment
under this Agreement shall not commence unless and until a Change in Control
Date occurs and shall continue thereafter until the second anniversary of the
Change in Control Date.
2. Cash Payments in the Event of Involuntary Termination During the Term.
In the event of your Involuntary Termination during the Term you will be paid
the following amounts in cash by the Employer:
(a) your Earned Compensation previously unpaid;
(b) a severance payment equal to the sum of (i) two times your
Reference Salary and (ii) two times your Reference Bonus; and
(c) a Supplementary Pension Payment designed to provide you with
the present cash value of the added benefits you would have
received under the Defined Benefit Plans had you continued in
your employment for a Measuring Period of two years; and
(d) a Gross-Up Payment to defray your Excise Tax liability if,
following a Change in Control Date, it is determined that any
Payment(s) made to you is (are) subject to the Excise Tax.
Payments under subsections (a) and (b) will be made within five (5) days of your
Date of Termination and payment under subsection (c) will be made within
forty-five (45) days of your date of termination. All calculations necessary to
compute the Supplementary Pension Benefit Payment shall be done by the
Accounting Firm at Employer's expense. Appendix II sets forth the applicable
procedures relating to the Gross-Up Payment.
<PAGE> 15
3. Benefit Continuation in the Event of Involuntary Termination During the
Term. In the event of your Involuntary Termination during the Term Employer
shall maintain all Benefit Plans in full force and effect, for the continued
benefit of you and your eligible dependents for a maximum Benefits Continuation
Period of two years. Employer's obligation under this Section 3 is subject to
the following: (i) that your and your eligible dependent's continued
participation is possible under the general terms and provisions of such Benefit
Plans (and under the terms of any applicable funding media) and (ii) that you
continue to pay an amount equal to your regular contribution under such plans
for such participation. You and your eligible dependents continued participation
in such plans shall also be subject to the additional conditions stated in
Appendix III.
4. Notice of Termination. Any termination of your employment by Employer
or by you during the Term shall be communicated by a Notice of Termination to
the other parties hereto.
5. No Mitigation or Offset; Employer's Opportunity to Correct. You shall
not be required to mitigate the amount of any payment provided for in this
Agreement by seeking other employment or otherwise, nor shall the amount of any
payment or benefit provided for in this Agreement be reduced by any compensation
earned by you as the result of employment by another employer or by pension
benefits paid by Employer or Employer's plans after the Date of Termination or
otherwise, except as provided in the definition of "Benefit Continuation
Period." No event shall constitute Good Reason for your resignation unless your
claim to that effect is communicated by you to Employer in writing and is not
corrected by Employer or Parent in a manner which is reasonably satisfactory to
you (including full retroactive correction with respect to any monetary matter)
within ten (10) days of the Employer's receipt of such written notice from you.
6. Legal Fees and Expenses Necessary to Enforce Agreement. The Employer
shall pay or reimburse you on an after-tax basis for all costs and expenses
(including, without limitation, court costs and reasonable legal fees and
expenses which reflect common practice with respect to the matters involved)
incurred by you as a result of any claim, action or proceeding (i) contesting,
disputing or enforcing any right, benefits or obligations under this Agreement
or which you reasonably claim to have or to be owed to you by Employer or Parent
or (ii) arising out of or challenging the validity, advisability or
enforceability of this Agreement or any provision hereof; provided, however,
that the amount of the payments and reimbursements under this Section 5 shall
not exceed $50,000.
7. Employment During the Term. During the Term you shall be employed by
Employer on the terms and conditions on which you were employed immediately
prior to the Change in Control Date without any Substantial Change.
<PAGE> 16
8. Successors; Binding Agreement; Respective Responsibilities of Parent
and Employer.
(a) Assumption by Successor. Parent and Employer will each require
their respective successors (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business or
assets of either, to expressly assume and to agree to perform this Agreement for
your benefit in the same manner and to the same extent that the Parent or the
Employer, as the case may be, would be required to perform it if no such
succession had taken place; provided, however, that no such assumption shall
relieve either the Parent or the Employer of its obligations hereunder, and no
failure to expressly assume and agree to perform this Agreement shall relieve
any successor of its obligations under this Agreement by operation of law.
(b) Enforceability; Beneficiaries. This Agreement shall be binding
upon, inure to the benefit of and be enforceable by you (and your personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees) and the Parent and Employer and any
Person(s) which succeeds to substantially all of the business or assets of the
Parent or Employer, whether by means of merger, consolidation, acquisition of
all or substantially all of the assets of the Parent or Employer or otherwise,
including, without limitation, as a result of a Change in Control or by
operation of law.
(c) Joint and Several Liability. Parent shall be jointly and
severally liable with Employer for all Employer's obligations hereunder and
Employer shall be jointly and severally liable with Parent for all Parent's
obligations hereunder.
9. Notices. For the purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when hand-delivered or when mailed by United
States registered mail, return receipt requested, postage prepaid, addressed, if
to Parent or Employer, to the Boards of Directors, Tiffany & Co. and Tiffany and
Company, 727 Fifth Avenue, New York, NY 10022, Attn. Legal Department, or, if to
you, to you at the address set forth on the first page of this Agreement, or to
such other address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be effective
only upon receipt.
10. Miscellaneous.
(a) Amendments, Waivers, Etc. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing, No waiver by either party hereto any time of any breach by
the other party hereto of, or compliance with, any condition or provision of
this Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provision or conditions at the same or at any later or
subsequent time. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter here have been made by either party
which are not expressly set forth in this Agreement
<PAGE> 17
and this Agreement shall supersede all prior agreements, negotiations,
correspondence, undertakings and communications of the parties, oral or written,
with respect to the subject matter hereof.
(b) Validity. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
(c) Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
(d) No Contract of Employment. Nothing in this Agreement shall be
construed as giving you any right to be retained in the employ of Employer or
Parent nor shall it affect the terms and conditions of your employment with
Employer prior to the commencement of the Term hereof. Failing the occurrence of
a Change in Control Date your employment shall continue to be "at will," meaning
that either you or Employer may terminate your employment with or without cause,
for any reason or no reason, with or without notice.
(e) Withholding. Amounts paid to you hereunder shall be subject to
all applicable federal, state and local withholding taxes.
(f) Source of Payments. All payments provided under this Agreement,
other than payments made pursuant to a Benefit Plan which provides otherwise,
shall be paid in cash from the general funds of Employer or Parent, and no
special or separate fund shall be established, and no other segregation of
assets made, to assure payment. You will have no right, title or interest
whatsoever in or to any investments which Employer or Parent may make to aid it
in meeting its obligations hereunder. To the extent that any person acquires a
right to receive payments from Employer or Parent hereunder, such right shall be
no greater than the right of an unsecured creditor of Parent or Employer, as the
case may be.
(g) Headings. The headings contained in this Agreement are intended
solely for convenience of reference and shall not affect the rights of the
parties to this Agreement.
(h) Governing Law. The validity, interpretation, construction, and
performance of this Agreement shall be governed by the laws of the State of New
York applicable to contracts entered into and to be performed in this State.
<PAGE> 18
If this letter set forth our agreement on the subject matter hereof,
kindly sign and return to Employer the enclosed copy of this letter which will
then constitute the agreement among us on this subject.
Sincerely,
TIFFANY & CO. ("Parent")
By:
-------------------------------
Name: William R. Chaney
Title: Chairman
TIFFANY AND COMPANY ("Employer")
By:_________________________________
Name: William R. Chaney
Title: Chairman
Agreed to as of this _____ day of _______ 1999
- ------------------------------------
James N. Fernandez
Attachment: Appendices I through III
<PAGE> 19
[Tiffany & Co. Letterhead]
March 30, 1999
Patrick B. Dorsey
727 Fifth Avenue
New York, NY 10022
Re: Retention Agreement
Dear Patrick:
Tiffany and Company and Tiffany & Co. (respectively, "Employer" and
"Parent,") wish to take steps to retain key management, it being recognized that
future discussions concerning a Change of Control or a decision to cooperate in
or effect a Change of Control could result in the departure or distraction of
key management at a time when Parent and Employer Board would require the clear
and focused attention of experienced management, unafflicted with concerns for
personal financial and job security. Accordingly, in order to induce you to
remain in the employ of the Employer, Parent and Employer have determined to
enter into this letter agreement (this "Agreement") which addresses the terms
and conditions of your employment in the event of a Change of Control.
This Agreement will provide you with certain payments and benefits should
you incur an Involuntary Termination after a Change of Control Date.
An "Involuntary Termination" means (i) your termination of employment by
Employer during the Term without Cause or (ii) your resignation of employment
with the Employer during the Term for Good Reason. The terms "Change of Control
Date," "Term," "Cause," "Good Reason" and other initially capitalized words and
phrases used in this letter agreement shall have the meanings ascribed to them
in Appendix I attached. With respect to your specific situation, you would also
have "Good Reason" to resign from employment with Employer if any of the
following occurs after a Change of Control Date:
<PAGE> 20
(A) at any time you are not the general counsel and corporate
secretary of the Successor Entity or the Controlling Entity;
(B) at any time you do not report directly to the board of
directors of the Successor Entity or the chief executive
officer of the Successor Entity;
(C) at any time you do not have regular direct access to the board
of directors of the Successor Entity and the chief executive
officer of the Successor Entity; and
(D) any similar adverse change on or after the Change in Control
Date in your title, position or reporting responsibilities.
1. Term of Employment Under This Agreement. The Term of your employment
under this Agreement shall not commence unless and until a Change in Control
Date occurs and shall continue thereafter until the second anniversary of the
Change in Control Date.
2. Cash Payments in the Event of Involuntary Termination During the Term.
In the event of your Involuntary Termination during the Term you will be paid
the following amounts in cash by the Employer:
(a) your Earned Compensation previously unpaid;
(b) a severance payment equal to the sum of (i) two times your
Reference Salary and (ii) two times your Reference Bonus; and
(c) a Supplementary Pension Payment designed to provide you with
the present cash value of the added benefits you would have
received under the Defined Benefit Plans had you continued in
your employment for a Measuring Period of two years; and
(d) a Gross-Up Payment to defray your Excise Tax liability if,
following a Change in Control Date, it is determined that any
Payment(s) made to you is (are) subject to the Excise Tax.
Payments under subsections (a) and (b) will be made within five (5) days of your
Date of Termination and payment under subsection (c) will be made within
forty-five (45) days of your date of termination. All calculations necessary to
compute the Supplementary Pension Benefit Payment shall be done by the
Accounting Firm at Employer's expense. Appendix II sets forth the applicable
procedures relating to the Gross-Up Payment.
<PAGE> 21
3. Benefit Continuation in the Event of Involuntary Termination During the
Term. In the event of your Involuntary Termination during the Term Employer
shall maintain all Benefit Plans in full force and effect, for the continued
benefit of you and your eligible dependents for a maximum Benefits Continuation
Period of two years. Employer's obligation under this Section 3 is subject to
the following: (i) that your and your eligible dependent's continued
participation is possible under the general terms and provisions of such Benefit
Plans (and under the terms of any applicable funding media) and (ii) that you
continue to pay an amount equal to your regular contribution under such plans
for such participation. You and your eligible dependents continued participation
in such plans shall also be subject to the additional conditions stated in
Appendix III.
4. Notice of Termination. Any termination of your employment by Employer
or by you during the Term shall be communicated by a Notice of Termination to
the other parties hereto.
5. No Mitigation or Offset; Employer's Opportunity to Correct. You shall
not be required to mitigate the amount of any payment provided for in this
Agreement by seeking other employment or otherwise, nor shall the amount of any
payment or benefit provided for in this Agreement be reduced by any compensation
earned by you as the result of employment by another employer or by pension
benefits paid by Employer or Employer's plans after the Date of Termination or
otherwise, except as provided in the definition of "Benefit Continuation
Period." No event shall constitute Good Reason for your resignation unless your
claim to that effect is communicated by you to Employer in writing and is not
corrected by Employer or Parent in a manner which is reasonably satisfactory to
you (including full retroactive correction with respect to any monetary matter)
within ten (10) days of the Employer's receipt of such written notice from you.
6. Legal Fees and Expenses Necessary to Enforce Agreement. The Employer
shall pay or reimburse you on an after-tax basis for all costs and expenses
(including, without limitation, court costs and reasonable legal fees and
expenses which reflect common practice with respect to the matters involved)
incurred by you as a result of any claim, action or proceeding (i) contesting,
disputing or enforcing any right, benefits or obligations under this Agreement
or which you reasonably claim to have or to be owed to you by Employer or Parent
or (ii) arising out of or challenging the validity, advisability or
enforceability of this Agreement or any provision hereof; provided, however,
that the amount of the payments and reimbursements under this Section 5 shall
not exceed $50,000.
7. Employment During the Term. During the Term you shall be employed by
Employer on the terms and conditions on which you were employed immediately
prior to the Change in Control Date without any Substantial Change.
<PAGE> 22
8. Successors; Binding Agreement; Respective Responsibilities of Parent
and Employer.
(a) Assumption by Successor. Parent and Employer will each require
their respective successors (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business or
assets of either, to expressly assume and to agree to perform this Agreement for
your benefit in the same manner and to the same extent that the Parent or the
Employer, as the case may be, would be required to perform it if no such
succession had taken place; provided, however, that no such assumption shall
relieve either the Parent or the Employer of its obligations hereunder, and no
failure to expressly assume and agree to perform this Agreement shall relieve
any successor of its obligations under this Agreement by operation of law.
(b) Enforceability; Beneficiaries. This Agreement shall be binding
upon, inure to the benefit of and be enforceable by you (and your personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees) and the Parent and Employer and any
Person(s) which succeeds to substantially all of the business or assets of the
Parent or Employer, whether by means of merger, consolidation, acquisition of
all or substantially all of the assets of the Parent or Employer or otherwise,
including, without limitation, as a result of a Change in Control or by
operation of law.
(c) Joint and Several Liability. Parent shall be jointly and
severally liable with Employer for all Employer's obligations hereunder and
Employer shall be jointly and severally liable with Parent for all Parent's
obligations hereunder.
9. Notices. For the purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when hand-delivered or when mailed by United
States registered mail, return receipt requested, postage prepaid, addressed, if
to Parent or Employer, to the Boards of Directors, Tiffany & Co. and Tiffany and
Company, 727 Fifth Avenue, New York, NY 10022, Attn. Legal Department, or, if to
you, to you at the address set forth on the first page of this Agreement, or to
such other address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be effective
only upon receipt.
10. Miscellaneous.
(a) Amendments, Waivers, Etc. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing, No waiver by either party hereto any time of any breach by
the other party hereto of, or compliance with, any condition or provision of
this Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provision or conditions at the same or at any later or
subsequent time. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter here have been made by either party
which are not expressly set forth in this Agreement
<PAGE> 23
and this Agreement shall supersede all prior agreements, negotiations,
correspondence, undertakings and communications of the parties, oral or written,
with respect to the subject matter hereof.
(b) Validity. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
(c) Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
(d) No Contract of Employment. Nothing in this Agreement shall be
construed as giving you any right to be retained in the employ of Employer or
Parent nor shall it affect the terms and conditions of your employment with
Employer prior to the commencement of the Term hereof. Failing the occurrence of
a Change in Control Date your employment shall continue to be "at will," meaning
that either you or Employer may terminate your employment with or without cause,
for any reason or no reason, with or without notice.
(e) Withholding. Amounts paid to you hereunder shall be subject to
all applicable federal, state and local withholding taxes.
(f) Source of Payments. All payments provided under this Agreement,
other than payments made pursuant to a Benefit Plan which provides otherwise,
shall be paid in cash from the general funds of Employer or Parent, and no
special or separate fund shall be established, and no other segregation of
assets made, to assure payment. You will have no right, title or interest
whatsoever in or to any investments which Employer or Parent may make to aid it
in meeting its obligations hereunder. To the extent that any person acquires a
right to receive payments from Employer or Parent hereunder, such right shall be
no greater than the right of an unsecured creditor of Parent or Employer, as the
case may be.
(g) Headings. The headings contained in this Agreement are intended
solely for convenience of reference and shall not affect the rights of the
parties to this Agreement.
(h) Governing Law. The validity, interpretation, construction, and
performance of this Agreement shall be governed by the laws of the State of New
York applicable to contracts entered into and to be performed in this State.
<PAGE> 24
If this letter set forth our agreement on the subject matter hereof,
kindly sign and return to Employer the enclosed copy of this letter which will
then constitute the agreement among us on this subject.
Sincerely,
TIFFANY & CO. ("Parent")
By:
-------------------------------
Name: William R. Chaney
Title: Chairman
TIFFANY AND COMPANY ("Employer")
By:_________________________________
Name: William R. Chaney
Title: Chairman
Agreed to as of this _____ day of _______ 1999
- ------------------------------------
Patrick B. Dorsey
Attachment: Appendices I through III
<PAGE> 25
Appendix I -- Definitions
For purposes of the Agreement, the following initially capitalized words shall
have the meanings set forth below:
"Accounting Firm" shall mean PricewaterhouseCoopers LLP or, if such firm
is unable or unwilling to perform such calculations or provide such opinions as
are required under this Agreement, such other nationally recognized public
accounting firm as shall be designated by agreement of you and the Employer, or
failing such Agreement, as designated by PricewaterhouseCoopers LLP, provided,
however, that if PricewaterhouseCoopers LLP, or any firm designated by
PricewaterhouseCoopers LLP, is serving as accountant or auditor for the Person
or group effecting the Change of Control (other than for Parent or Employer),
you may appoint another nationally recognized public accounting firm as
Accounting Firm hereunder.
"Affiliate" shall mean any Person that controls, is controlled by or is
under common control with, any other Person, directly or indirectly.
"Benefit Continuation Period" means the period beginning on your Date of
Termination and ending following the period of years stated in Section 3,
provided that such period shall earlier terminate on the commencement date of
equivalent benefits from your new employer or your attainment of age sixty-five
(65), whichever first occurs.
"Benefit Plans" mean all insured and self-insured employee welfare benefit
plans in which you were entitled to participate immediately prior to your Date
of Termination.
"Cause" shall mean a termination of your employment during the Term which
is the result of :
(i) your conviction or plea of nolo contendere to a felony
involving financial impropriety or a felony which would tend
to subject Employer or any of its Affiliates to public
criticism or materially interfere with your continued service
to Employer;
(ii) your willful disclosure of material trade secrets or other
material confidential information related to the business of
Employer or any of its Affiliates, which disclosure actually
results in substantive harm to such business or puts such
business at an actual competitive disadvantage;
(iii) your willful failure or refusal to perform substantially all
such proper and achievable directives issued by your superior
(other than any such failure resulting from your incapacity
due to physical or mental illness, any such actual or
anticipated failure resulting from a resignation by you for
Good Reason, or any such refusal made by you in good faith
because you believe such directives to be illegal, unethical
or immoral) after a written demand for substantial performance
is delivered to you on behalf of Employer, which demand
specifically identifies the manner in which you have not
substantially performed your duties, and which performance is
not substantially corrected by you within ten (10) days of
receipt of such demand;
(iv) your gross negligence in the performance of your duties and
responsibilities materially injurious to the Employer;
(v) your willful breach of any material obligation that you have
to Parent or Employer under any written agreement that you
have with either Parent or Employer;
I-1
<PAGE> 26
(vi) your fraud or dishonesty with regard to Employer or any of
its Affiliates;
(vii) your death; or
(viii) your Disability.
For purposes of the previous sentence, no act or failure to act on your part
shall be deemed "willful" unless done, or omitted to be done, by you in bad
faith toward, or without reasonable belief that your action or omission was in
the best interests of, Parent, Employer or an Affiliate of Parent or Employer.
Notwithstanding the foregoing, you shall not be deemed to have been terminated
for Cause with respect to items (i) through (vi) or item (viii) unless and until
there shall have been delivered to you a copy of a resolution duly adopted by
the affirmative vote of not less than three-fourths (3/4th) of the entire
membership of the Employer Board at a meeting called and held for such purpose
(after reasonable notice to you and an opportunity for you, together with your
counsel, to be heard before such Board), finding that, in the good faith opinion
of such Board, Cause exists as set forth in items (i), (ii), (iii), (iv), (v),
(vi) or (viii) above.
"Change in Control" shall mean a change in control of Parent of a nature
that would be required to be reported in response to Item 6(e) of Schedule 14A
of Regulation 14A promulgated under the Exchange Act, whether or not Parent is
then subject to such reporting requirement; provided, however, that, anything in
this Agreement to the contrary notwithstanding, a Change in Control shall be
deemed to have occurred if:
(i) any Person, or any syndicate or group deemed to be a person
under Section 14(d)(2) of the Exchange Act, excluding Parent
or any of its Affiliates, a trustee or any fiduciary holding
securities under an employee benefit plan of Parent or any of
its Affiliates, an underwriter temporarily holding securities
pursuant to an offering of such securities or a corporation
owned, directly or indirectly by stockholders of Parent in
substantially the same proportion as their ownership of
Parent, is or becomes the "beneficial owner" (as defined in
Rule 13d-3 of the General Rules and Regulations under the
Exchange Act), directly or indirectly, of securities of Parent
representing Thirty-five percent (35%) or more of the combined
voting power of Parent's then outstanding securities entitled
to vote in the election of directors of Parent;
(ii) ten (10) days following the "Shares Acquisition Date" if any
Person has in fact become and then remains an "Acquiring
Person" under the Rights Plan;
(iii) if the Parent Board should resolve to redeem the "Rights"
under the Rights Plan in response to a proposal by any Person
to acquire, directly or indirectly, securities of Parent
representing Fifteen percent (15%) or more of the combined
voting power of Parent's then outstanding securities entitled
to vote in the election of directors of Parent;
(iv) if the Incumbent Directors cease to constitute a majority of
the Parent Board; provided, however, that no person shall be
deemed an Incumbent Director if he or she was appointed or
elected to the Parent Board after having been designated to
serve on the Parent Board by a Person who has entered into an
agreement with Parent to effect a transaction described in
clauses (i), (iii), (v), (vi), (vii), (viii) or (ix) of this
definition;
(v) there occurs a reorganization, merger, consolidation or other
corporate transaction involving Parent, in each case with
respect to which the stockholders of Parent immediately prior
to such transaction do not, immediately after such
transaction, own more than Fifty percent (50%) of the combined
voting power
I-2
<PAGE> 27
of the Parent or other corporation resulting from such
transaction, as the case may be;
(vi) all or substantially all of the assets of Parent are sold,
liquidated or distributed, except to an Affiliate of Parent;
(vii) all or substantially all of the assets of Employer are sold,
liquidated or distributed, except to an Affiliate of Parent;
(viii) any Person, or any syndicate or group deemed to be a person
under Section 14(d)(2) of the Exchange Act, excluding Parent
or any of its Affiliates, a trustee or any fiduciary holding
securities under an employee benefit plan of Parent or any of
its Affiliates, an underwriter temporally holding securities
pursuant to an offering of such securities or a corporation
owned, directly or indirectly by stockholders of Parent in
substantially the same proportion as their ownership of
Parent, is or becomes the "beneficial owner" (as defined in
Rule 13d-3 of the General Rules and Regulations under the
Exchange Act), directly or indirectly, of securities of
Employer representing Fifty percent (50%) or more of the
combined voting power of Employer's then outstanding
securities entitled to vote in the election of directors of
Employer; or
(ix) there is a "change of control" or a "change in the effective
control" of Parent within the meaning of Section 280G of the
Code and the Regulations.
"Change in Control Date" shall mean the earliest of:
(i) the date on which a Change of Control occurs;
(ii) the date on which Parent executes an agreement or its
stockholders adopt a resolution, the consummation of which
would result in the occurrence of a Change of Control;
(iii) the date the Parent Board approves a transaction or series of
transactions, the consummation of which would result in a
Change in Control; and
(iv) the date Parent or Employer fails to satisfy the obligation
to have this Agreement expressly assumed by their respective
successors in accordance with Section 8(a) of the Agreement;
provided that if your employment with Employer terminates prior to any of the
dates specified in items (i) through (iv) of this definition and it is
reasonably demonstrated that your termination of employment (a) was at the
request of a third party who has taken steps reasonably calculated to effect a
Change in Control or (b) otherwise arose in connection with or in anticipation
of a Change in Control, then "Change in Control Date" shall mean the date
immediately prior to your Date of Termination.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and any
successor provisions thereto.
"Common Stock" shall mean the common stock of Parent.
"Controlling Entity" shall mean the Controlling Person of the Successor
Entity if such a Controlling Person exists; otherwise "Controlling Entity" shall
mean the Successor Entity.
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<PAGE> 28
The "Controlling Person" of any Person shall mean the Person which
ultimately controls such first Person and all other Affiliates of such first
Person, directly or indirectly, through ownership of voting stock or otherwise.
Your "Date of Termination" shall mean:
(i) if your employment is terminated for Disability, thirty (30)
days after a Notice of Termination is given (provided that you
shall not have returned to the full-time performance of your
duties during such thirty (30) day period);
(ii) if your employment is terminated by Employer in an Involuntary
Termination, five (5) days after the date the Notice of
Termination is received by you;
(iii) if your employment is terminated by Employer for Cause (other
than Disability), the later of the date specified in the
Notice of Termination or ten (10) days following the date such
Notice is received by you;
(iv) if you resign and specify Good Reason, ten (10) days after the
date your Notice of Termination is received by Employer; and
(v) if you resign and decline to specify Good Reason, the date set
forth in your Notice of Termination, which shall be no earlier
than ten (10) days after the date such notice is received by
Employer.
"Defined Benefit Plans" shall mean, collectively, the Tiffany and Company
Pension Plan and the 1994 Tiffany and Company Supplemental Retirement Income
Plan.
"Disability" shall mean your incapacity due to physical or mental illness
which causes you to be absent from the full-time performance of your duties with
Employer for six (6) consecutive months provided, however, that you shall not be
determined to be subject to a Disability for purposes of this Agreement unless
you fail to return to full-time performance of your duties with Employer within
thirty (30) days after written Notice of Termination due to Disability is given
to you.
"Earned Compensation" shall mean:
(i) any earned but unpaid base salary through your Date of
Termination at the rate in effect at the time of the Notice of
Termination;
(ii) all unused vacation time which you may have accrued as of your
Date of Termination; and
(iii) a pro rata portion of your target bonus or incentive award for
the fiscal year in which your Involuntary Termination occurs,
calculated on the assumption that all performance targets
(including your individual performance targets and sales and
earnings targets applicable to the Employer and/or to the
Successor Entity) have been or will be achieved.
"Employer" shall mean Tiffany and Company, a New York corporation, and any
successor to its business and/or assets by operation of law or otherwise.
"Employer Board" shall mean the Board of Directors of Employer.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
and any successor provisions thereto.
I-4
<PAGE> 29
"Excise Tax" shall mean the excise tax imposed by Section 4999 of the Code
and interest or penalties with respect to such excise tax .
"Good Reason" means, in addition to those reasons stated in the body of
the Agreement, your resignation from employment with Employer during the Term as
a result of any of the following:
(i) A meaningful and detrimental alteration in your position,
your titles, or the nature or status of your responsibilities
(including your reporting responsibilities) from those in
effect immediately before the Change in Control Date.
(ii) A reduction by Employer in your annual base salary as in
effect immediately prior to the Change in Control Date or as
the same may be increased from time to time thereafter; a
failure by the Employer to increase your salary at a rate
commensurate with that of other key executives of Employer;
or a reduction in your target bonus or incentive award
(expressed as a percentage of base salary) below the target
in effect for you prior to the Change in Control Date;
(iii) The failure by Employer to pay you a bonus or incentive award
commensurate with the bonus paid other key executives of
Employer (expressed as a percentage of your target bonus)
unless such failure is justified by clear and objective
deficiencies of the business units for which you are
responsible;
(iv) the relocation of the office of Employer where you were
employed immediately prior to the Change in Control Date to a
location which is more than 50 miles away or should Employer
require you to be based more than 50 miles away from such
office (except for required travel on the Employer's business
to an extent substantially consistent with your customary
business travel obligations in the ordinary course of
business prior to the Change in Control Date);
(v) the failure by Employer or Parent to continue in effect any
compensation plan in which you participated prior to the
Change in Control Date or made available to you after the
Change in Control Date, unless an equitable arrangement
(embodied in an ongoing substitute or alternative plan) has
been made with respect to such plan in connection with the
Change in Control, or the failure by Employer or Parent to
continue your participation therein on at least as favorable
a basis, both in terms of the amount of benefits provided and
the level of your participation relative to other
participants, as existed on the Change in Control Date;
(vi) the failure by Employer or Parent to continue to provide you
with benefits at least as favorable in the aggregate to those
enjoyed by you under the Defined Benefit Plans, the Benefit
Plan or Employer's or Parent's savings, life insurance,
disability and fringe benefit plans and programs in which you
were participating or had a right to participate immediately
prior to the Change in Control Date; or the failure by the
Company to provide you with the number of paid vacation days
to which you were entitled on the basis of years of service
with Employer in accordance with Employer's normal vacation
policy in effect immediately prior to the Change in Control
Date;
(vii) the failure of Employer and Parent to obtain an express
agreement reasonably satisfactory to you from their
successors, if any, to assume and agree to perform this
Agreement, as contemplated in Section 8(a) of the Agreement;
(viii) any termination of your employment with Employer which is not
effected pursuant to the terms of this Agreement; or
I-5
<PAGE> 30
(ix) a material breach by Employer or Parent of the provisions of
this Agreement.
"Gross-Up Payment" means a payment to you by the Employer such that after
payment by you of all Taxes (including any Excise Tax and any state or federal
income taxes) imposed upon the Gross-Up Payment, you retain an amount of the
Gross-Up Payment equal to the sum of (x) the Excise Tax imposed upon the
Payments which have triggered your right to a Gross-Up Payment and (y) the
product of any deductions disallowed you because of the inclusion of the
Gross-Up Payment in your adjusted gross income and the highest applicable
marginal rate of federal income taxation for the calendar year in which the
Gross-Up Payment is to be made.
"Incumbent Directors" shall mean those individuals who were members of the
Board of Directors of Tiffany & Co., a Delaware corporation, as of the date of
this Agreement and those individuals whose later appointment to such Board, or
whose later nomination for election to such Board by the stockholders of Tiffany
& Co., was approved by a vote of at least a majority of those members of such
Board who either were members of such Board as of the date of this Agreement, or
whose election or nomination for election was previously so approved.`-+*
"Measurement Period" means the period of years after your Date of
Termination specified in Section 3.
"Notice of Termination" shall mean a written notice indicating the
specific termination provision in this Agreement relied upon and setting forth
in reasonable detail the facts and circumstances claimed to provide a basis for
termination of your employment under the provision so indicated.
"Parent" shall mean Tiffany & Co., a Delaware corporation, and any
successor to its business and/or assets by operation of law or otherwise.
"Parent Board" shall mean the Board of Directors of Parent.
"Payment" means (i) any amount due or paid to you under this Agreement,
(ii) any amount that is due or paid to you under any plan, program or
arrangement of Parent or Employer (including, without limitation the Parent's
stock option plans) and (iii) any amount or benefit that is due or payable to
you under this Agreement or under any plan, program or arrangement of Parent or
Employer not otherwise covered under clause (i) or (ii) hereof which must
reasonably be taken into account under Section 280G of the Code and the
Regulation in determining the amount of "parachute payments" received by you,
including, without limitation, any amounts which must be taken into account
under the Code and Regulations as a result of (A) the acceleration of the
vesting of any option, restricted stock or other equity award granted under the
Parent's employee stock option plans or otherwise, (B) the acceleration of the
time at which any payment or benefit is receivable by you or (C) any contingent
severance or other amounts that are payable to you.
"Person" shall mean any individual, firm, corporation, partnership,
limited partnership, limited liability partnership, business trust, limited
liability company, unincorporated association or other entity, and shall include
any successor (by merger or otherwise) of such entity.
"Reference Bonus" shall mean the greater of (i) the target annual bonus
applicable to you for the year in which your Involuntary Termination occurs and
(ii) the highest annual bonus paid to you in any of the three years ended prior
to the Change in Control Date. For this purpose, the term "bonus" shall also
refer to a cash Incentive Award under the 1998 Employee Incentive Plan.
"Reference Salary" shall mean the greater of (i) the annual rate of your
base salary from Employer in effect immediately prior to the date of your
Involuntary Termination and (ii) the highest annual rate of your base salary
from Employer in effect at any point during the three-year period ended on the
Change in Control Date.
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<PAGE> 31
"Regulations" shall mean regulations under Section 280G of the Code,
including proposed and temporary regulations, and any successor provisions
thereto.
"Rights Plan" shall mean the Amended and Restated Rights Agreement Dated
as of September 22, 1998 by and between Parent and ChaseMellon Shareholder
Services L.L.C., as Rights Agent, as such Agreement may be further amended from
time to time.
"Substantial Change" means any substantial change in the terms or
conditions of your employment following a Change of Control Date that is less
favorable to you than those in effect previous to the Change of Control Date.
"Successor Entity" shall mean the Person who is in most immediate control,
whether through voting stock ownership of one or more subsidiaries or otherwise,
of the worldwide consolidated business of Parent's Affiliates, substantially as
such business existed immediately prior to the Change in Control Date whether or
not such Person is ultimately controlled by another Person.
"Supplementary Pension Payment" means the lump sum actuarial equivalent
(employing actuarial assumptions no less favorable to you than those in effect
under the Defined Benefit Plans prior to the Change in Control Date) of the
excess of the (i) aggregate benefits under the Defined Benefit Plans which you
would receive if your employment with Employer continued for the Measurement
Period over (ii) your vested accrued benefits payable under the Defined Benefit
Plans as of your Date of Termination. The following assumptions shall be used to
calculate such actuarial equivalent, that: (x) your accrued benefits under the
Defined Benefit Plans were fully vested, (y) in each of the years during the
Measurement Period your salary and bonus were equivalent to your Reference
Salary and Reference Bonus and (z) that you will begin to receive benefits under
Defined Benefit Plans at age 65, as calculated by the Accounting Firm with the
assistance of the actuaries for the Tiffany and Company Pension Plan.
"Taxes" shall mean the federal, state and local income taxes to which you
are subject at the time of determination, calculated on the basis of the highest
marginal rates then in effect, plus any additional payroll or withholding taxes
to which you are then subject.
"Term" shall mean the term of your employment under this Agreement as
defined in Section 1.
I-7
<PAGE> 32
Appendix II - Procedures Relating to Gross Up Payment
(A) Assumptions to be Used in Calculating the Gross-Up Payment. In determining
the amount of the Gross-Up Payment, you shall be deemed to:
(1) pay federal income taxes at the highest marginal rates of federal
income taxation for the calendar year in which the Gross-Up Payment is to
be made;
(2) pay applicable state and local income taxes at the highest marginal
rate of taxation for the calendar year in which the Gross-Up Payment is to
be made, net of the maximum reduction in federal income taxes which could
be obtained from deduction of state and local taxes; and
(3) have otherwise allowable deductions for federal income tax purposes at
least equal to those which could be disallowed because of the inclusion of
the Gross-Up Payment in your gross income.
(B) Calculation and Payment of Gross-Up Payment. Subject to the provisions set
out below, all determinations required under this Appendix, including whether a
Gross-Up Payment is required, the amount of the Payments constituting excess
parachute payments, and the amount of the Gross-Up Payment, shall be made by the
Accounting Firm. Any determination by the Accounting Firm shall be binding upon
you and the Employer. The Accounting Firm shall be instructed by the Employer to
provide detailed supporting calculations both to you and the Employer within
fifteen days of the Change of Control Date, your Date of Termination or any
other date reasonably requested by you or the Employer on which a determination
under this Appendix is necessary or advisable. The Employer shall pay to you the
initial amount of the Gross-Up Payment within five days of the receipt by you
and the Employer of the Accounting Firm's determination. If the Accounting Firm
determines that no Excise Tax is payable by you, the Employer shall cause the
Accounting Firm to provide you with an opinion that the Accounting Firm has
substantial authority under the Code and Regulations that you are not required
to report an Excise Tax on your federal income tax return. If the initial
Gross-Up Payment is insufficient to cover the amount of the Excise Tax that is
ultimately determined to be owing by you with respect to any Payment
(hereinafter an "Underpayment"), the Employer, after exhausting its remedies
under (C) below, shall promptly pay to you an additional Gross-Up Payment in
respect of the Underpayment.
(C) Procedures Regarding Claims In Respect of Underpayments. If a claim is made
upon you by the Internal Revenue Service, that would, if successful, require the
Employer to make a Gross-Up Payment to you, you must notify the Employer as soon
as practicable after you know of the claim. Such notice must state the nature of
the claim and the date that payment is demanded. As a condition to your right to
a Gross-Up Payment in respect of such claim, you shall not pay such claim until
the expiration of a thirty (30) day period following the date on which you
notify the Employer of such claim, or such shorter period ending on the date the
Taxes in respect to such claim are due (the "Notice Period"). If the Employer
notifies you in writing prior to the expiration of the Notice Period that it
desires to contest the claim, you shall:
(1) give the Employer any information reasonably requested by the Employer
relating to the claim;
(2) take such action in connection with the claim as the Employer may
reasonably request, including, without limitation, accepting legal
representation with respect to such claim by an attorney reasonably
selected by the Employer and reasonably acceptable to you;
(3) cooperate with the Employer in good faith in contesting the claim; and
(4) permit the Employer to participate in any proceedings relating to the
claim.
You shall permit the Employer to control all proceedings related to the claim
and, at its option, permit the Employer to pursue or forego any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim.
II-1
<PAGE> 33
If requested to do so by the Employer, you agree either to pay the tax claimed
and sue for a refund or contest the claim in any permissible manner and to
prosecute such contest to a determination before any administrative tribunal, in
a court of initial jurisdiction and in one or more appellate courts as the
Employer shall determine; provided, however, that, if the Employer directs you
pay such claim and pursue a refund, the Employer shall advance the amount of
such payment to you on an after-tax and interest-free basis (an "Advance").
The Employer's control of the contest related to the claim shall be limited to
the issues related to the Gross-Up Payment and you shall be entitled to settle
or contest, as the case may be, any other issues raised by the Internal Revenue
Service or other taxing authority. If the Employer does not notify you in
writing prior to the end of the Notice Period of its desire to contest the
claim, the Employer shall pay to you an additional Gross-Up Payment in respect
of the excess parachute payments that are the subject of the claim, and you
agree to pay the amount of the Excise Tax that is the subject of the claim to
the applicable taxing authority in accordance with applicable law.
(D) Repayment of Advance. If, after receipt by you of an Advance, you become
entitled to a refund with respect to the claim to which such Advance relates,
you shall pay the Employer the amount of the refund (together with any interest
paid or credited thereon after Taxes applicable thereto). If, after receipt by
you of any Advance, a third-party determination is made that you are not
entitled to any refund with respect to the claim and the Employer does not
promptly notify you of its intent to contest the denial of refund, then the
amount thereof shall offset the amount of the additional Gross-Up Payment then
owing to you with respect to such claim.
(E) Indemnity and Costs Relating to Gross-Up Payments. The Employer shall
indemnify you and hold you harmless, on an after-tax basis, from any costs,
expenses, penalties, fines, interest or other liabilities ("Losses") incurred by
you with respect to the exercise by the Employer of any of its rights under this
Appendix II, including, without limitation, any Losses related to the Employer's
decision to contest a claim or any imputed income to you resulting from any
Advance or action taken on your behalf by the Employer hereunder. The Employer
shall pay all legal fees and expenses incurred by you under this Appendix II,
and shall promptly reimburse you for the reasonable expenses incurred by you in
connection with any actions taken by the Employer or required to be taken by you
hereunder. The Employer shall also pay all of the fees and expenses of the
Accounting firm, including, without limitation, the fees and expenses related to
the determination referred to in (B) above.
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<PAGE> 34
Appendix III - Benefit Continuation
(A) In the event that your participation in any Benefit Plan is barred, Employer
shall, at its sole cost and expense, arrange to have issued for the benefit of
you and your eligible dependents individual policies of insurance providing
benefits substantially similar (on an after-tax basis) to those which you
otherwise would have been entitled to receive under such Benefit Plan pursuant
to Section 3 for the Benefit Continuation Period.
(B) In lieu of the benefits provided in (A) above, if, in the reasonable opinion
of Employer, such insurance is not available at a reasonable cost to the
Employer, the Employer shall directly provide you and your eligible dependents
with equivalent benefits (on an after-tax basis).
(C) In either of the circumstances described in (A) or (B), you shall not be
required to pay any premiums or other charges in an amount greater than that
which you would have paid in order participate in such Benefit Plan had your
Involuntary Termination not occurred.
(D) If at the end of the Benefit Continuation Period you have not reached age
sixty-five and you have not previously received or are not then receiving
equivalent benefits from a new employer, Employer shall arrange to enable you to
convert your and your eligible dependents' coverage under the Benefit Plans to
individual policies or programs upon the same terms as employees of the Employer
may apply for such conversions. Employer shall bear the cost of making such
conversions available to you; you shall bear the cost of coverage under such
converted policies or programs.
(E) For the purposes of Section 3 and this Appendix, a dependent will be deemed
"eligible" if, at the time in question, you would, if an employee of Employer,
be entitled to cover such dependent under the plan in question.
III-1
<PAGE> 1
Exhibit 13.1
SELECTED FINANCIAL DATA
The following table sets forth selected financial data, which have been derived
from the Company's audited financial statements for 1989-1998. All references to
years relate to the fiscal year that ended on January 31 of the following
calendar year. Diluted earnings (loss) per share and the weighted average number
of common shares have been retroactively restated to comply with the Financial
Accounting Standards Board's Statement of Financial Accounting Standards No.
128, "Earnings Per Share," adopted by the Company in 1997 (see Notes A and G to
consolidated financial statements). During 1993, the Company realigned its
operations in Japan (see Note K to consolidated financial statements). All share
and per share data have been retroactively adjusted to reflect the two-for-one
split in 1996 of the Company's Common Stock effected in the form of a share
distribution ("stock dividend").
<TABLE>
<CAPTION>
(in thousands, except per share amounts, percentages and employees) 1998 1997 1996
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
EARNINGS DATA
Net sales $1,169,244 $1,017,616 $922,108
Gross profit 654,297 564,208 499,694
Earnings (loss) from operations 161,122 133,422 109,413
Earnings (loss) before accounting change and extraordinary item 90,062 72,822 58,439
Earnings (loss) per share before
accounting change and extraordinary item (diluted) 2.50 2.02 1.66
Weighted average number of common shares (diluted) 35,984 36,104 35,690
- ----------------------------------------------------------------------------------------------------------
BALANCE SHEET AND CASH FLOW DATA
Total assets $1,057,023 $ 827,067 $739,418
Cash and cash equivalents 188,593 107,252 117,161
Inventories 481,439 386,431 335,389
Working capital 522,927 381,084 342,511
Net cash provided by (used in) operations 80,178 29,652 24,784
Capital expenditures 62,821 50,565 39,884
Short-term borrowings 97,370 90,054 76,338
Long-term debt 194,420 90,930 92,675
Stockholders' equity 516,453 443,724 378,264
Stockholders' equity per share 14.87 12.70 10.95
Cash dividends per share 0.340 0.260 0.185
- ----------------------------------------------------------------------------------------------------------
RATIO ANALYSIS
As a percentage of net sales:
Earnings (loss) from operations 13.8% 13.1% 11.9%
Earnings (loss) before accounting change and extraordinary item 7.7% 7.2% 6.3%
Current ratio 2.8:1 2.5:1 2.5:1
Return on average assets 9.6% 9.3% 8.4%
Net-debt as a percentage of total capital 16.7% 14.2% 12.1%
Return on average stockholders' equity 18.8% 17.7% 18.2%
Number of employees 4,845 4,360 3,892
</TABLE>
14 Tiffany & Co. and Subsidiaries
<PAGE> 2
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991 1990 1989
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$803,292 $682,831 $566,501 $486,396 $491,906 $455,712 $383,964
427,370 358,202 232,882 237,033 243,009 223,600 191,683
80,013 64,655 (10,029) 26,741 61,028 67,806 60,977
39,215 29,341 (10,242) 15,712 31,805 36,661 33,305
1.21 0.93 (0.33) 0.50 1.00 1.17 1.07
34,020 33,582 33,348 33,358 33,236 31,388 31,302
- -----------------------------------------------------------------------------------
$654,257 $556,672 $504,409 $419,355 $394,882 $307,268 $237,061
81,966 44,318 4,994 6,672 3,972 4,643 2,557
311,252 270,075 262,282 224,151 213,435 173,964 142,545
284,102 242,779 212,266 199,334 159,466 131,219 112,735
35,981 65,930 (19,125) (4,935) (3,617) 14,320 8,198
26,455 19,227 18,103 22,754 41,385 24,835 14,040
78,967 60,696 59,289 22,458 43,566 31,046 14,339
101,500 101,500 101,500 101,500 50,000 18,226 18,226
264,378 221,697 189,081 204,806 200,039 176,183 135,568
8.27 7.06 6.04 6.56 6.30 5.62 4.36
0.140 0.140 0.140 0.140 0.140 0.130 0.090
- -----------------------------------------------------------------------------------
10.0% 9.5% (1.8)% 5.5% 12.4% 14.9% 15.9%
4.9% 4.3% (1.8)% 3.2% 6.5% 8.0% 8.7%
2.3:1 2.5:1 2.4:1 3.1:1 2.3:1 2.3:1 2.5:1
6.5% 5.5% (2.2)% 3.9% 7.3% 13.5% 16.7%
27.1% 34.7% 45.2% 36.4% 30.9% 20.2% 18.1%
16.1% 14.3% (5.2)% 7.8% 13.5% 23.5% 28.4%
3,656 3,306 3,133 2,865 2,735 2,379 2,085
</TABLE>
Tiffany & Co. and Subsidiaries 15
<PAGE> 3
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Overview
The Company operates three channels of distribution: U.S. Retail includes retail
sales in Company-operated stores in the U.S., wholesale sales to independent
retailers in the U.S. and wholesale sales of fragrance products to independent
retailers in the Americas; International Retail includes retail sales in
Company-operated stores and boutiques, corporate sales and wholesale sales to
independent retailers and distributors in the Asia-Pacific region, Europe,
Canada, the Middle East and Latin America; and Direct Marketing includes
corporate (business-to-business) and catalog sales in the U.S.
All references to years relate to the fiscal year that ended on January 31 of
the following calendar year.
The Company's net sales increased 15% in 1998 and 10% in 1997. Sales growth and
higher operating margins resulted in net earnings growth of 24% in 1998 and 25%
in 1997.
The following table sets forth certain operating data of the Company as a
percentage of net sales:
<TABLE>
<CAPTION>
1998 1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%
Cost of sales 44.0 44.6 45.8
-----------------------------------
Gross profit 56.0 55.4 54.2
Selling, general
and administrative
expenses 42.2 42.3 42.3
-----------------------------------
Earnings from
operations 13.8 13.1 11.9
Other expenses, net 0.5 0.5 0.8
-----------------------------------
Earnings before
income taxes 13.3 12.6 11.1
Provision for
income taxes 5.6 5.4 4.8
-----------------------------------
Net earnings 7.7% 7.2% 6.3%
===================================
</TABLE>
Net Sales
Net sales by channel of distribution:
<TABLE>
<CAPTION>
(in thousands) 1998 1997 1996
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Retail $ 590,666 $ 491,459 $424,185
International
Retail 462,474 421,054 397,341
Direct
Marketing 116,104 105,103 100,582
----------------------------------------
$1,169,244 $1,017,616 $922,108
========================================
</TABLE>
<TABLE>
<CAPTION>
(percentage of net sales) 1998 1997 1996
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Retail 50% 48% 46%
International
Retail 40 42 43
Direct
Marketing 10 10 11
----------------------------------------
100% 100% 100%
========================================
</TABLE>
U.S. Retail sales increased 20% in 1998 and 16% in 1997. Comparable U.S. store
sales increased 10% in 1998 and 11% in 1997, largely reflecting geographically
broad-based sales growth. Sales in the flagship Fifth Avenue store in New York
rose 3% in 1998 and 8% in 1997, and accounted for 14%, 16% and 16% of net sales
in 1998, 1997 and 1996. Comparable branch store sales rose 13% in 1998 and 12%
in 1997. Overall comparable store sales growth was due to an increased number of
sales transactions. In addition, sales to domestic customers (representing the
largest portion of sales) generated the sales growth, as opposed to sales to
foreign tourists which declined as a percentage of U.S. Retail sales.
U.S. Retail sales growth also benefited from six new stores in 1998 and the
opening of five new stores in 1997. Since 1993, the Company has designed its new
U.S. branch stores in a smaller-size format to increase sales productivity and
profitability by increasing selling space as a percentage of total space. The
Company currently plans to open three new U.S. stores in 1999, including its
second stores in Dallas and Los Angeles. Wholesale sales increased 4% and 14% in
1998 and 1997, and represented 6%, 7% and 8% of U.S. Retail sales in 1998, 1997
and 1996.
16 Tiffany & Co. and Subsidiaries
<PAGE> 4
International Retail sales increased 10% in 1998 and 6% in 1997. On a
constant-exchange rate basis, excluding the effect of translating
local-currency-denominated sales at fluctuating exchange rates into U.S.
dollars, International Retail sales rose 14% and 15% in 1998 and 1997.
Japan represented 27% of net sales in 1998, 1997 and 1996. In local currency,
total retail sales in Japan rose 20% in 1998 and 23% in 1997, primarily due to
comparable store sales growth of 15% and 13% in those years. Changes in foreign
currency exchange rates affect results when translated into U.S. dollars;
specifically, the generally stronger U.S. dollar had the effect of reducing
yen-denominated sales growth when translated into U.S. dollars during the
1996-1998 period. The Company opened two new boutiques in Japanese department
stores in 1998 and three in 1997.
The Company's reported sales and earnings reflect either a translation-related
benefit from a strengthening Japanese yen or a detriment from a strengthening
U.S. dollar. The Company's hedging program (see Financial Condition-Market Risk)
has achieved its objective by stabilizing product costs over the short-term,
despite exchange rate fluctuations (see Note I to consolidated financial
statements). However, as a result of changes in the relationship between the yen
and the dollar, the Company adjusts its retail prices when necessary to maintain
its gross margin over the longer term.
The Asia-Pacific region outside Japan represented 6%, 8% and 10% of net sales in
1998, 1997 and 1996. Comparable store sales in Company- operated locations in
local currencies declined 7% in 1998 and increased 1% in 1997. Management
attributes these results to adverse local economic conditions and reduced sales
to foreign travelers.
Europe represented 4% of net sales in 1998, 1997 and 1996. Comparable store
sales in local currencies rose 16% and 17% in 1998 and 1997. Sales were
particularly strong in London.
The Company's international retail expansion plans in 1999 include opening one
new boutique in a Japanese department store and opening a new store in Paris, as
well as renovating/expanding several existing international retail locations and
closing one Japanese department store boutique.
Direct Marketing sales increased 10% in 1998 and 4% in 1997. Sales in the
Corporate Division increased 6% and 9% in 1998 and 1997, primarily due to higher
transactional volumes. Sales growth in the Corporate Division benefited from
expansion into new geographical markets. Catalog Division sales increased 18% in
1998 following a 2% decline in 1997. The Company's catalog mailings and the
response rate (number of orders received as a percentage of catalogs mailed)
were 24.3 million and 1.4% in 1998, 21.4 million and 1.3% in 1997 and 20.6
million and 1.4% in 1996. The Company plans to increase mailings by
approximately 5-10% in 1999. Direct Marketing sales in 1997 were adversely
affected by the transition to the Company's new Customer Service/Distribution
Center, which affected order processing and shipping.
Gross Profit
Increases in gross profit as a percentage of net sales in 1998 and 1997 were
largely due to favorable shifts in sales mix toward the Company's retail
businesses. Management's ongoing gross margin and pricing strategy is to pass
product-cost increases on to customers through higher retail selling prices in
order to maintain gross margin at or above prior-year levels.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased 14% in 1998 and 10% in
1997. The increases in 1998 and 1997 were largely due to incremental occupancy,
staffing and marketing expenses related to the Company's expansion program, as
well as to sales-related variable expenses. 1996 expenses included nonrecurring
pretax charges of $4,400,000 for the closing and relocation of a U.S. store and
the impairment of certain European assets. The rate of expense growth was
moderated in
Tiffany & Co. and Subsidiaries 17
<PAGE> 5
both years by the weakening, on average, of the yen and its effect when
translating yen-denominated expenses into U.S. dollars. The ratio of selling,
general and administrative expenses to net sales improved in 1998 and was
unchanged in 1997. Management's ongoing objective is to reduce the expense ratio
by leveraging the Company's fixed-expense base.
Earnings from Operations
The above factors resulted in a 21% increase in earnings from operations in 1998
following a 22% increase in 1997. The ratio of earnings from operations to net
sales improved in both years.
Interest Expense and Financing Costs
Interest expense rose in 1998 due to the cost of higher net-debt that primarily
resulted from the Company's Common Stock repurchase program (see Liquidity and
Capital Resources), as well as an increase in working capital. Lower interest
expense in 1997 was due to the conversion and redemption of the Company's
$50,000,000 principal amount 63 1/48% Convertible Subordinated Debentures Due
2001 in June 1996. A significant portion of the Company's short-term borrowings
in 1998 and 1997 was denominated in yen and used to support the local working
capital requirements of the Company's Japanese operations. Based on current
plans, as well as the interest cost of a private debt placement (see Liquidity
and Capital Resources) and potential share repurchases, management expects
interest expense and financing costs to increase in 1999.
Other Income
Other income in 1998 and 1997 includes interest income and realized and
unrealized gains (losses) on investment activities. In 1996, the Company
recognized a pretax gain of $4,500,000 from the sale of the assets and business
of Howard H. Sweet and Son, Inc., one of the Company's manufacturing affiliates
(see Note B to consolidated financial statements).
Provision for Income Taxes
The provision for income taxes resulted in an effective tax rate of 42.1% in
1998, 43.0% in 1997 and 43.2% in 1996. The declining rates were largely due to a
shift in the geographical business mix toward lower-tax jurisdictions as a
result of the Company's ongoing expansion program.
New Accounting Standards
In February 1998, the American Institute of Certified Public Accountants'
Accounting Standards Executive Committee issued Statement of Position No. 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use" ("SOP No. 98-1"). SOP No. 98-1 requires certain costs incurred in
connection with developing or obtaining internal-use software to be capitalized
and other costs to be expensed. The Company adopted SOP No. 98-1 effective
February 1998 and its application in 1998 had no material effect on the
Company's financial position or results of operations.
In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS No. 133"), which requires that an
entity recognize all derivative instruments as either assets or liabilities on
its balance sheet at their fair value. Gains and losses resulting from changes
in the fair value of derivatives are recorded each period in current earnings or
comprehensive earnings, depending on whether a derivative is designated as part
of a hedge transaction, and, if it is, the type of hedge transaction. Gains and
losses on derivative instruments reported in comprehensive earnings will be
reclassified as earnings in the period in which earnings are affected by the
hedged item. SFAS No. 133 is effective for the Company's financial statements
for the year ending January 31, 2001 and the Company is currently evaluating the
impact of the new FASB statement on its financial position and results of
operations.
18 Tiffany & Co. and Subsidiaries
<PAGE> 6
Euro Conversion
On January 1, 1999, 11 of the 15 member countries of the European Economic and
Monetary Union converted to a common currency, known as the Euro, and
established fixed conversion rates between their existing currencies ("legacy
currencies") and the Euro. The Euro is traded on currency exchanges and may be
used in business transactions. The conversion to the Euro eliminates currency
exchange rate risk between the member countries. On January 1, 2002, new
Euro-denominated bills and coins will be issued by participating countries and
legacy currencies will be withdrawn from circulation. The Company is addressing
the issues raised by the Euro currency conversion. These issues include, among
others, the need to adapt and modify information technology systems and business
processes and equipment to accommodate Euro-denominated transactions. The
Company's policy is to maintain uniform pricing among the member countries and,
as a result, the Company does not anticipate that the conversion to the Euro
will have a material impact on the financial position, results of operations or
liquidity of its European businesses.
Year 2000
The Company recognizes the need to ensure that its operations will not be
adversely impacted by year 2000 computer hardware and software failures
(information technology systems) and embedded chip or processor failures
(non-information technology systems). Certain systems will, unless modified, be
unable to process date-sensitive calculations using the year 2000. Such failures
are a known risk to the future integrity of the Company's financial reporting
and to virtually all aspects of the Company's operations, including the
Company's ability to process sales transactions, fulfill customer orders and
receive and manage inventories and other assets.
Accordingly, the Company has established a disciplined process to identify,
prioritize and evaluate year 2000 problems and to replace or modify and test
computer software and operating procedures. The objective of these efforts is to
achieve year 2000 compliance with minimal impact on customer service or other
disruption to, or loss of integrity in, business or financial operations.
Sources of potential failure in internal systems have been identified and
conversion efforts are underway. These conversion efforts are scheduled to be
completed in the spring of 1999. By that time, the Company will have been
required to remediate or replace (i) internally-developed computer code and (ii)
code purchased from third-party software vendors. At January 31, 1999, these
efforts were 94% complete in category (i) and 73% complete in category (ii), on
schedule with the Company's timetable for completion.
The foregoing conversion efforts address "information technology" systems,
(i.e., those operated and maintained by the Company's U.S.-based Information
Technology staff, such as financial, order entry, inventory control and
forecasting systems). An analysis has also been completed of all
"non-information technology" systems (i.e., those using embedded microprocessor
technology such as security systems, safes, telephone systems and warehouse
automation equipment) and upgrades or replacements are being deployed as
required. Other applications software is maintained on personal computers by
end-users in the U.S. and by wholly-owned Company subsidiaries outside the U.S.
Typically, such software has been purchased from third-party vendors and
specific applications have been developed by the end-user. The Information
Technology staff together with end-users have completed the determination of the
materiality of these applications to the Company and their status regarding year
2000 compliance. As required, remediation and testing plans have been initiated.
As of January 31, 1999, these efforts were 67% complete, on schedule with the
Company's timetable for completion.
The Company has also evaluated year 2000 issues that may be experienced by key
merchandise and service vendors in order to assess the potential effect of
vendor failure on the Company's operations. The responses from key vendors and
suppliers indicate that more than 95% are year 2000 compliant at this time, will
be year 2000 compliant before December 31, 1999, or are not dependent on
computer technology to deliver products
Tiffany & Co. and Subsidiaries 19
<PAGE> 7
and services to the Company. To further clarify the extent to which vendors and
suppliers have tested and confirmed their year 2000 readiness, a detailed
questionnaire has been distributed and responses will be analyzed to further
determine risk and potential remedial action.
Contingency plans for manual and delayed information processing are now being
developed because of the possibility of year 2000 failures or service
interruptions within the domestic and international public network
communications infrastructure that the Company relies upon for daily operations.
These plans and procedures address both proactive and reactive measures that may
be deployed to provide merchandise to stores and customers and continue domestic
and international operations. Due to the thorough project approach and rigorous
testing that the Company has performed and continues to perform on its own
information technology systems, the Company believes that any failures should be
quickly rectifiable.
In addition to the cost of internal resources, the Company's total cost of
achieving year 2000 compliance is estimated to be $8,500,000 for third-party
service providers and will be incurred through the year ending January 31, 2000.
Year 2000 costs for such providers are charged to operations as incurred and
amounted to $6,374,000 in 1998 and $6,960,000 on a cumulative basis.
FINANCIAL CONDITION
Liquidity and Capital Resources
The Company's liquidity needs have been, and are expected to remain, primarily a
function of its seasonal working capital requirements which have increased due
to the Company's expansion. Management believes that the Company's financial
condition at January 31, 1999 provides sufficient resources to support current
business activities and planned expansion. Working capital (current assets less
current liabilities) and the corresponding current ratio (current assets divided
by current liabilities) were $522,927,000 and 2.8:1 at January 31, 1999,
compared with $381,084,000 and 2.5:1 at January 31, 1998.
Inventories (which represent the largest portion of total assets) at January 31,
1999 were 25% higher than January 31, 1998. The increase was due to higher
finished goods to support sales growth, new stores and new/expanded product
offerings and higher raw materials that support expanded internal manufacturing.
Total inventory turnover was 0.9 times in 1998 compared with 1.0 times in 1997.
The Company's ongoing 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.
The Company achieved a net cash inflow from operating activities of $80,178,000
in 1998, compared with inflows of $29,652,000 and $24,784,000 in 1997 and 1996.
The increased inflow in 1998 compared with 1997 was largely due to increased net
earnings and a decreased use of working capital. The larger inflow in 1997
compared with 1996 resulted from increased net earnings, partially offset by an
increased use of working capital.
Capital expenditures were $62,821,000, $50,565,000 and $39,884,000 in 1998, 1997
and 1996. Expenditures in all three years were due to costs associated with new
store openings, renovations and/or relocations of existing stores, expansion
and/or renovation of administrative, distribution and manufacturing facilities
and investments in new systems. Based on current plans, management expects that
capital expenditures will be approximately $77,000,000 in 1999.
Cash dividends were $11,897,000, $9,097,000 and $6,303,000 in 1998, 1997 and
1996. In May 1998 and 1997, the Board of Directors declared increases of 29% and
40% in the quarterly dividend rates, which became effective in July 1998 and
1997. The dividend payout ratio (dividends as a percentage of net earnings) was
13%, 12% and 11% in 1998, 1997 and 1996, and the
20 Tiffany & Co. and Subsidiaries
<PAGE> 8
Company expects to continue to retain the majority of its earnings to support
its business and future expansion.
In November 1997, the Board of Directors authorized the repurchase of up to
$100,000,000 of the Company's Common Stock in the open market over a three-year
period. The timing and actual number of shares to be purchased depends on a
variety of factors such as price and other market conditions. In 1998, the
Company repurchased and retired 798,600 shares of its Common Stock at an
aggregate cost of $30,035,000, or an average cost of $37.61 per share. In 1997,
the Company repurchased and retired 225,000 shares of its Common Stock at an
aggregate cost of $8,672,000, or an average cost of $38.54 per share.
Net-debt (short-term borrowings plus long-term debt less cash and cash
equivalents) and the corresponding ratio of net-debt as a percentage of total
capital (net-debt plus stockholders' equity) were $103,197,000 and 17% at
January 31, 1999, compared with $73,732,000 and 14% at January 31, 1998.
In December 1998, the Company, in private transactions with various
institutional lenders, issued, at par, $60,000,000 principal amount 6.90% Series
A Senior Notes Due 2008 and $40,000,000 principal amount 7.05% Series B Senior
Notes Due 2010. The proceeds of these new issuances are being used by the
Company as working capital and to refinance a portion of outstanding short-term
indebtedness under the Company's revolving credit facility.
During 1998, the Company's $130,000,000 multi- currency revolving credit
facility (the "Credit Facility") was amended to increase the amount the Company
is entitled to borrow to $160,000,000 and to increase the number of
participating banks from four to five. The amended Credit Facility entitles the
Company to borrow $31,250,000 on a pro-rata basis from each of three banks,
$30,000,000 from one bank and $36,250,000 from an agent bank. All borrowings are
at interest rates based on a prime rate or a reserve-adjusted LIBOR. The Credit
Facility expires on June 30, 2002. Management anticipates that
internally-generated cash flows and funds available under the revolving credit
facility will be sufficient to support the Company's planned worldwide business
expansion and seasonal working capital increases that are typically required
during the third and fourth quarters of the year.
Market Risk
The Company is exposed to market risk from fluctuations in foreign currency
exchange rates and interest rates, which could impact its consolidated financial
position, results of operations and cash flows. The Company manages its exposure
to market risk through its regular operating and financing activities and, when
deemed appropriate, through the use of derivative financial instruments. The
Company uses derivative financial instruments as risk management tools and not
for trading or speculative purposes and does not maintain such instruments which
may expose the Company to significant market risk.
The Company uses foreign currency-purchased put options and, to a lesser extent,
foreign-exchange forward contracts to reduce its risk in foreign
currency-denominated transactions in order to minimize the impact of a
significant strengthening of the U.S. dollar against other foreign currencies.
Gains and losses on these instruments substantially offset losses and gains on
the assets, liabilities and transactions being hedged. At January 31, 1999 and
1998, the Company's primary net foreign currency market exposure was the
Japanese yen. Management does not foresee or expect any significant changes in
foreign currency exposure in the near future.
The fair value of foreign currency-purchased put options is sensitive to changes
in foreign currency exchange rates. At January 31, 1999, there were no
unrealized gains on the Company's yen-purchased put options. The unrealized gain
at January 31, 1998 was $2,398,000. Unrealized gains and losses from foreign
currency exchange contracts are defined as the difference between the contract
rate at the inception date and the current market exchange rate. If the market
yen-exchange rates at maturity are stronger than the
Tiffany & Co. and Subsidiaries 21
<PAGE> 9
contracted exchange rates, the Company will allow the options to expire. At
January 31, 1999 and 1998, a 10% appreciation in yen-exchange rates from the
prevailing market rates would result in unrealized losses limited to the amount
incurred to purchase the put options. At January 31, 1999 and 1998, a 10%
depreciation in yen-exchange rates from the prevailing market rates would result
in unrealized gains of $3,189,000 and $9,362,000.
The Company also manages a portfolio of fixed-rate debt to reduce its exposure
to interest rate changes. The fair value of the Company's fixed-rate long-term
debt is sensitive to interest rate changes. Interest rate changes would result
in gains/losses in the market value of this debt due to differences between
market interest rates and rates at the inception of the debt obligation. Based
on a hypothetical immediate 100 basis point increase in interest rates at
January 31, 1999 and 1998, the market value of the Company's fixed-rate
long-term debt would decrease by $13,483,000 and $6,445,000. Based on a
hypothetical immediate 100 basis point decrease in interest rates at January 31,
1999 and 1998, the market value of the Company's fixed-rate long-term debt would
increase by $14,859,000 and $7,135,000.
See Notes A, H and I to the Consolidated Financial Statements for a discussion
of the Company's Debt and Financial Instruments.
Seasonality
As a jeweler and specialty retailer, the Company's business is seasonal in
nature, with the fourth quarter typically representing a proportionally greater
percentage of annual sales, earnings from operations and cash flow. Management
expects such seasonality to continue.
Risk Factors
This document contains certain "forward-looking statements" concerning the
Company's objectives and expectations with respect to store openings, catalog
mailings, retail prices, gross profit, expenses, inventory performance, capital
expenditures, cash flow and year 2000 compliance. In addition, management makes
other forward-looking statements from time to time concerning objectives and
expectations. As a jeweler and specialty retailer, the Company's success in
achieving its objectives and expectations is partially dependent upon economic
conditions, competitive developments and consumer attitudes. However, certain
assumptions are specific to the Company and/or the markets in which it operates.
The following assumptions, among others, are "risk factors" which could affect
the likelihood that the Company will achieve the objectives and expectations
communicated by management: (i) that sales made in Japan will not decline
substantially; (ii) that there will not be a substantial adverse change in the
exchange relationship between the Japanese yen and the U.S. dollar; (iii) that
the Company's commercial relationship with Mitsukoshi, Ltd. ("Mitsukoshi") and
Mitsukoshi's ability to continue as a leading department store operator in Japan
will continue; (iv) that Mitsukoshi and other department store operators in
Japan, in the face of declining sales, will not close or consolidate stores in
which TIFFANY&CO. boutiques are located; (v) that low or negative growth in the
economy or in the financial markets will not occur and reduce discretionary
spending on goods that are, or are perceived to be, "luxuries"; (vi) that
existing product supply arrangements, including license agreements with
third-party designers Elsa Peretti and Paloma Picasso, will continue; (vii) that
the wholesale market for high-quality cut diamonds will provide continuity of
supply and pricing; (viii) that new stores and other sales locations can be
leased or otherwise obtained on suitable terms in desired markets and that
construction can be completed on a timely basis; (ix) that new systems,
particularly for inventory management, can be successfully integrated into the
Company's operations, and that warehousing and distribution productivity and
capacity can be further improved to support the Company's worldwide distribution
requirements; and (x) that no downturn in consumer spending will occur during
the fourth quarter of any year.
22 Tiffany & Co. and Subsidiaries
<PAGE> 10
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
Years Ended January 31,
----------------------------------
(in thousands, except per share amounts) 1999 1998 1997
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $1,169,244 $1,017,616 $922,108
Cost of sales 514,947 453,408 422,414
----------------------------------
Gross profit 654,297 564,208 499,694
Selling, general and administrative expenses 493,175 430,786 390,281
----------------------------------
Earnings from operations 161,122 133,422 109,413
Interest expense and financing costs 9,326 8,037 9,480
Other income 3,852 2,373 2,953
----------------------------------
Earnings before income taxes 155,648 127,758 102,886
Provision for income taxes 65,586 54,936 44,447
----------------------------------
Net earnings $ 90,062 $ 72,822 $ 58,439
==================================
Net earnings per share:
Basic $ 2.58 $ 2.08 $ 1.74
==================================
Diluted $ 2.50 $ 2.02 $ 1.66
==================================
Weighted average number of common shares:
Basic 34,965 34,953 33,682
Diluted 35,984 36,104 35,690
</TABLE>
See notes to consolidated financial statements.
Tiffany & Co. and Subsidiaries 23
<PAGE> 11
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
January 31,
----------------------
(in thousands) 1999 1998
- ------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 188,593 $107,252
Accounts receivable, less allowances of $8,106 and $6,988 108,381 99,492
Inventories 481,439 386,431
Deferred income taxes 18,061 17,373
Prepaid expenses and other current assets 19,170 20,539
----------------------
Total current assets 815,644 631,087
Property and equipment, net 189,795 156,367
Deferred income taxes 9,032 8,859
Other assets, net 42,552 30,754
----------------------
$1,057,023 $827,067
======================
LIABILITIES AND STOCKHOLDERS` EQUITY
Current liabilities:
Short-term borrowings $ 97,370 $ 90,054
Accounts payable and accrued liabilities 140,660 118,456
Income taxes payable 32,485 23,501
Merchandise and other customer credits 22,202 17,992
----------------------
Total current liabilities 292,717 250,003
Reserve for product return -- 2,580
Long-term debt 194,420 90,930
Postretirement/employment benefit obligations 21,539 20,121
Other long-term liabilities 31,894 19,709
Commitments and contingencies
Stockholders' equity:
Common Stock, $0.01 par value; authorized 60,000 shares,
issued and outstanding 34,733 and 34,930 347 349
Additional paid-in capital 185,238 168,085
Retained earnings 344,223 293,689
Accumulated other comprehensive loss:
Foreign currency translation adjustments (13,355) (18,399)
----------------------
Total stockholders' equity 516,453 443,724
----------------------
$1,057,023 $827,067
======================
</TABLE>
See notes to consolidated financial statements.
24 Tiffany & Co. and Subsidiaries
<PAGE> 12
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended January 31,
--------------------------------
(in thousands) 1999 1998 1997
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 90,062 $ 72,822 $ 58,439
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 29,652 22,058 20,828
Provision for uncollectible accounts 1,996 1,255 2,138
Reduction in reserve for product return (2,580) (3,220) (5,438)
Provision for inventories 6,015 6,019 5,220
Tax benefit from exercise of stock options 7,082 6,875 4,805
Deferred income taxes (618) (1,782) (6,695)
Gain on sale of subsidiary's net assets -- -- (4,500)
Impairment loss on certain assets -- -- 2,281
Loss on disposal of fixed assets 435 -- --
Provision for postretirement/employment benefits 1,418 930 1,160
Changes in assets and liabilities:
Accounts receivable (6,179) (18,734) (9,439)
Inventories (81,891) (70,697) (53,176)
Prepaid expenses 1,865 288 (1,688)
Other assets, net (4,869) (1,879) (7,557)
Accounts payable 10,611 4,724 2,139
Accrued liabilities 10,576 8,132 4,932
Income taxes payable 8,105 (1,873) 6,867
Merchandise and other customer credits 4,210 3,755 3,183
Other long-term liabilities 4,288 979 1,285
--------------------------------
Net cash provided by operating activities 80,178 29,652 24,784
--------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (62,821) (50,565) (39,884)
Acquisitions, net of liabilities assumed (8,150) -- --
Proceeds from lease incentives 3,952 851 1,590
Proceeds from sale of subsidiary's net assets -- -- 15,000
--------------------------------
Net cash used in investing activities (67,019) (49,714) (23,294)
--------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term borrowings, net 15 18,913 7,089
Prepayment of long-term trade payable -- -- (26,029)
Proceeds from issuance of long-term debt 100,000 -- 46,625
Repurchase of Common Stock (30,035) (8,672) --
Proceeds from exercise of stock options 11,073 10,046 13,462
Cash dividends on Common Stock (11,897) (9,097) (6,303)
Redemption of Convertible Subordinated Debentures -- -- (916)
--------------------------------
Net cash provided by financing activities 69,156 11,190 33,928
--------------------------------
Effect of exchange rate changes on
cash and cash equivalents (974) (1,037) (223)
--------------------------------
Net increase (decrease) in cash and cash equivalents 81,341 (9,909) 35,195
Cash and cash equivalents at beginning of year 107,252 117,161 81,966
--------------------------------
Cash and cash equivalents at end of year $188,593 $107,252 $117,161
================================
</TABLE>
See notes to consolidated financial statements.
Tiffany & Co. and Subsidiaries 25
<PAGE> 13
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Accumulated
Total Other Common Stock Additional
Stockholders' Retained Comprehensive ------------------- Paid-in Comprehensive
(in thousands) Equity Earnings Loss Shares Amount Capital Earnings
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, January 31, 1996 $ 264,378 $ 185,823 $ (4,225) 15,988 $ 160 $ 82,620
Two-for-one stock split -- -- -- 17,197 172 (172)
Exercise of stock options 13,462 -- -- 449 4 13,458
Tax benefit from exercise
of stock options 4,805 -- -- -- -- 4,805
Issuance of Common Stock 1,000 -- -- 18 -- 1,000
Conversion of Convertible
Subordinated Debentures 49,084 -- -- 877 9 49,075
Bond fees relating to the
conversion of Convertible
Subordinated Debentures (741) -- -- -- -- (741)
Cash dividends on Common Stock (6,303) (6,303) -- -- -- --
Comprehensive earnings:
Net earnings 58,439 58,439 -- -- -- -- $ 58,439
Other comprehensive loss:
Foreign currency translation
adjustments (5,860) -- (5,860) -- -- -- (5,860)
---------
Comprehensive earnings $ 52,579
---------
-------------------------------------------------------------------------------------------
Balances, January 31, 1997 378,264 237,959 (10,085) 34,529 345 150,045
Exercise of stock options 10,046 -- -- 576 6 10,040
Tax benefit from exercise
of stock options 6,875 -- -- -- -- 6,875
Issuance of Common Stock 1,800 -- -- 50 -- 1,800
Purchase and retirement
of Common Stock (8,672) (7,995) -- (225) (2) (675)
Cash dividends on Common Stock (9,097) (9,097) -- -- -- --
Comprehensive earnings:
Net earnings 72,822 72,822 -- -- -- -- $ 72,822
Other comprehensive loss:
Foreign currency translation
adjustments (8,314) -- (8,314) -- -- -- (8,314)
---------
Comprehensive earnings $ 64,508
---------
-------------------------------------------------------------------------------------------
Balances, January 31, 1998 443,724 293,689 (18,399) 34,930 349 168,085
Exercise of stock options 11,073 -- -- 570 6 11,067
Tax benefit from exercise
of stock options 7,082 -- -- -- -- 7,082
Issuance of Common Stock 1,400 -- -- 32 -- 1,400
Purchase and retirement
of Common Stock (30,035) (27,631) -- (799) (8) (2,396)
Cash dividends on Common Stock (11,897) (11,897) -- -- -- --
Comprehensive earnings:
Net earnings 90,062 90,062 -- -- -- -- $ 90,062
Other comprehensive earnings:
Foreign currency translation
adjustments 5,044 -- 5,044 -- -- -- 5,044
---------
Comprehensive earnings $ 95,106
---------
-------------------------------------------------------------------------------------------
Balances, January 31, 1999 $ 516,453 $ 344,223 $ (13,355) 34,733 $ 347 $ 185,238
===========================================================================================
</TABLE>
See notes to consolidated financial statements.
26 Tiffany & Co. and Subsidiaries
<PAGE> 14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Fiscal Year
The Company's fiscal year ends on January 31 of the following calendar year.
References to years relate to fiscal years rather than calendar years.
Basis of Reporting
The consolidated financial statements include the accounts of Tiffany & Co. and
all majority-owned domestic and foreign subsidiaries (the "Company").
Intercompany accounts, transactions and profits have been eliminated in
consolidation. These statements have been prepared in conformity with generally
accepted accounting principles and require management to make certain estimates
and assumptions that affect amounts reported and disclosed in the financial
statements and related notes. The most significant estimates include valuation
of inventories, provision for uncollectible accounts and the recoverability of
long-lived assets. Actual results could differ from these estimates.
Periodically, the Company reviews all significant estimates and assumptions
affecting the financial statements and, when necessary, records the effect of
any adjustments.
Cash and Cash Equivalents
Cash and cash equivalents are stated at cost plus accrued interest, which
approximates fair value. Cash equivalents include highly liquid investments with
an original maturity of three months or less and consist of time deposits with a
number of U.S. and non-U.S. commercial banks with high credit ratings. The
Company's policy restricts the amounts invested in any one bank.
Receivables and Finance Charges
Finance charges on retail revolving charge accounts were not material and have
been accounted for 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. Domestic and foreign
branch inventories are valued using the LIFO (last-in, first-out) method.
Inventories held by foreign subsidiaries are valued using the FIFO (first-in,
first-out) method.
Long-Lived Assets
Property and equipment are stated at cost less accumulated depreciation.
Depreciation is calculated on a straight-line basis over the estimated useful
lives of the assets. Leasehold improvements are amortized over the shorter of
their estimated useful lives or the related lease terms. Maintenance and repair
costs are charged to earnings while expenditures for major renewals and
improvements are capitalized. Upon the disposition of property and equipment,
the accumulated depreciation is deducted from the original cost and any gain or
loss is reflected in current earnings.
Goodwill represents the excess of cost over fair value of net assets acquired
and is amortized over 20 years using the straight-line method. At January 31,
1999 and 1998, unamortized goodwill of $11,308,000 and $4,455,000 was included
in Other assets, net.
The Company periodically reviews long-lived assets such as property and
equipment, goodwill and other intangibles for impairment by comparing the
carrying value of the assets with their estimated future undiscounted cash
flows. If it is determined that an impairment loss has occurred, the loss would
be recognized during that period. The impairment loss is calculated as the
difference between asset carrying values and the present value of estimated net
cash flows or comparable market values, giving consideration to recent operating
performance and pricing trends. In 1998 and 1997, there
Tiffany & Co. and Subsidiaries 27
<PAGE> 15
were no impairment losses related to long-lived assets. In 1996, the Company
recorded an impairment loss of $2,300,000, included in Selling, general and
administrative expenses, as a result of evaluating future cash flows estimated
to be generated by its long-lived assets at the retail store level and continued
difficult operating conditions in certain of its European markets.
Financial Instruments
The Company manages a foreign currency hedging program intended to reduce the
Company's risk in foreign currency-denominated (primarily yen) trans-actions. To
minimize the potentially negative impact of a significant strengthening of the
U.S. dollar against the yen, the Company (generally on a regular basis) enters
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. Unrealized gains and losses on these foreign
exchange contracts are initially deferred and later recognized in earnings or as
adjustments to inventories and liabilities when the related transactions are
settled. Due to the short-term nature of the Company's forward-exchange
contracts, book value approximates fair value. The Company does not use
derivative financial instruments for trading or speculative purposes.
Preopening Costs
Costs associated with the opening of new retail stores are expensed in the
period incurred.
Advertising Costs
Advertising costs, which include media, production and catalogs, totaled
$52,500,000, $51,800,000 and $43,900,000 in 1998, 1997 and 1996. Media and
production costs are expensed as incurred, while catalog costs are expensed upon
mailing.
Income Taxes
Income taxes are accounted for by the asset and liability method, which
recognizes deferred tax assets and liabilities by applying statutory tax rates
in effect at the balance sheet date to differences between the book and tax
basis of existing assets and liabilities. The Company, its domestic subsidiaries
and its foreign branches file a consolidated Federal income tax return.
Foreign Currency
The functional currency of the Company's foreign subsidiaries is the applicable
local currency. Assets and liabilities are translated into U.S. dollars using
the current exchange rates in effect at the balance sheet date, while revenues
and expenses are translated at the average exchange rate during the period. The
resulting translation adjustments are recorded as a component of other
comprehensive earnings within stockholders' equity. Gains and losses resulting
from foreign currency transactions are included in Other income.
Revenue Recognition
Revenue is recognized at the "point of sale," which occurs when merchandise is
sold in an "over-the-counter" transaction or upon shipment to a customer. In
1998, 1997 and 1996, the largest portion of the Company's sales were denominated
in U.S. dollars.
Stock-Based Compensation
Employee stock options are accounted for under the intrinsic value method, which
measures compensation cost as the excess, if any, of the quoted market price of
the stock at grant date over the amount an employee must pay to acquire the
stock. The Company makes pro forma disclosures of net earnings and earnings per
share as if the fair-value-based method of accounting had been applied as
required by Statement of Financial Accounting Standards ("SFAS") No. 123,
"Accounting for Stock-Based Compensation" ("SFAS No. 123").
Earnings Per Share
Basic earnings per share is computed as net earnings divided by the weighted
average number of common shares outstanding for the period. Diluted earnings per
share includes the dilutive effect of the assumed exercise of stock options and,
through the second quarter of 1996, reflects the assumed conversion of the
Company's $50,000,000 principal amount 63 1/48% Convertible Subordinated
Debentures Due 2001 (the
28 Tiffany & Co. and Subsidiaries
<PAGE> 16
"Debentures"). All per share data and the weighted average number of common
shares have been retroactively restated to conform to the requirements of SFAS
No. 128, "Earnings Per Share" ("SFAS No. 128").
Reclassifications
Certain reclassifications were made to prior years' consolidated financial
statements to conform with the current year's presentation.
New Accounting Standards
In February 1998, the American Institute of Certified Public Accountants'
Accounting Standards Executive Committee issued Statement of Position No. 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use" ("SOP No. 98-1"). SOP No. 98-1 requires certain costs incurred in
connection with developing or obtaining internal-use software to be capitalized
and other costs to be expensed. The Company adopted SOP No. 98-1 effective
February 1998 and its application in that year had no material effect on the
Company's financial position or results of operations.
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS No.
133"), which requires that an entity recognize all derivative instruments as
either assets or liabilities on its balance sheet at their fair value. Gains and
losses resulting from changes in the fair value of derivatives are recorded each
period in current or comprehensive earnings, depending on whether a derivative
is designated as part of a hedge transaction, and, if it is, the type of hedge
transaction. Gains and losses on derivative instruments reported in
comprehensive earnings will be reclassified to earnings in the period in which
earnings are affected by the hedged item. SFAS No. 133 is effective for the
Company's financial statements for the year ending January 31, 2001 and the
Company is currently evaluating the impact of this new FASB statement on its
financial position and results of operations.
B. ACQUISITIONS AND DISPOSITIONS
In March 1999, the Company acquired the business of a TIFFANY&CO. retail
boutique operated by Mitsukoshi, Ltd. for $6,900,000.
In February 1998, the Company acquired substantially all of the assets and
assumed certain liabilities of a TIFFANY & CO. retail boutique operated by
Mitsukoshi, Ltd., a related party (see Note K), for $8,150,000 plus contingent
payments based on operating performance over a five-year period. This
acquisition was accounted for under the purchase method and, accordingly, the
assets and liabilities have been recorded at their estimated fair values at the
date of acquisition. The excess of the purchase price over the estimated fair
values of the net assets acquired has been recorded as goodwill.
In January 1997, the Company sold the assets and business of Howard H. Sweet &
Son, Inc., a manufacturer of gold and silver components and finished products
located in Massachusetts, for $15,000,000. As a result of this sale, the Company
recorded a pretax gain of $4,500,000 which was included in Other income.
C. SUPPLEMENTAL CASH FLOW
INFORMATION
Supplemental cash flow information:
<TABLE>
<CAPTION>
Years Ended January 31,
---------------------------------
(in thousands) 1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash paid during the year for:
Interest $ 7,806 $ 7,242 $10,985
=================================
Income taxes $47,625 $49,827 $39,001
=================================
</TABLE>
Details of businesses acquired in purchase transactions:
<TABLE>
<S> <C> <C> <C>
Fair value of
assets acquired $12,302 $ -- $ --
Less: liabilities
assumed 4,152 -- --
---------------------------------
Net cash paid for
acquisitions $ 8,150 $ -- $ --
=================================
</TABLE>
Tiffany & Co. and Subsidiaries 29
<PAGE> 17
Supplemental Noncash Investing and Financing Activities:
<TABLE>
<CAPTION>
Years Ended January 31,
---------------------------------
(in thousands) 1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Financing activities:
Conversion of
Subordinated
Debentures
to equity $ -- $ -- $48,343
=================================
Issuance of
Common Stock
for the Employee
Profit Sharing
and Retirement
Savings Plan $ 1,400 $ 1,800 $ 1,000
=================================
</TABLE>
D. INVENTORIES
<TABLE>
<CAPTION>
January 31,
------------------------
(in thousands) 1999 1998
- -------------------------------------------------------------------------------
<S> <C> <C>
Finished goods $413,371 $327,314
Raw materials 66,258 57,926
Work-in-process 3,599 2,918
------------------------
483,228 388,158
Reserves (1,789) (1,727)
------------------------
$481,439 $386,431
========================
</TABLE>
LIFO-based inventories at January 31, 1999 and 1998 were $363,322,000 and
$292,353,000, with the current cost exceeding the LIFO inventory value by
approximately $15,870,000 in both years. The LIFO valuation method had no effect
on net earnings for the year ended January 31, 1999. The LIFO valuation method
had the effect of decreasing net earnings by $0.02 and $0.05 per share for the
years ended January 31, 1998 and 1997.
E. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
January 31,
----------------------------
(in thousands) 1999 1998
- -------------------------------------------------------------------------------
<S> <C> <C>
Leasehold improvements $ 157,243 $ 135,290
Office equipment 68,526 53,469
Machinery and equipment 84,299 63,060
----------------------------
310,068 251,819
Accumulated depreciation
and amortization (120,273) (95,452)
----------------------------
$ 189,795 $ 156,367
============================
</TABLE>
The provision for depreciation and amortization for the years ended January 31,
1999, 1998 and 1997 was $29,347,000, $22,745,000 and $19,835,000.
F. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
<TABLE>
<CAPTION>
January 31,
--------------------
(in thousands) 1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
Accounts payable-trade $ 63,117 $ 51,283
Accrued compensation
and commissions 19,994 10,977
Other 57,549 56,196
--------------------
$140,660 $118,456
====================
</TABLE>
G. EARNINGS PER SHARE
The following table summarizes the reconciliation of the numerators and
denominators for the basic and diluted earnings per share ("EPS") computations:
<TABLE>
<CAPTION>
Years Ended January 31,
-------------------------------
(in thousands) 1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Net earnings
for basic EPS $90,062 $72,822 $58,439
Dilutive securities:
Debentures -- -- 682
-------------------------------
Net earnings for
diluted EPS $90,062 $72,822 $59,121
===============================
Weighted average
shares for
basic EPS 34,965 34,953 33,682
Incremental shares upon conversions:
Debentures -- -- 690
Stock options 1,019 1,151 1,318
-------------------------------
Weighted average
shares for
diluted EPS 35,984 36,104 35,690
===============================
</TABLE>
30 Tiffany & Co. and Subsidiaries
<PAGE> 18
H. DEBT
<TABLE>
<CAPTION>
January 31,
-------------------------
(in thousands) 1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
Short-term borrowings $ 97,370 $ 90,054
Long-term debt:
7.52% Senior Notes 51,500 51,500
6.90% Series A Senior Notes 60,000 --
7.05% Series B Senior Notes 40,000 --
4.50% Japan long-term debt 42,920 39,430
-------------------------
$291,790 $180,984
=========================
</TABLE>
In December 1998, the Company, in private transactions with various
institutional lenders, issued, at par, $60,000,000 principal amount 6.90% Series
A Senior Notes Due 2008 and $40,000,000 principal amount 7.05% Series B Senior
Notes Due 2010. The proceeds of these new issuances are being used by the
Company for working capital and to refinance a portion of outstanding short-term
indebtedness under the Company's revolving credit facility. The Note Purchase
Agreements evidencing these transactions 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.
In April 1998, the Company's $130,000,000 multicurrency revolving credit
facility (the "Credit Facility") was amended to increase the amount to
$160,000,000. The Company is entitled to borrow under the Credit Facility as
follows: $31,250,000 on a pro-rata basis from each of three banks, $30,000,000
from one bank and $36,250,000 from an agent bank. All borrowings are at interest
rates based on a prime rate or a reserve-adjusted LIBOR. The Credit Facility
expires on June 30, 2002. At January 31, 1999 and 1998, the amounts outstanding
under the Credit Facility were $96,823,000 and $87,734,000 with interest rates
ranging from 0.51% to 21.00% and 0.70% to 21.00%. The weighted average interest
rates were 2.10% and 1.71% for the years ended January 31, 1999 and 1998.
The Credit Facility requires the payment of an annual fee based on the total
amount of available credit 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 1996, the Company entered into a yen 5,000,000,000, 15-year term loan
agreement bearing interest at a rate of 4.50%. The proceeds from this loan were
used for working capital and construction costs associated with the Company's
flagship store in Tokyo, which opened in 1996, as well as to reduce short-term
indebtedness in Japan.
On June 24, 1996 (the "Redemption Date"), the Company redeemed $916,000 of its
$50,000,000 Debentures. The remaining $49,084,000 principal amount of the
Debentures was converted, at the option of the holders, into shares of the
Company's Common Stock. In accordance with the terms of the Debentures, the
redemption price was 101% of their principal amount, subject to conversion of
principal at the rate of $28.00 per share (adjusted to reflect the two-for-one
stock split in July 1996). The right of conversion expired at the close of
business on the Redemption Date. If the Debentures had been converted at the
beginning of the period, basic earnings per share would have been reduced by
$0.03 per share.
In 1992, the Company entered into agreements with a group of lenders to issue,
at par, $51,500,000 of 7.52% Senior Notes Due 2003. The Note Purchase 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 fair value of the 7.52% Senior Notes at January 31, 1999 and 1998 was
$53,766,000 and $54,358,000. The fair value of the 6.90% Series A and 7.05%
Series B Senior Notes at January 31, 1999 was $60,636,000 and $40,476,000. The
fair value of the Senior Notes was determined using the quoted market prices of
debt instruments with similar terms and maturities. The fair value of the 4.50%
Japan long-term debt was $50,770,000 and $45,904,000 at January 31, 1999 and
1998 and was based upon discounted cash flow analysis for securities with
similar characteristics.
Tiffany & Co. and Subsidiaries 31
<PAGE> 19
I. FINANCIAL INSTRUMENTS
The Company manages a foreign currency hedging program intended to reduce the
Company's risk in foreign currency-denominated (primarily yen) transactions (see
Note A). At January 31, 1999, the Company had outstanding foreign
currency-purchased put options maturing at various dates through January 24,
2000, giving it the right, but not the obligation, to sell yen 13,566,000,000 at
predetermined contract-exchange rates. If the market yen-exchange rates at
maturity are below the contracted rates, the Company will allow the options to
expire. Recognized gains on the Company's purchased put options were $7,731,000,
$6,374,000 and $3,472,000 in 1998, 1997 and 1996 with unamoritized gains
totaling $2,386,000, $3,918,000 and $2,160,000 for those years. At January 31,
1999, there were no deferred unrealized gains on the Company's purchased put
options.
At January 31, 1999 and 1998, the Company also had $5,917,000 and $7,483,000 of
outstanding forward exchange yen contracts, which subsequently matured on
February 26, 1999 and 1998, to support the settlement of merchandise liabilities
for the Company's business in Japan. The Company's pretax expense related to its
hedging program was $3,455,000, $1,631,000 and $1,827,000 in 1998, 1997 and
1996.
J. COMMITMENTS AND CONTINGENCIES
The Company leases certain office, distribution, retail and manufacturing
facilities. The lease agreements, which expire at various dates through 2016,
are subject, in some cases, to renewal options and provide for the payment of
taxes, insurance and maintenance. Certain leases contain escalation clauses
resulting from the pass-through of increases in operating costs, property taxes
and the effect on costs from changes in consumer price indices.
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 for the company's operating leases, including escalations,
consisted of the following:
<TABLE>
<CAPTION>
Years Ended January 31,
---------------------------------------
(in thousands) 1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Minimum rent $40,633 $33,682 $33,302
Contingent rent
based on sales 7,818 5,557 3,776
---------------------------------------
$48,451 $39,239 $37,078
=======================================
</TABLE>
Future minimum annual rental payments under noncancelable operating leases are
as follows:
<TABLE>
<CAPTION>
Minimum Annual
Rental Payments
Years Ending January 31, (in thousands)
- --------------------------------------------------------------------------------
<S> <C>
2000 $ 42,787
2001 33,781
2002 31,938
2003 30,051
2004 27,444
2005 and thereafter 134,195
</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 financial position, results of operations or cash
flows.
K. RELATED PARTY TRANSACTIONS
On February 3, 1999, Mitsukoshi, Ltd. ("Mitsukoshi"), a leading Japanese
department store group, sold 4,270,000 shares of the Company's Common Stock in a
public offering at $56.00 per share. Prior to this public offering, Mitsukoshi
owned approximately 12.3% of the Company's outstanding Common Stock. Until July
1993, Mitsukoshi was the Company's principal product distributor in Japan.
Pursuant to a written agreement, the Company now operates TIFFANY & CO.
boutiques in Mitsukoshi's stores and a flagship store in Tokyo, and, in
exchange, pays Mitsukoshi fees based on
32 Tiffany & Co. and Subsidiaries
<PAGE> 20
a percentage of net retail sales; such fees totaled $57,400,000, $50,300,000 and
$47,500,000 in 1998, 1997 and 1996. Mitsukoshi also operates certain boutiques
in the Asia-Pacific region, primarily outside of Japan. Wholesale sales to
Mitsukoshi totaled $5,200,000, $14,700,000 and $21,400,000 in 1998, 1997 and
1996. Trade receivables due from Mitsukoshi were $1,017,000 and $2,295,000 at
January 31, 1999 and 1998.
In 1993, 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 this
transaction, the Company agreed to repurchase approximately $115,000,000 of
TIFFANY & CO. merchandise previously sold to Mitsukoshi. In February 1998, the
Company repurchased all remaining merchandise under this agreement.
In 1996, the Company prepaid its long-term trade payable to Mitsukoshi which
amounted to yen 2,750,000,000, which was due on or before February 28, 1998.
L. STOCKHOLDERS' EQUITY
Stock Repurchase Program
In November 1997, the Board of Directors authorized the repurchase of up to
$100,000,000 of the Company's Common Stock in the open market over a three-year
period. The timing and actual number of shares purchased will depend on a
variety of factors such as price and other market conditions. During 1998 and
1997, the Company repurchased and retired 798,600 and 225,000 shares of Common
Stock at an aggregate cost of $30,035,000 and $8,672,000, or an average cost of
$37.61 and $38.54 per share.
Authorized Stock
In May 1996, the stockholders approved an amendment to the Company's Restated
Certificate of Incorporation to increase the number of common shares authorized
from 30,000,000 shares to 60,000,000 shares. Subsequently, the Board of
Directors declared a two-for-one split of the Company's Common Stock, which was
effected in the form of a share distribution (stock dividend), distributed on
July 23, 1996 to stockholders of record on June 28, 1996. All applicable share
and per share data have been retroactively adjusted to reflect the stock split.
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, 1999 and 1998, there were no shares
of Preferred Stock issued or outstanding.
Stockholder Rights Plan
In September 1998, the Board of Directors amended and restated the Company's
existing Stockholder Rights Plan (the "Rights Plan") to extend its expiration
date from November 17, 1998 to September 17, 2008. Under the Rights Plan, as
amended, each outstanding share of the Company's Common Stock has a stock
purchase right, initially subject to redemption at $0.01 per right, which right
first becomes exercisable should certain take-over-related events occur.
Following certain such events, but before any person has acquired beneficial
ownership of 15% of the Company's 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 $165.00 (subject to
adjustment); after such an acquisition, each right becomes nonredeemable and may
be used to purchase for the exercise price common shares having a market value
equal to two times the exercise price. If, after such 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
Tiffany & Co. and Subsidiaries 33
<PAGE> 21
exercise price, common shares of the acquiring corporation having a market value
equal to two times the exercise price. Rights held by such a 15% owner may not
be exercised.
Cash Dividends
In May 1998 and 1997, the Board of Directors increased cash dividends on common
shares by 29% and 40%, increasing the quarterly rate to $0.09 and $0.07 per
share. On February 17, 1999, the Board of Directors declared a quarterly
dividend of $0.09 per common share. This dividend will be paid on April 12, 1999
to stockholders of record on March 22, 1999.
M. STOCK COMPENSATION PLANS
In May 1998, the stockholders approved both the Company's 1998 Employee
Incentive Plan and Directors Option Plan. No award may be made under either plan
after March 19, 2008. Under the Employee Incentive Plan, the maximum number of
shares of Common Stock subject to award is 1,750,000 (subject to adjustment);
awards may be made to employees of the Company or its related companies in the
form of stock options, stock appreciation rights, shares of stock and cash;
awards made in the form of non-qualified stock options, tax-qualified incentive
stock options or stock appreciation rights may have a maximum term of 10 years
and may not be granted for an exercise price below fair market value. With the
adoption of the Employee Incentive Plan, no further stock options may be granted
under the Company's 1986 Stock Option Plan; however, 2,248,268 shares remain
subject to issuance based on prior grants made under such plan. Under the
Directors Option Plan, the maximum number of shares of Common Stock subject to
award is 250,000 (subject to adjustment); awards may be made to non-employee
directors of the Company in the form of stock options or shares of stock but may
not exceed 5,000 shares per non-employee director in any fiscal year; awards
made in the form of stock options may have a maximum term of 10 years and may
not be granted for an exercise price below fair market value unless the director
has agreed to forego all or a portion of his or her annual cash retainer or
other fees for service as a director in exchange for below market exercise price
options. No further options may be granted under the 1988 Directors Option Plan,
which has expired; all options awarded under the 1988 Plan were granted at 50%
below the market value at the date of grant and the Company has recognized
compensation expense relating to such options based on the difference between
the option price and the fair market value at the date of grant.
A summary of activity for the Company's stock option plans is presented below:
<TABLE>
<CAPTION>
Weighted
Number Average
of Exercise
Shares Price
- --------------------------------------------------------------------------------
<S> <C> <C>
Outstanding, January 31, 1996 3,562,536 $18.90
Granted 427,961 36.54
Exercised (763,147) 17.48
Forfeited (120,663) 19.20
-------------------------
Outstanding, January 31, 1997 3,106,687 21.46
Granted 623,198 38.60
Exercised (576,002) 16.68
Forfeited (128,948) 27.41
-------------------------
Outstanding, January 31, 1998 3,024,935 25.52
Granted 788,225 58.34
Exercised (570,163) 19.42
Forfeited (102,600) 32.70
-------------------------
Outstanding, January 31, 1999 3,140,397 $34.64
=========================
</TABLE>
The number of options exercisable at January 31, 1999, 1998 and 1997 were
1,608,838, 1,676,377 and 1,745,551.
34 Tiffany & Co. and Subsidiaries
<PAGE> 22
The Company continues to account for stock-based compensation using the
intrinsic value method. Accordingly, compensation expense has not been
recognized for stock options granted at or above fair value. Had compensation
expense been determined and recorded based upon fair value at grant date, net
earnings and earnings per share would have been reduced to pro forma amounts as
follows:
<TABLE>
<CAPTION>
Years Ended January 31,
(in thousands, -------------------------------
except per share amounts) 1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Net earnings:
As reported $90,062 $72,822 $58,439
Pro forma 87,858 71,469 57,680
Basic earnings per share:
As reported 2.58 2.08 1.74
Pro forma 2.51 2.04 1.71
Diluted earnings per share:
As reported 2.50 2.02 1.66
Pro forma 2.44 1.98 1.64
</TABLE>
The pro forma effect on net earnings and earnings per share only takes into
account options granted since January 1, 1995 and is likely to increase in
future years as additional options are granted and amortized on a pro-rata basis
over the vesting period of such options, which extend beyond the reported years.
The weighted-average fair value of options granted for the years ended January
31, 1999, 1998 and 1997 were $19.18, $11.07 and $10.78. The fair value of each
option grant is estimated at the date of grant using the Black-Scholes
option-pricing model with the following weighted average assumptions:
<TABLE>
<CAPTION>
Years Ended January 31,
--------------------------------
1999 1998 1997
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Dividend yield 0.8% 0.8% 0.8%
Expected volatility 30.5% 21.5% 20.0%
Risk-free interest rate 4.8% 5.5% 6.2%
Expected life (years) 5 5 5
</TABLE>
The following tables summarize information concerning options outstanding and
exercisable at January 31, 1999:
<TABLE>
<CAPTION>
Options Outstanding
---------------------------------------
Weighted
Average Weighted
Range Remaining Average
of Exercise Number Contractual Exercise
Prices Outstanding Life (years) Price
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 3.00-$18.00 761,814 6.2 $14.67
$18.00-$35.00 730,583 6.6 25.40
$35.00-$60.00 1,648,000 13.0 47.97
---------------------------------------
3,140,397 9.9 $34.64
=======================================
</TABLE>
<TABLE>
<CAPTION>
Options Exercisable
---------------------------
Weighted
Range Average
of Exercise Number Exercise
Prices Exercisable Price
- --------------------------------------------------------------------------------
<S> <C> <C>
$ 3.00-$18.00 756,564 $14.66
$18.00-$35.00 573,758 24.90
$35.00-$60.00 278,516 38.32
---------------------------
1,608,838 $22.41
============================
</TABLE>
Tiffany & Co. and Subsidiaries 35
<PAGE> 23
N. EMPLOYEE BENEFIT PLANS
Pensions and Other Postretirement Benefits
Effective January 31, 1999, the Company adopted SFAS No. 132, "Employers'
Disclosures about Pensions and Other Postretirement Benefits" ("SFAS No. 132").
The provisions of SFAS No. 132 provide new disclosure requirements for pensions
and other postretirement benefit plans, but do not change the measurement or
recognition of these plans. SFAS No. 132 standardizes the disclosure
requirements for pensions and other postretirement benefits to the extent
practicable and requires additional information on the changes in benefit
obligations and fair values of plan assets that will facilitate financial
analysis.
The Company maintains 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 obligation
is calculated based on the expected date of separation or retirement of the
Company's eligible employees.
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 U.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
prior years' claims experience. Based on current estimates and a fixed
health-care-cost trend rate of 6.50%, an increase to this rate by one percentage
point would increase the Company's accumulated postretirement benefit obligation
by $1,310,000 and the aggregate service and interest cost components of net
periodic postretirement benefits by $172,000 for the year ended January 31,
1999. Decreasing the health-care-cost trend rate by one percentage point would
decrease the Company's accumulated postretirement benefit obligation by
$1,200,000 and the aggregate service and interest cost components of net
periodic postretirement benefits by $156,000 for the year ended January 31,
1999.
36 Tiffany & Co. and Subsidiaries
<PAGE> 24
The following tables provide reconciliations of benefit obligations, plan assets
and funded status of the plans, as required by SFAS No. 132:
<TABLE>
<CAPTION>
Other Postretirement
Pension Benefits Benefits
-----------------------------------------------
(in thousands, except percentages) 1999 1998 1999 1998
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CHANGE IN BENEFIT OBLIGATION:
Benefit obligation at February 1 $ 58,748 $ 49,991 $ 15,064 $ 14,653
Service cost 3,501 3,123 1,253 979
Interest cost 4,089 3,693 1,055 937
Participants' contributions -- -- 12 15
Amendments -- 1,000 -- --
Actuarial gain (loss) 6,950 3,479 2,047 (847)
Benefits paid (2,596) (2,538) (508) (673)
-----------------------------------------------
Benefit obligation at January 31 $ 70,692 $ 58,748 $ 18,923 $ 15,064
===============================================
CHANGE IN PLAN ASSETS:
Fair value of plan assets at February 1 $ 56,803 $ 48,511 $ -- $ --
Actual return on plan assets 13,178 10,830 -- --
Employer contribution -- -- 496 658
Participants' contributions -- -- 12 15
Benefits paid (2,596) (2,538) (508) (673)
-----------------------------------------------
Fair value of plan assets at January 31 $ 67,385 $ 56,803 $ -- $ --
===============================================
Funded status $ (3,307) $ (1,945) $(18,923) $(15,064)
Unrecognized net actuarial gain (5,319) (2,776) (2,666) (4,898)
Unrecognized prior service cost (obligation) 1,189 1,421 (257) (297)
Unrecognized transition obligation 238 341 -- --
-----------------------------------------------
Accrued benefit cost at January 31 $ (7,199) $ (2,959) $(21,846) $(20,259)
===============================================
Weighted-average assumptions at January 31:
Discount rate 6.25% 7.00% 6.25% 7.00%
Expected return on plan assets 9.00% 9.00% -- --
Rate of increase in compensation 4.00% 4.50% -- --
</TABLE>
Net periodic pension and other postretirement benefit costs included the
following components:
<TABLE>
<CAPTION>
Other Postretirement
Pension Benefits Benefits
--------------------------------------------------------------
(in thousands) 1999 1998 1997 1999 1998 1997
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Service cost-benefits
earned during period $ 3,501 $ 3,123 $ 2,989 $ 1,253 $ 979 $ 1,101
Interest cost on accumulated
benefit obligation 4,089 3,693 3,317 1,055 937 804
Return on plan assets (3,999) (3,738) (2,420) -- -- --
Net amortization and deferrals 649 456 -- (225) (333) --
--------------------------------------------------------------
Net expense $ 4,240 $ 3,534 $ 3,886 $ 2,083 $ 1,583 $ 1,905
==============================================================
</TABLE>
Tiffany & Co. and Subsidiaries 37
<PAGE> 25
Profit Sharing and Retirement Savings Plan
The Company also maintains an Employee Profit Sharing and Retirement Savings
Plan (the "EPSRS Plan") that covers substantially all U.S.-based employees.
Under the profit sharing portion of the EPSRS Plan, the Company makes
contributions to the employees' accounts based upon the achievement of certain
targeted earnings objectives established by the Board of Directors. The
Company's contribution in 1998, 1997 and 1996 totaled $1,600,000, $1,400,000 and
$1,800,000 in the form of newly issued Company Common Stock. Under the
retirement savings feature, employees who meet certain eligibility requirements
can participate in the EPSRS Plan by contributing up to 15% of their annual
compensation and the Company provides a 50% matching contribution up to 6% of
each participant's total compensation. The Board of Directors approved the
annual 50% matching contribution feature of the EPSRS Plan during the year ended
January 31, 1997. The Company's contribution totaled $2,477,000, $2,152,000 and
$1,631,000 in 1998, 1997 and 1996.
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 payments, disability benefits and continuation of
health care benefits and life insurance coverage.
O. INCOME TAXES
Earnings before income taxes consisted of the following:
<TABLE>
<CAPTION>
Years Ended January 31,
------------------------------------------
(in thousands) 1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
United States $118,541 $102,032 $ 76,357
Foreign 37,107 25,726 26,529
------------------------------------------
$155,648 $127,758 $102,886
==========================================
</TABLE>
Components of the provision for income taxes were as follows:
<TABLE>
<CAPTION>
Years Ended January 31,
------------------------------------------
(in thousands) 1999 1998 1997
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ 38,346 $ 32,934 $ 27,637
State 13,250 11,263 9,896
Foreign 14,384 12,621 12,771
------------------------------------------
65,980 56,818 50,304
------------------------------------------
Deferred:
Federal (511) (106) (3,160)
State (307) (130) (1,469)
Foreign 424 (1,646) (1,228)
------------------------------------------
(394) (1,882) (5,857)
------------------------------------------
$ 65,586 $ 54,936 $ 44,447
==========================================
</TABLE>
Deferred tax assets (liabilities) consisted of the following:
<TABLE>
<CAPTION>
January 31,
--------------------------
(in thousands) 1999 1998
- -------------------------------------------------------------------------------
<S> <C> <C>
Postretirement/
employment benefits $ 10,160 $ 9,515
Product return reserves 651 1,601
Inventory reserves 8,314 7,784
Accrued expenses 4,798 4,388
Financial hedging instruments 1,619 2,449
Depreciation (1,192) (603)
Pension contribution 2,466 537
Undistributed earnings of
foreign subsidiaries (6,316) (4,937)
Other 6,593 5,498
--------------------------
$ 27,093 $ 26,232
==========================
</TABLE>
38 Tiffany & Co. and Subsidiaries
<PAGE> 26
The income tax effects of items comprising the deferred income tax benefit were
as follows:
<TABLE>
<CAPTION>
Years Ended January 31,
-------------------------------------
(in thousands) 1999 1998 1997
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Postretirement/
employment benefit
obligations $ (645) $ (424) $ (528)
Product return
reserves 950 2,403 1,821
Undistributed
earnings of
foreign
subsidiaries 1,378 1,118 1,840
Accelerated
depreciation 244 219 (856)
Inventory reserves (538) (744) (1,399)
Financial hedging
instruments 830 (762) (1,687)
Excess pension
contribution (1,929) (1,608) (1,768)
Other (684) (2,084) (3,280)
-------------------------------------
$ (394) $(1,882) $(5,857)
=====================================
</TABLE>
Reconciliations of the provision for income taxes at the statutory Federal
income tax rate to the Company's effective tax rate were as follows:
<TABLE>
<CAPTION>
Years Ended January 31,
----------------------------
1999 1998 1997
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory Federal
income tax rate 35.0% 35.0% 35.0%
State income taxes,
net of Federal benefit 5.4 5.7 5.8
Foreign losses with
no tax benefit 0.6 0.7 1.1
Other 1.1 1.6 1.3
----------------------------
42.1% 43.0% 43.2%
============================
</TABLE>
P. OPERATING SEGMENTS
Effective January 31, 1999, the Company adopted SFAS No. 131, "Disclosures About
Segments of an Enterprise and Related Information" ("SFAS No. 131"), which
establishes revised standards for the reporting of operating segments and the
related descriptive information. SFAS No. 131 also establishes new standards for
related disclosures about products and services and geographic areas. Operating
segments are defined as components of a business enterprise about which separate
financial information is available and is evaluated regularly by the Company's
chief operating decision-maker or group in deciding how to allocate resources
and assess performance. The Company's chief operating decision-making group
consists of the Executive Officers of the Company.
The Company operates its business in three reportable segments: U.S. Retail,
International Retail and Direct Marketing (see Management's Discussion and
Analysis of Financial Condition and Results of Operations for an overview of the
Company's business). The Company's reportable segments represent channels of
distribution that offer similar merchandise and service and marketing and
distribution strategies. The Company's Executive Officers evaluate the
performance of its operating segments on the basis of net sales and earnings
from operations after the elimination of intersegment sales and transfers. The
accounting policies of the operating segments are the same as those described in
the summary of significant accounting policies (see Note A).
The Company's products are primarily sold in more than 100 TIFFANY & CO. stores
and boutiques in key markets around the world, as well as in select fine jewelry
and department stores. In Japan, the Company's largest international operation,
net sales accounted for 27% of the Company's net sales for the years ended
January 31, 1999, 1998 and 1997. Net sales by geographic area are presented by
attributing revenues from external customers on the basis of the country in
which the merchandise is sold.
Tiffany & Co. and Subsidiaries 39
<PAGE> 27
Certain information relating to the Company's reportable operating segments is
set forth below:
<TABLE>
<CAPTION>
Years Ended January 31,
--------------------------------------------
(in thousands) 1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales:
U.S. Retail $ 590,666 $ 491,459 $ 424,185
International
Retail 462,474 421,054 397,341
Direct
Marketing 116,104 105,103 100,582
--------------------------------------------
$1,169,244 $1,017,616 $ 922,108
============================================
Earnings
from operations*:
U.S. Retail $ 129,636 $ 102,140 $ 86,960
International
Retail 113,484 97,717 87,866
Direct
Marketing 15,005 10,425 11,276
--------------------------------------------
$ 258,125 $ 210,282 $ 186,102
============================================
</TABLE>
* Represents earnings from operations before unallocated corporate expenses and
interest and other expenses, net.
Executive Officers of the Company evaluate the performance of the Company's
assets on a consolidated basis. Therefore, separate financial information for
the Company's assets on a segment basis is not available. For the years ended
January 31, 1999, 1998 and 1997, total assets were $1,057,023,000, $827,067,000
and $739,418,000.
The following table sets forth reconciliations of the reportable segments'
earnings from operations to the Company's consolidated earnings before income
taxes:
<TABLE>
<CAPTION>
Years Ended January 31,
------------------------------------
(in thousands) 1999 1998 1997
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Earnings from
operations
for reportable
segments $258,125 $210,282 $186,102
Unallocated
corporate
expenses (97,003) (76,860) (76,689)
Interest and other
expenses, net (5,474) (5,664) (6,527)
------------------------------------
Earnings before
income taxes $155,648 $127,758 $102,886
====================================
</TABLE>
Sales to unaffiliated customers and long-lived assets, by geographic area, were
as follows:
GEOGRAPHIC AREAS
<TABLE>
<CAPTION>
Years Ended January 31,
------------------------------------------
(in thousands) 1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales:
United States $ 735,354 $ 629,436 $ 565,552
Japan 312,204 270,472 246,552
Other areas 121,686 117,708 110,004
------------------------------------------
$1,169,244 $1,017,616 $ 922,108
==========================================
Long-lived assets:
United States $ 188,482 $ 146,676 $ 119,291
Japan 4,887 4,279 5,142
Other areas 17,727 19,000 19,178
------------------------------------------
$ 211,096 $ 169,955 $ 143,611
==========================================
</TABLE>
CLASSES OF SIMILAR PRODUCTS
<TABLE>
<CAPTION>
Years Ended January 31,
--------------------------------------------
(in thousands) 1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales:
Jewelry $ 861,443 $ 739,201 $ 649,172
Timepieces,
tableware
and other 307,801 278,415 272,936
--------------------------------------------
$1,169,244 $1,017,616 $ 922,108
============================================
</TABLE>
40 Tiffany & Co. and Subsidiaries
<PAGE> 28
Q. QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
1998 Quarter Ended
---------------------------------------------
(in thousands, except per share amounts) April 30 July 31 October 31 January 31
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $226,159 $247,722 $252,560 $442,803
Gross profit 121,008 135,686 138,592 259,011
Earnings from operations 20,466 24,980 22,455 93,221
Net earnings 11,120 13,525 12,122 53,295
Net earnings per share*:
Basic $ 0.32 $ 0.38 $ 0.35 $ 1.54
=============================================
Diluted $ 0.31 $ 0.37 $ 0.34 $ 1.49
=============================================
<CAPTION>
1997 Quarter Ended
---------------------------------------------
(in thousands, except per share amounts) April 30 July 31 October 31 January 31
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $199,699 $217,149 $233,074 $367,694
Gross profit 106,254 116,627 126,879 214,448
Earnings from operations 16,703 19,245 21,426 76,048
Net earnings 8,880 10,380 11,463 42,099
Net earnings per share*:
Basic $ 0.26 $ 0.30 $ 0.33 $ 1.20
=============================================
Diluted $ 0.25 $ 0.29 $ 0.32 $ 1.17
=============================================
</TABLE>
* Basic and diluted earnings per share have been retroactively restated to
comply with the Financial Accounting Standards Board's SFAS No. 128, "Earnings
Per Share," adopted by the Company in 1997 (see Notes A and G).
The sum of the quarterly net earnings per share amounts may not equal the
full-year amount since the computations of the weighted average number of
common-equivalent shares outstanding for each quarter and the full year are made
independently.
Tiffany & Co. and Subsidiaries 41
<PAGE> 29
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
PricewaterhouseCoopers LLP, 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
/s/ Michael J. Kowalski
Michael J. Kowalski
President and Chief Executive Officer
/s/ James N. Fernandez
James N. Fernandez
Executive Vice President and Chief
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and
Board of Directors of Tiffany & Co.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of earnings, stockholders' equity and cash flows present
fairly, in all material respects, the consolidated financial position of Tiffany
& Co. and Subsidiaries at January 31, 1999 and 1998 and the consolidated results
of their operations and their cash flows for each of the three years in the
period ended January 31, 1999, in conformity with generally accepted accounting
principles. 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 of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audits 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, assessing the accounting principles used and
significant estimates made by management and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
New York, New York
March 2, 1999
42 Tiffany & Co. and Subsidiaries
<PAGE> 1
Tiffany & Co. Exhibit 21.1
Subsidiaries Tiffany & Co.
Report on Form 10-K
===============
TIFFANY & CO.
Delaware
August 16, 1984
===============
=================== =================
TIFFANY AND COMPANY TIFFANY & CO.
INTERNATIONAL
New York Delaware
May 30, 1968 October 11, 1984
=================== =================
Domestic International Domestic International
Subsidiaries Subsidiaries Subsidiaries 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
================ ====================== =================== ===================
================ ====================== =================== ===================
JUDEL SOCIETE FRANCAISE TIFFANY FARAONE
PRODUCTS CORP. POUR LE DEVELOPPEMENT S.p.A.
(Formerly DE LA PORCELAINE D'ART
Glassware
Acquisition Inc.
West Virginia France Italy
================ ====================== ===================
================ ====================== ===================
TIFFANY & CO. TIFFCO. KOREA LTD.
(Unlimited Liability)
United Kingdom Republic of Korea
====================== ===================
====================== ===================
TIFFANY & CO. K.K. Tiffany & Co.
(Tiffany and Company Mexico, S.A.
51% Mitsukoshi, Ltd. de C.V.
49%)
Japan Mexico
====================== ===================
====================== ===================
TIFFANY & CO.
OVERSEAS FINANCE
B.V.
Netherlands
===================
===================
TIFFANY & CO.
PTE LTD.
Singapore
===================
===============
UPTOWN ALLIANCE
(M) sdn. blvd
Malaysia
===============
===================
TIFFANY & CO.
A.G.
Switzerland-Canton
Zurich
===================
===================
TIFFANY & CO.
WATCH CENTER A.G.
Switzerland-Canton
Zurich
===================
<PAGE> 1
Exhibit 23.1
Tiffany & Co. Report on Form 10-K
Fiscal Year 1998
Consent of Independent Accountants
We consent to the incorporation by reference in the registration statement of
Tiffany & Co. on Form S-8 of our report, dated March 2, 1999, on our audits of
the consolidated financial statements and financial statement schedule of
Tiffany & Co. and Subsidiaries as of January 31, 1999 and 1998 and for each of
the three years in the period ended January 31, 1999, which report is
incorporated by reference in the Company's Annual Report on Form 10-K.
/s/ PricewaterhouseCoopers LLP
New York, New York
April 8, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<CASH> 188,593,000
<SECURITIES> 0
<RECEIVABLES> 116,487,000
<ALLOWANCES> 8,106,000
<INVENTORY> 481,439,000
<CURRENT-ASSETS> 815,644,000
<PP&E> 310,068,000
<DEPRECIATION> 120,273,000
<TOTAL-ASSETS> 1,057,023,000
<CURRENT-LIABILITIES> 292,717,000
<BONDS> 0
0
0
<COMMON> 347,000
<OTHER-SE> 516,106,000
<TOTAL-LIABILITY-AND-EQUITY> 1,057,023,000
<SALES> 1,169,244,000
<TOTAL-REVENUES> 1,169,244,000
<CGS> 514,947,000
<TOTAL-COSTS> 493,175,000
<OTHER-EXPENSES> 5,474,000
<LOSS-PROVISION> 1,996,000
<INTEREST-EXPENSE> 9,326,000
<INCOME-PRETAX> 155,648,000
<INCOME-TAX> 65,586,000
<INCOME-CONTINUING> 90,062,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 90,062,000
<EPS-PRIMARY> 2.58
<EPS-DILUTED> 2.50
<FN>
Note: The amount reported for EPS primary and fully diluted is in compliance
with with Statement of Financial Accounting Standards No. 128, "Earnings
Per Share" and represents the Basic and Diluted calculation as required by
this standard.
</FN>
</TABLE>
