SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 10-Q
----------------
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ----- EXCHANGE ACT OF 1934 for the quarter ended October 31, 1999. OR
- ----- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION FROM ________ TO _____________.
Commission file number: 1-9494
TIFFANY & CO.
(Exact name of registrant as specified in its charter)
Delaware 13-3228013
(State of incorporation) (I.R.S. Employer Identification No.)
727 Fifth Ave. New York, NY 10022
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 755-8000
Former name, former address and former fiscal year, if changed since last report
_________.
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 .
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding
of each of the issuer's classes of common stock as of the latest practicable
date: Common Stock, $.01 par value, 72,358,012 shares outstanding at the close
of business on October 31, 1999.
<PAGE>
TIFFANY & CO. AND SUBSIDIARIES
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED OCTOBER 31, 1999
PART I - FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Balance Sheets - October 31, 1999
(Unaudited), January 31, 1999 and
October 31, 1998 (Unaudited) 3
Consolidated Statements of Earnings - for the
three and nine month periods ended
October 31, 1999 and 1998 (Unaudited) 4
Consolidated Statements of Cash Flows - for
the nine months ended October 31, 1999
and 1998 (Unaudited) 5
Notes to Consolidated Financial Statements
(Unaudited) 6-11
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 12-18
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 19
(a) Exhibits
(b) Reports on Form 8-K
- 2 -
<PAGE>
PART I. Financial Information
Item 1. Financial Statements
TIFFANY & CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
October 31, January 31, October 31,
1999 1999 1998
-------------- ------------- --------------
(Unaudited) (Unaudited)
ASSETS
Current assets:
<S> <C> <C> <C>
Cash and cash equivalents $ 155,937 $ 188,593 $ 43,922
Accounts receivable, less allowances
of $9,176, $8,106 and $7,778 107,006 108,381 92,457
Inventories 575,962 481,439 519,427
Deferred income taxes 30,251 18,061 21,286
Prepaid expenses and other current assets 34,502 19,170 34,754
---------------- --------------- ----------------
Total current assets 903,658 815,644 711,846
Property and equipment, net 217,004 189,795 183,397
Deferred income taxes 8,037 9,032 7,674
Other assets, net 133,692 42,552 40,588
---------------- --------------- ----------------
$ 1,262,391 $ 1,057,023 $ 943,505
================ =============== ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 43,959 $ 97,370 $ 153,969
Accounts payable and accrued liabilities 194,253 140,660 154,052
Income taxes payable 10,370 32,485 5,171
Merchandise and other customer credits 26,353 22,202 19,756
---------------- --------------- ----------------
Total current liabilities 274,935 292,717 332,948
Long-term debt 251,618 194,420 94,315
Postretirement/employment benefit obligations 22,990 21,539 21,176
Other long-term liabilities 34,651 31,894 30,782
Commitments and contingencies
Stockholders' equity:
Common Stock, $.01 par value; authorized 120,000 shares,
issued and outstanding 72,358, 69,466 and 69,212 724 695 692
Additional paid-in capital 290,395 184,890 180,831
Retained earnings 393,587 344,223 294,289
Accumulated other comprehensive loss -
Foreign currency translation adjustments (6,509) (13,355) (11,528)
---------------- --------------- ----------------
Total stockholders' equity 678,197 516,453 464,284
---------------- --------------- ----------------
$ 1,262,391 $ 1,057,023 $ 943,505
================ =============== ================
</TABLE>
See notes to consolidated financial statements
- 3 -
<PAGE>
TIFFANY & CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
October 31, October 31,
------------------------------ ------------------------------
1999 1998 1999 1998
------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
Net sales $ 322,706 $ 252,560 $ 902,050 $ 726,441
Cost of sales 141,216 113,968 397,227 331,155
------------ ------------ ------------- ------------
Gross profit 181,490 138,592 504,823 395,286
Selling, general and administrative expenses 142,008 116,137 393,949 327,385
------------ ------------ ------------- ------------
Earnings from operations 39,482 22,455 110,874 67,901
Other expenses, net 2,257 1,554 6,170 4,141
------------ ------------ ------------- ------------
Earnings before income taxes 37,225 20,901 104,704 63,760
Provision for income taxes 15,263 8,779 43,604 26,993
------------ ------------ ------------- ------------
Net earnings $ 21,962 $ 12,122 $ 61,100 $ 36,767
============ ============ ============= ============
Net earnings per share:
Basic $ 0.30 $ 0.17 $ 0.86 $ 0.52
============ ============ ============= ============
Diluted $ 0.29 $ 0.17 $ 0.82 $ 0.51
============ ============ ============= ============
Weighted average number of common shares:
Basic 72,330 69,694 71,166 70,126
Diluted 75,602 71,050 74,117 72,090
</TABLE>
See notes to consolidated financial statements.
- 4 -
<PAGE>
TIFFANY & CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
October 31,
---------------------------------
1999 1998
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net earnings $ 61,100 $ 36,767
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Depreciation and amortization 26,902 21,580
Loss on equity investment 250 -
Provision for uncollectible accounts 992 1,217
Reduction in reserve for product return - (2,580)
Provision for inventories 5,776 3,350
Tax benefit from exercise of stock options 17,676 5,432
Deferred income taxes (10,786) (2,438)
Provision for postretirement/employment benefits 1,451 1,055
Changes in assets and liabilities, net of acquisitions:
Accounts receivable 2,240 10,490
Inventories (79,628) (114,704)
Prepaid expenses (13,963) (12,219)
Other assets, net (16,789) (2,550)
Accounts payable 8,985 24,907
Accrued liabilities 39,357 8,232
Income taxes payable (22,587) (18,813)
Merchandise and other customer credits 3,438 1,764
Other long-term liabilities 2,439 3,275
-------------- --------------
Net cash provided by (used in) operating activities 26,853 (35,235)
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Equity investment (70,636) -
Capital expenditures (52,743) (47,112)
Acquisitions, net of liabilities assumed (7,031) (8,150)
Proceeds from lease incentives 4,316 3,063
-------------- --------------
Net cash used in investing activities (126,094) (52,199)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of Common Stock 71,426 -
Proceeds from issuance of long-term debt 47,498 -
(Repayments of) proceeds from short-term borrowings (55,435) 54,014
Repurchase of Common Stock - (29,773)
Proceeds from exercise of stock options 14,832 8,643
Cash dividends on Common Stock (11,736) (8,780)
-------------- --------------
Net cash provided by financing activities 66,585 24,104
-------------- --------------
Net decrease in cash and cash equivalents (32,656) (63,330)
Cash and cash equivalents at beginning of year 188,593 107,252
-------------- --------------
Cash and cash equivalents at end of period $ 155,937 $ 43,922
============== ==============
</TABLE>
See notes to consolidated financial statements.
- 5 -
<PAGE>
TIFFANY & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. CONSOLIDATED FINANCIAL STATEMENTS
---------------------------------
The accompanying consolidated financial statements include the accounts
of Tiffany & Co. and all majority-owned domestic and foreign
subsidiaries (the "Company"). All material intercompany balances and
transactions have been eliminated. The interim statements are unaudited
and, in the opinion of management, include all adjustments (which
include only normal recurring adjustments including the adjustment
necessary as a result of the use of the LIFO (last-in, first-out)
method of inventory valuation, which is based on assumptions as to
inflation rates and projected fiscal year-end inventory levels)
necessary to present fairly the Company's financial position as of
October 31, 1999 and the results of its operations and cash flows for
the interim periods presented. The consolidated balance sheet data for
January 31, 1999 is derived from the audited financial statements which
are included in the Company's report on Form 10-K, which should be read
in connection with these financial statements. In accordance with the
rules of the Securities and Exchange Commission, these financial
statements do not include all disclosures required by generally
accepted accounting principles.
Since the Company's business is seasonal, with a higher proportion of
sales and earnings generated in the last quarter of the fiscal year,
the results of operations for the three and nine months ended October
31, 1999 and 1998 are not necessarily indicative of the results of the
entire fiscal year.
2. SUPPLEMENTAL CASH FLOW INFORMATION
----------------------------------
<TABLE>
<CAPTION>
Supplemental cash flow information:
<S> <C> <C>
October 31, October 31,
(in thousands) 1999 1998
-------------- ------------ -----------
Cash paid during the nine months for:
Interest $ 8,258 $ 5,187
============ ============
Income taxes $59,171 $42,356
============ ============
Details of businesses acquired in
purchase transactions:
Fair value of assets acquired $ 7,048 $12,302
Less: liabilities assumed 17 4,152
------------ ------------
Net cash paid for acquisitions $ 7,031 $ 8,150
============ ============
Supplemental Noncash Investing
and Financing Activities:
Issuance of Common Stock for the
Employee Profit Sharing and
Retirement Savings Plan $ 1,600 $ 1,400
============ ============
</TABLE>
- 6 -
<PAGE>
3. INVENTORIES
-----------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
October 31, January 31, October 31,
(in thousands) 1999 1999 1998
-------------- --------------- --------------- ---------------
Finished goods $507,933 $413,371 $444,555
Raw materials 64,338 66,258 76,149
Work-in-process 7,127 3,599 1,960
--------------- --------------- ---------------
579,398 483,228 522,664
Reserves (3,436) (1,789) (3,237)
--------------- --------------- ---------------
$575,962 $481,439 $519,427
=============== =============== ===============
</TABLE>
LIFO-based inventories at October 31, 1999, January 31, 1999 and
October 31, 1998 were $432,860,000, $363,322,000 and $387,995,000,
with the current cost exceeding the LIFO inventory value by
approximately $16,870,000, $15,870,000 and $16,870,000 at the end of
each period. The LIFO valuation method had no effect on net earnings
for the three month period ended October 31, 1999 and 1998. The LIFO
valuation method had the effect of decreasing net earnings by $0.01
and $0.02 per diluted share in each of the nine month periods ended
October 31, 1999 and 1998.
4. DEBT
----
On October 26, 1999, the Company entered into a yen 5,500,000,000,
five-year term loan agreement, bearing interest at the six-month
Japanese LIBOR rate plus 50 basis points, adjusted every six months.
The proceeds from this loan were primarily used to reduce short-term
indebtedness in Japan.
5. FINANCIAL HEDGING INSTRUMENTS
-----------------------------
On October 26, 1999, the Company entered into a five-year, yen
5,500,000,000 interest rate swap agreement. In addition to the interest
on the yen 5,500,000,000 term loan, the Company will pay a fixed rate
of interest of 1.815 percent and will receive the six-month Japanese
LIBOR rate plus 50 basis points, adjusted every six months.
In accordance with the Company's foreign currency hedging program, at
October 31, 1999, the Company had outstanding purchased put options
maturing at various dates through October 24, 2000, giving it the
right, but not the obligation, to sell yen 13,186,000,000 for dollars
at predetermined contract-exchange rates. If the market yen-exchange
rates at maturity are below the contract rates, the Company will allow
the options to expire. At October 31, 1999, there were no deferred
unrealized gains on the Company's purchased put options.
To mitigate the exchange rate fluctuations primarily related to
intercompany inventory purchases for the Company's business in Japan,
the Company enters into forward exchange yen contracts. At October 31,
1999, the Company had $19,421,000 of such contracts outstanding, which
will mature on November 26, 1999. At October 31, 1998, the Company had
$17,008,000 of such contracts outstanding, which subsequently matured
on January 26, 1999.
- 7 -
<PAGE>
6. EARNINGS PER SHARE
------------------
Basic earnings per share are computed by dividing net earnings by the
weighted average number of shares outstanding during the period.
Diluted earnings per share are calculated to give effect to potentially
dilutive stock options that were outstanding during the period.
The following table summarizes the reconciliation of the numerators and
denominators for the basic and diluted earnings per share ("EPS")
computations:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
October 31, October 31,
-------------------------- ----------------------------
(in thousands) 1999 1998 1999 1998
-------------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Net earnings for basic
and diluted EPS $21,962 $12,122 $61,100 $36,767
========= ========= ========= =========
Weighted average shares
for basic EPS 72,330 69,694 71,166 70,126
Weighted average incremental
shares from assumed
exercise of stock options: 3,272 1,356 2,951 1,964
--------- --------- ---------- ---------
Weighted average shares
for diluted EPS 75,602 71,050 74,117 72,090
========== ========= ========== =========
</TABLE>
7. COMPREHENSIVE EARNINGS
----------------------
Comprehensive earnings include all changes in equity during a period
except those resulting from investments by and distributions to
stockholders. The Company's foreign currency translation adjustments,
reported separately in stockholders' equity, are required to be
included in the determination of comprehensive earnings.
The components of comprehensive earnings were:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
October 31, October 31,
---------------------------- ----------------------------
(in thousands) 1999 1998 1999 1998
-------------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Net earnings $21,962 $12,122 $61,100 $36,767
Other comprehensive
gain(loss):
Foreign currency 7,097 11,977 6,846 6,871
translation adjustments
-------------- ------------- --------------- ------------
Comprehensive earnings $29,059 $24,099 $67,946 $43,638
=============== ============= =============== ============
</TABLE>
Foreign currency translation adjustments are not adjusted for income
taxes since they relate to investments that are permanent in nature.
- 8 -
<PAGE>
8. OPERATING SEGMENTS
------------------
The Company operates three reportable business 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.
Certain information relating to the Company's reportable operating
segments is set forth below:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
October 31, October 31,
---------------------------------- ---------------------------------
(in thousands) 1999 1998 1999 1998
-------------- ---- ---- ---- ----
Net sales:
<S> <C> <C> <C> <C>
U.S. Retail $ 161,491 $ 125,762 $ 452,694 $ 363,519
International Retail 132,869 101,249 371,917 290,987
Direct Marketing 28,346 25,549 77,439 71,935
--------------- ---------------- --------------- ---------------
$ 322,706 $ 252,560 $ 902,050 $ 726,441
=============== =============== ============== ===============
Earnings from
operations*:
U.S. Retail $ 30,715 $ 19,833 $ 87,735 $ 65,346
International Retail 29,094 22,327 89,382 64,296
Direct Marketing 2,952 2,027 10,964 8,265
--------------- ---------------- --------------- ---------------
$ 62,761 $ 44,187 $ 188,081 $ 137,907
=============== =============== ============== ===============
</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.
- 9 -
<PAGE>
The following table sets forth a reconciliation of the reportable
segment's earnings from operations to the Company's consolidated
earnings before income taxes:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
October 31, October 31,
---------------------------------- -------------------------------------
(in thousands) 1999 1998 1999 1998
-------------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Earnings from
operations for
reportable segments $ 62,761 $ 44,187 $ 188,081 $ 137,907
Unallocated
corporate expenses (23,279) (21,732) (77,207) (70,006)
Interest and other
expenses, net (2,257) (1,554) (6,170) (4,141)
--------------- --------------- -------------- ---------------
Earnings before
income taxes $ 37,225 $ 20,901 $ 104,704 $ 63,760
=============== =============== =============== ===============
</TABLE>
9. COMMON STOCK
------------
On July 23, 1999, the Company issued 1,450,000 shares of its Common
Stock at a price of $49.375 per share, resulting in net proceeds of
$71,426,000. The net proceeds from the sale were added to the Company's
working capital and have been used to support ongoing business
expansion.
On May 20, 1999, the stockholders approved an amendment to the
Company's Restated Certificate of Incorporation to increase the number
of common shares authorized from 60,000,000 shares to 120,000,000
shares.
On May 20, 1999, the Board of Directors declared a two-for-one split of
the Company's Common Stock, effected in the form of a share
distribution (stock dividend) paid on July 21, 1999 to stockholders of
record on June 23, 1999. Stock options and per share data have been
retroactively adjusted to reflect the split.
10. EQUITY INVESTMENT
-----------------
On July 16, 1999, the Company made a strategic investment in Aber
Resources Ltd. ("Aber"), a publicly-traded company headquartered in
Canada, by purchasing 8 million shares of its common stock at a cost of
$70,636,000, representing approximately 14.9% of Aber's outstanding
shares. Aber holds a 40% interest in the Diavik Diamonds Project in
Canada's Northwest Territories, an operation being developed to mine
gem-quality diamond reserves. Production is expected to commence in
2003. This investment is included in Other assets, net and is accounted
for under the equity method. The Company's share of Aber's results
from operations has been included in Other expenses, net and is
not material.
In addition, the Company will form a joint venture and enter into a
diamond purchase agreement with Aber. It is expected that this
commercial relationship will enable the Company to secure a considerable
portion of its future diamond needs.
- 10 -
<PAGE>
11. SUBSEQUENT EVENTS
-----------------
On November 18, 1999, the Company's Board of Directors declared a
quarterly dividend of $0.06 per common share. This dividend will be
paid on January 10, 2000 to stockholders of record on December 20,
1999.
On November 22, 1999, the Company purchased the land and building for
its flagship store at Fifth Avenue and 57th Street, New York City, for
a cash purchase price of $94,000,000, plus $5,300,000 in fees and
expenses. The financial effect between the cost of leasing and the cost
of ownership is not expected to have a significant impact upon
earnings.
- 11 -
<PAGE>
PART I. Financial Information
Item 2. 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) sales and catalog sales in the U.S.
All references to full years relate to the fiscal year that ends on January 31
of the following calendar year.
Net sales rose 28% in the three-month period (third quarter) ended October 31,
1999 and rose 24% in the nine-month period (year-to-date) ended October 31,
1999. Sales growth, combined with higher operating margins, resulted in net
earnings growth of 81% in the third quarter and 66% in the year-to-date.
Net sales by channel of distribution were as follows:
- ----------------------------------------------------
Three months Nine months
Ended October 31, Ended October 31,
------------------ -----------------
(in thousands) 1999 1998 1999 1998
- -------------- -------- -------- -------- --------
U.S. Retail $161,491 $125,762 $452,694 $363,519
International Retail 132,869 101,249 371,917 290,987
Direct Marketing 28,346 25,549 77,439 71,935
-------- -------- -------- --------
$322,706 $252,560 $902,050 $726,441
======== ======== ======== ========
U.S. Retail sales rose 28% in the third quarter and 25% in the year-to-date.
This was primarily due to comparable store sales growth of 22% in the third
quarter and 15% in the year-to-date, as well as from sales in new stores opened
during the past year. Sales in the Company's flagship New York store rose 16% in
the third quarter and 12% in the year-to-date, while comparable branch store
sales increased 24% in the third quarter and 17% in the year-to-date. Comparable
store sales growth primarily resulted from an increased number of transactions.
In addition, purchases by domestic customers continued to account for the
largest portion of the sales growth, although there was an increase in sales to
foreign tourists. In 1999, the Company opened a second store in Dallas, Texas, a
second store in Los Angeles, California, a store in Boca Raton, Florida and
acquired the business of a TIFFANY & CO. boutique in Guam from Mitsukoshi Ltd.
The Company's strategy is to open three to five new U.S. stores each year.
Wholesale sales to independent retailers in the U.S., which represented less
than 3% of total Company sales, declined in the third quarter and the
year-to-date. The Company will discontinue such business effective January 1,
2000, in order to focus on Company-operated store
- 12 -
<PAGE>
distribution in the U.S. Management does not expect that this decision will
significantly impact the Company's financial position or earnings.
International Retail sales increased 31% in the third quarter and 28% in the
year-to-date. In Japan, the Company's largest international market, comparable
store sales in local currency rose 10% in the third quarter and 12% in the
year-to-date due to sales growth throughout Japan. 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 yen
strengthened in 1999's third quarter and year-to-date and, as a result, total
Japan retail sales, when translated into U.S. dollars, increased 34% and 30% in
the third quarter and the year-to-date, respectively. The Company's hedging
program uses yen put options in order to stabilize product costs over the
short-term, despite exchange rate fluctuations. 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.
In the Asia-Pacific region outside Japan, comparable store sales in local
currencies rose 49% in the third quarter and 33% in the year-to-date due to
improvement in most markets. In Europe, comparable store sales in local
currencies rose 33% in the third quarter and 24% in the year-to-date,
particularly due to strength in London.
The Company's international retail expansion in 1999 has included: in Japan,
opening two new department store boutiques and renovating/expanding five
existing boutiques and its Tokyo Ginza flagship store; expanding its Hong
Kong-Landmark store; opening a second store in Mexico City; and opening a store
in Paris.
Direct Marketing sales increased 11% in the third quarter and 8% in the
year-to-date. Corporate sales increased 9% and 5% in the third quarter and
year-to-date, while catalog sales rose 14% and 12% in the third quarter and
year-to-date. The Company anticipates increasing its catalog mailings by
approximately 7% in 1999.
Gross Profit
- ------------
Gross profit as a percentage of net sales was 56.2% in the third quarter and
56.0% in the year-to-date, compared with 54.9% and 54.4% in the respective
prior-year periods. Management attributes the increases to favorable shifts in
sales mix and leveraging of fixed costs, as well as product
manufacturing/sourcing efficiencies and selective price increases. In order to
maintain gross margin at, or above, prior-year levels, the Company's strategy
includes selective price increases, achieving further product
manufacturing/sourcing efficiencies and leveraging fixed costs.
Selling, General and Administrative Expenses
- --------------------------------------------
Selling, general and administrative expenses increased 22% in the third quarter
and 20% in the year-to-date, primarily due to incremental occupancy, staffing
and marketing expenses related to the Company's worldwide expansion program, as
well as to sales-related variable expenses. As a percentage of net sales, the
operating expense ratios of 44.0% in the third quarter and 43.7% in the
year-to-date represented improvements of 2.0 points and 1.4 points versus 1998.
Management's ongoing objective is to reduce the expense ratio by leveraging the
Company's fixed-expense base.
- 13 -
<PAGE>
Other Expenses, net
- -------------------
Other expenses, net rose in the third quarter and the year-to-date primarily due
to higher interest expense related to a $100,000,000 long-term financing that
the Company completed in December 1998. Management expects Other expenses, net
in the next four quarters to be higher than prior-year levels resulting from the
Company's purchase of its flagship store in New York in November 1999 (see
Financial Condition).
Provision for Income Taxes
- --------------------------
The provision for income taxes resulted in an effective tax rate of 41.0% in the
third quarter and 41.6% in the year-to-date, compared with 42.0% and 42.3% in
the respective 1998 periods. The lower rates were due to a shift in the
geographical business mix toward lower-tax jurisdictions as a result of the
Company's ongoing expansion program.
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 have been completed.
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 have been 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 has completed the determination of the significance of these
applications to the Company and their status regarding year 2000 compliance. All
significant applications have been remediated and tested year for 2000
compliance.
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
- 14 -
<PAGE>
from key vendors and suppliers indicate that substantially all 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 and services to the
Company.
Contingency plans for manual and delayed information processing have also been
completed. These plans were developed because of the possibility of year 2000
failures or service interruptions within the domestic and international 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. While the Company currently expects no significant
adverse effect in its business, financial condition, results of operations or
cash flows due to year 2000 issues, its beliefs and expectations are based on
assumptions that ultimately may prove to be inaccurate.
In addition to the cost of internal resources, the Company's total cost for
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 $1,403,000 in the year-to-date of 1999 and $8,363,000 on a
cumulative basis.
FINANCIAL CONDITION
- -------------------
The Company's liquidity needs have been, and are expected to remain, primarily a
function of its seasonal working capital requirements and capital expenditure
needs, which have increased due to the Company's expansion. Management believes
that the Company's financial condition at October 31, 1999 provides sufficient
resources to support current business activities and planned expansion.
The Company incurred a net cash inflow from operating activities of $26,853,000
in the nine months ended October 31, 1999 compared with an outflow of
$35,235,000 in the nine months ended October 31, 1998. The improved cash flow
primarily resulted from increased net earnings, as well as a decreased use of
working capital.
Working capital (current assets less current liabilities) and the corresponding
current ratio (current assets divided by current liabilities) were $628,723,000
and 3.3:1 at October 31, 1999, compared with $522,927,000 and 2.8:1 at January
31, 1999 and $378,898,000 and 2.1:1 at October 31, 1998.
Accounts receivable at October 31, 1999 were 1% lower than at January 31, 1999
(which is a seasonal high-point) but were 16% higher than at October 31, 1998
due to sales growth.
Inventories (which represent the largest portion of assets) at October 31, 1999
were 20% higher than at January 31, 1999 and were 11% higher than at October 31,
1998. The increases were due to higher finished goods to support sales growth,
new stores and new/expanded product offerings. In addition, the increases were
also partly due to the translation effect of a stronger Japanese yen. The
Company's ongoing objective is to improve inventory performance through:
refinement of worldwide replenishment systems; focus on the specialized
- 15 -
<PAGE>
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.
Capital expenditures in the nine months ended October 31, 1999 were $52,743,000,
compared with $47,112,000 in the prior-year period. Based on current plans,
management expects that capital expenditures will be approximately $75 million
in 1999.
On July 16, 1999, the Company made a strategic investment in Aber Resources Ltd.
("Aber"), a publicly-traded company headquartered in Canada, by purchasing 8
million shares of its common stock at a cost of $70,636,000, representing
approximately 14.9% of Aber's outstanding shares. Aber holds a 40% interest in
the Diavik Diamonds Project in Canada's Northwest Territories, an operation
being developed to mine gem-quality diamond reserves. Production is expected to
commence in 2003. The investment is included in Other assets, net and is
accounted for under the equity method. The Company's share of Aber's results
from operations has been included in Other expenses, net and is not material.
In addition, the Company will form a joint venture and enter into a
diamond-purchase agreement with Aber. It is expected that this commercial
relationship will enable the Company to secure a considerable portion of its
future diamond needs.
On July 23, 1999, the Company issued 1,450,000 shares of its Common Stock at a
price of $49.375 per share, resulting in net proceeds of $71,426,000. The net
proceeds from the sale were added to the Company's working capital and have been
used to support ongoing business expansion.
On October 26, 1999, the Company entered into a yen 5,500,000,000, five-year
term loan agreement, bearing interest at the six-month Japanese LIBOR rate plus
50 basis points, adjusted every six months. The proceeds were primarily used to
reduce short-term indebtedness in Japan.
As a result of the above factors, net-debt (short-term borrowings and 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
$139,640,000 and 17% at October 31, 1999, compared with $103,197,000 and 17% at
January 31, 1999 and $204,362,000 and 31% at October 31, 1998.
On November 22, 1999, the Company purchased the land and building for its
flagship store at Fifth Avenue and 57th Street, New York City, for a cash
purchase price of $94,000,000, plus $5,300,000 in fees and expenses. The
financial effect between the cost of leasing and the cost of ownership is not
expected to have a significant impact upon earnings.
The Company's sources of working capital are internally-generated cash flows and
borrowings available under a five-year, $160,000,000 multicurrency,
noncollateralized, five-bank revolving credit facility which 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 the seasonal working capital
increases
- 16 -
<PAGE>
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 any losses and gains
on the assets, liabilities and transactions being hedged. The Company's primary
net foreign currency market exposure is the Japanese yen. Management does not
foresee nor expect any significant changes in foreign currency exposure in the
near future.
The Company manages its 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. Management
does not foresee nor expect any significant changes in its exposure to interest
rate fluctuations, or in how such exposure is managed in the near future.
The Company uses an interest rate swap to manage its yen-denominated floating
rate long-term debt in order to reduce the impact of interest rate changes on
earnings and cash flows and to lower overall borrowing costs.
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
- 17 -
<PAGE>
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 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.
- 18 -
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.128 Translation of Loan Agreement between Tiffany & Co. Japan
Inc. and the Fuji Bank, Ltd., Hong Kong Branch dated 22
October 1999, Guaranty issued in connection therewith by the
Registrant and Agreement on Bank Transactions referenced in
the aforesaid Loan Agreement; Schedule to the Master
Agreement dated as of October 18, 1999 between The Chase
Manhattan Bank and Tiffany & Co. Japan Inc. (made with
reference to International Swap Dealers Association, Inc.
Master Agreement form copyrighted 1992), Guaranty dated
October 18, 1999 issued in connection with such Master
Agreement by Tiffany and Company, Tiffany & Co.
International and Registrant in favor of The Chase Manhattan
Bank and Confirmation issued October 29, 1999 by The Chase
Manhattan Bank.
27 Financial Data Schedule (SEC/EDGAR only).
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements 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: December 13, 1999 By: /s/ James N. Fernandez
----------------------------------------
James N. Fernandez
Executive Vice President and
Chief Financial Officer
(principal financial officer)
- 19 -
<PAGE>
EXHIBIT INDEX
Exhibit
Number
10.128 Translation of Loan Agreement between Tiffany & Co. Japan Inc. and
the Fuji Bank, Ltd., Hong Kong Branch dated 22 October 1999, Guaranty
issued in connection therewith by the Registrant and Agreement on Bank
Transactions referenced in the aforesaid Loan Agreement; Schedule to
the Master Agreement dated as of October 18, 1999 between The Chase
Manhattan Bank and Tiffany & Co. Japan Inc. (made with reference to
International Swap Dealers Association, Inc. Master Agreement form
copyrighted 1992), Guaranty dated October 18, 1999 issued in
connection with such Master Agreement by Tiffany and Company, Tiffany
& Co. International and Registrant in favor of The Chase Manhattan
Bank and Confirmation issued October 29, 1999 by The Chase Manhattan
Bank.
27 Financial Data Schedule
(submitted to SEC only)
Exhibit 10.128
Tiffany & Co.
Loan Agreement
(Translation of Loan Agreement)
(For short-term borrowing, or medium-and long-term borrowing
at floating interest rates, denominated in Euroyen)
Date 22th October, 1999
(Borrower) Address
Name (Print Letter)
Tiffany & Co. Japan Inc.
-------------------------------
Signature/Seal
(Z) The Fuji Bank, Ltd. Branch
(Bank)
-----------------------------------
Authorized Signature
This Agreement is made between Tiffany & Co. Japan Inc. (hereinafter referred to
as the "Borrower") and The Fuji Bank, Ltd. (hereinafter referred to as the
"Bank").
Whereas, the Borrower has requested the Bank to make a loan specified in the
following description, confirming the applicability of the articles of the
"Agreement on Bank Transactions" which the Borrower has separately executed and
delivered to the Bank, and the Bank has agreed to make such a loan upon the
terms and conditions set forth in this Agreement. If there are any
inconsistencies between the terms of this Agreement and the terms of the
Agreement on Bank Transactions, the terms of this Agreement shall prevail
[DESCRIPTION OF LOAN]
- ------------------------------ ------------------------
Loan Execution Branch: Hong Kong Branch Reference No.:
- ------------------------------
Loan Application Branch: Aoyama Branch
<PAGE>
(Y)5,500,000,000
Total Amount of Borrowing: JPY5,500,000,000
- -------------------------------- ----------------------------
Date of Borrowing: 26th October, 1999 Maturity Date: 26th October, 2004
Interest Rate: 0.72625% 6 Month JPY LIBOR + 0.50%
- --------------------------------
Method of Repayment: One lump sum payment
[In the case of repayment in installments]
- --------------------------------- -----------------------------
The first repayment Date: Subsequent repayment date:
- ---------------------------------
Repayment cycle:
- ---------------------------------
Installment Repayment Amount:
{Interest Payment Method]
- --------------------------------- ----------------------------
The first interest payment date: 26th April, 2000 Interest payment date: 26th
- ---------------------------------
Interest payment cycle: every 6month
Interest calculation method:
Principal amount outstanding x Interest rate x (Interest days/360) (including
excluding the last day of the period).
- ---------
The first decimal figure shall be rounded.
- ----------------------------------
Holiday: Tokyo, London, New York
If the repayment date of principal, the interest payment date, or the last day
of interest calculation period falls on a holiday, the date shall be: The next
business day
- --------------------------------------------------------------------------------
(Bank Use)
<PAGE>
[TERMS AND CONDITIONS]
Article 1. (Definitions)
The following terms shall have the following meanings in this Agreement.
1. Interest calculation period
The first interest calculation period shall be from the date of
borrowing stated in the "Description of Loan" to the first interest
payment date, and thereafter it means the period from each interest
payment date to the next interest payment date.
2. Interest days
"Interest days" means the actual number of days elapsed in each
interest calculations period.
3. Holiday
"Holiday" means a day on which banks are closed or the foreign exchange
market is closed in any one of the cities stated in the "Holiday"
column of the "Description of Loan".
4. Business day
"Business day" means a day which is not a holiday.
5. London business day
"London business day" means a day on which banks are open for business
in London.
6. Interest rate for funding
"Interest rate for funding" means such interest rate at which the Bank
can raise fund for the same period with each interest calculation
period, in the international financial market, as of the date two
business days prior to the beginning day of each interest calculation
period. In the case in which the Bank recognizes that Bank is unable to
determine the interest rate due to closure of the funds market or the
like, appropriate means of determining it shall be decided through
mutual consultation.
7. LIBOR
"LIBOR" means the yen interest rate for the same period with each
interest calculation period, appearing on page 3750 of the TELERATE at
approximately 11:00 a.m. London time, two London business days prior to
the beginning day of each interest calculation period. Furthermore, if
the Bank considers that it is inappropriate to determine the interest
rate based on the LIBOR due to closure of the market or the like,
appropriate means of determining it shall be decided through mutual
consultation.
8. Prepayment date, etc.
"Payment date, etc." means the date on which the Borrower makes
prepayment in special occasions with Bank's consent, or the date on
which the Borrower makes prepayment of all obligations hereunder due to
acceleration of payment.
Article 2. (Notification of interest payment cycle)
In the case in which the phrase "the Borrower will determine with
consent of the Bank" is stipulated in the column for "Interest payment
cycle" of the "Description of Loan", the Borrower shall notify the Bank
in writing by the date five business days prior to the beginning date
of each interest calculation period, in order to obtain consent of the
Bank. In case the Borrower failed to perform this notification, the
Bank shall be allowed to determine the following interest payment cycle
as the same period as that of the immediately preceding interest
payment cycle.
<PAGE>
Article 3. (Damages for delay)
In case the Borrower fails to perform any obligations owned to the
Bank, the Borrower shall pay the Bank damages at whichever higher of
(i) 14% per annum, or (ii) the interest rate per annum at which the
Bank would be required to raise fund corresponding to the loan amount
plus two percent (2%) per annum, for the period from the default date
to the date of the actual payment in full.
Article 4. (Acceleration of payment)
In addition to the acceleration of payment pursuant to Article 5 of the
Agreement on Bank Transactions, in cases (1) (A) liabilities and/or
other obligations hereunder and inter-company debt), whether as
principal, guarantor, surety or other obligor, for the payment or
purchase of any indebtedness, (i) shall become or shall be declared to
be due and payable prior to the expressed maturity thereof (unless such
acceleration shall have thereafter been unconditionally rescinded or
annulled prior to the time that all obligations hereunder have become
or been declared due and payable) or (ii) shall not be paid when due or
within any grace period for the payment or purchase thereof, or (B) any
holder of such obligations shall have the right to declare the
indebtedness evidenced thereby due and payable or to require the
purchase of the indebtedness evidenced thereby prior to its stated
maturity (unless such right shall have thereafter been unconditionally
waived prior to the time such holder shall have declared such
indebtedness due and payable or required the purchase of such
indebtedness) or (2) the borrowing hereunder becomes unlawful or
improper due to changes in laws, regulations or administrative
measures, etc. any and all obligations hereunder shall immediately
become due and payable upon demand by the Bank and the Borrower shall
pay such obligations forthwith.
Article 5 (Cancellation before loan execution)
1. Prior to the loan execution, the Borrower shall not cancel this
Agreement, except for the cases provided for in the following
Paragraph of this Article
2. .In case, after the date on which the Bank has raised the necessary
funds to make the Loan in full to the Borrower, the Borrower cancels
this Agreement in special occasions with the Bank's consent, or in
case, after the date on which the Bank has raised the necessary funds
to make the Loan in full to the Borrower, any one of the events
stipulated in Article 5, Paragraph 1 or 2 of the Agreement on Bank
Transactions occurs to the Borrower and the Bank makes demand to that
effect, the Borrower shall immediately pay the Bank damages calculated
as follows. However, if the value thus calculated is less than zero,
no payment obligation of damages arises.
(Total amount of borrowing stated in the "Description of
Loan")x(A-B)x(Actual number of days from the date of borrowing to
the day preceding the following interest payment date)/360
A. Offered rate (indication) of Euroyen market for
transactions corresponding to period from the date of
borrowing to the day preceding the following interest
payment date, as of captioned date.
B. Bid rate (indication) of Euroyen market for
transactions corresponding to the period from the
date of borrowing to the day preceding the following
interest payment date, as of the cancellation date of
this Agreement or the date on which demand is made by
the Bank.
Article 6. (Standard date for calculating damages)
In case, under the preceding Article, any one of the events stipulated in
Article 5, Paragraph 1 or 2 of the Agreement on Bank Transactions occurs to the
Borrower, and demand is made by the Bank for the payment of damages if standard
date for calculating damages is stipulated when the demand is made, damages
shall be
<PAGE>
calculated on the assumption that the notice of demand has arrived at the
Borrower on the relevant standard date. If utilized, the standard date shall be
reasonably chosen by the Bank.
Article 7. (Prepayments, etc.)
1. After the loan is executed on the date of borrowing, the Borrower shall not
make prepayments.
2. Notwithstanding the preceding Paragraph, in case the Borrower makes
prepayments in special occasions with consent of the Bank, or in case any
one of the events stipulated in Article 4 of this Agreement, or Article 5
Paragraph 1 or 2 of the Agreement on Bank Transactions occurs to the
Borrower, and the Borrower makes repayment due to the acceleration of
payment, the Borrower shall pay the Bank as damages the total amount
calculated as follows in addition to the outstanding principal and the
accrued and unpaid interest amount stipulated in the "Description of Loan".
However, if the total value thus calculated is less than zero no payment
obligation of damages arises.
(Repayment (prepayment amount)x(C-D)x (Actual number of days from the
prepayment date, etc. to the day preceding the following interest
payment date)/360
C. Interest rate as stipulated in the "Description of Loan",
applicable as of the prepayment date, etc.
D. Bid rate (indication) of Euroyen market for the transactions
corresponding to the period from the prepayment date, etc. to the
day preceding the following interest payment date, as of the date
two business days prior to the prepayment date, etc.
Article 8. (Change in handling branches)
In case any one of the events stipulated in Article 5, Paragraph 1 or 2
of the Agreement on Bank Transactions occurs to the Borrower, upon
notification from the Bank, the Borrower shall agree, without any
objection,(i) that the Bank's branch handling this loan is immediately
changed from the Loan Execution Branch to the Loan Application Branch
as stipulated in the "Description of Loan," with regard to any and all
obligations owed by the Borrower under this Agreement, and (ii) that
such change is not a novation of the obligations.
Article 9. (Preparation of notarial deeds)
The Borrower shall, upon the Bank's demand, immediately take necessary
procedures to prepare notarial deeds authorizing compulsory execution
of the Borrower's obligations under this Agreement.
Article 10. (Bearing of expenses, etc.)
The Borrower shall bear any and all charges and expenses related to
this Agreement, including but not limited to the preparation of this
instrument and the notarial deeds mentioned in the preceding Article,
as well as the disposition of collateral, etc.
Furthermore, in case more expenses are incurred on the Bank related to
this loan, by reserve requirements, interest equalization tax,, or any
other means or reasons, due to changes in laws and regulations of
Japan or any countries concerned, or changes in interpretation of them,
the Borrower shall agree to changing the interest rate within the range
generally approved or shall pay such expenses.
Article 11. (observation of laws and regulations)
When the Borrower makes borrowing under this Agreement, the Borrower
shall do so in compliance with the "Foreign Exchange and Foreign Trade
Law" and ordinances/regulations, etc. based on the Law (hereinafter
referred to as the "Control Law").
The same shall apply also in the case where the Control Law is changed
or amended in the future.
<PAGE>
Article 12. (Governing law and jurisdiction by agreement)
This Agreement shall be governed by and construed in accordance with
the laws of Japan. In the event the filing of lawsuits in connection
with this Agreement becomes necessary, the Borrower shall agree that
the Court having its jurisdiction in the locale in which the Bank's
Head Office or the Loan Application Branch as stipulated in the
"Description of Loan" is situated shall be the competent Court.
In witness whereof, the parities hereto have caused this Agreement to be duly
executed in duplicate at the Loan Execution Branch as stipulated in the
"Description of Loan", each party retaining one original.
(End)
(This English translation is for convenience of the Borrower only. Any and all
questions that may arise in regard to the meaning of the words, provisions and
stipulations of the Agreement shall be interpreted in accordance with the
Japanese original).
<PAGE>
GUARANTY
Date:
To: The Fuji Bank, Limited
The Guarantor (Rentai hosho-nin): Signature /s/ James N. Fernandez
Full Name Tiffany & Co.
Address 5th Ave. 727 New York, NY, USA
The Principal: Signature /s/ James N. Fernandez
Full Name Tiffany & Co. Japan Inc.
Address
(The contents of the guaranteed obligations) The guarantor confirms the
guaranteed obligations as follows.
<TABLE>
<CAPTION>
<S> <C> <C>
- ------------ -------------------------- -------------------------------------------------------------
Seal or signature The contents of guaranteed obligations
(Remarks 1) (Remarks 2)
- ------------ -------------------------- -------------------------------------------------------------
1 Any and all obligations which the Principal at present or in
the future may owe your Bank under the Article 1 of the
Agreement on Bank Transactions.
- ------------ -------------------------- --------------------------------------------------------------
2 Obligations Ditto, provided that in no event shall the guarantor be
required to make payments in excess of an aggregate
amount of _____________________ yen.
Please
Check
A __X__ Obligations arising from loan by deed
-----------------------------------------------------------------
B ____ Obligations arising from loan against Bills of Ex-change
or Promissory Notes
-----------------------------------------------------------------
C ____ Obligations arising from Guarantee of Payment
- ------------ -------------------------- --------------------------------------------------------------
Date of loan or date of
application for your
guarantees of payments October 26, 1999
- ------------ -------------------------- --------------------------------------------------------------
3 Amount $5,500,000,000
(the present balance
- ------------ -------------------------- --------------------------------------------------------------
Final due date October 26, 2004
- ------------ -------------------------- --------------------------------------------------------------
Rate of interest or BBA Libor + 0.5% Rate of interest 14% per annum
guarantee fee per annum for arrears
- ------------ -------------------------- -------------------- -------------------- --------------------
In case of a loan against a note or bill, when a new note or bill is executed by the
Principal and delivered to your Bank in substitution for a note or bill therefore
executed and delivered by the Principal, the previous note or bill shall be deemed to
have been revised, and this guarantee will cover the obligations arising from a loan
against the new note or bill. The same shall apply to any subsequent renewal of note
or bills.
- ------------ -----------------------------------------------------------------------------------------
</TABLE>
(Remarks 1) In the column of the contents of the guaranteed
obligations, the guarantor is requested to encircle
1,2 or 3 according to circumstances, to put seal (or
sign) and to fill the blanks.
(Remarks 2) In case the guarantor wants to guarantee a certain
transaction (s), he is requested to set forth the
name of the transaction (s) for which he gives this
guarantee in any of boxes 1,2 or 3 as the case may be
and put his seal (or sign) there.
<PAGE>
Agreement
In regard to the obligations specified hereinabove, which the Principal may owe
your Bank, the guarantor, hereby agreeing to the terms and conditions of this
Agreement in addition to the provisions of the Agreement on Bank Transactions
(please refer to the attached copy thereof) and the Agreement on
________________________(please refer to the attached copy thereof), both
submitted separately the Principal, shall be liable jointly with the Principal
and severally for the performance of all such obligations.
1. The Guarantor shall not set off any obligations the Principal owes your
Bank against the Principal's deposits and/or any other Principal's credits
with your Bank.
2. Even if your Bank changes or releases the security or other guarantees at
your Bank's convenience, the Guarantor shall not claim exemption from the
obligations.
3. If and when the Guarantor performs any obligations of guarantee, the
Guarantor shall not exercise any rights obtained from your Bank by
subrogation without the prior approval of your Bank so long as transactions
between the Principal and your Bank continue.
Upon your Bank's demand, the Guarantor shall assign such rights and
priority to your Bank without demanding compensation.
4. In case the Guarantor has given to your Bank with any other guarantee for
the Principal than this guarantee, such other guarantee shall in no way be
affected by this guarantee, and in case any limitation on the amount of
liability is provided for in any other guarantee, the amount guaranteed by
this Agreement shall not be included in but shall be deemed to be in
addition to the maximum amount in such other guarantee.
These provisions described hereinabove in this paragraph 4shall apply to
any case in which the guarantor may hereafter give to your Bank any other
guarantee on behalf of the Principal in regard to any transaction with your
Bank.
(All questions that may arise within or without courts of law in regard to the
meaning of the words, provisions and stipulations of this Agreement shall be
decided in accordance with the Japanese text.)
<PAGE>
AGREEMENT ON BANK TRANSACTIONS
Dated:
TO: THE FUJI BANK, LIMITED.
Address:
Principal
(Signature/Seal):
----------------------------------
Name (Print Letter):
I, we do hereby agree to the terms and conditions set forth in the following
Articles in regard to my our transactions with your Bank:
Article 1 (Scope of Application)
1. I/we shall abide by this Agreement pertaining to the performance
of my/our obligations arising from loans against Bills of Exchange
(hereinafter referred to as "Bills") and Promissory Notes
(hereinafter referred to as "Notes"), discounts of Bills and
Notes, loans by deed, overdrafts, acceptances and guarantees,
foreign exchanges, and any and all other transactions.
2. Even in cases in which your Bank has, through your Bank's
transactions with any third party, acquired Bills and Notes drawn,
endorsed accepted, accepted by intervention, or guaranteed by
me/us, I/we shall also abide by this Agreement pertaining to the
performance of my/or obligations evidenced by such Bills and
Notes.
Article 2 (obligations in Bills and Notes and Money Borrowed)
In cases in which your Bank has granted me/us loans accompanied by Bills
and Notes, your Bank may demand from me/us the payment of my/our
obligations arising from the loans by exercising your Bank's rights either
on the Bills and Notes or on the loans.
Article 3 (Interest, Damages, etc.)
1. In regard to the stipulations concerning the rates of interest,
discount charges, guarantee fees, handling commissions and rebates of
any thereof, and also concerning the time and method of payment
thereof, I/we shall agree, in the event of changes in the financial
situation or any other reasonable and probable causes arising, to the
revision of the stipulations to those in the range prevailing
generally.
2. In case I/we fail to perform any obligations, which I/we owe your
Bank, I/we shall pay your Bank damages at the rate of 14% per annum
for the amount payable. In this case the calculation will be made on
the actual number of days on a 365-day year basis.
Article 4 (Security)
1. In cases in which a reasonable and probable cause necessitates the
preservation of your Bank's rights, I/we shall upon demand forthwith
furnish to your Bank such security or additional security, or such
guarantors or additional guarantors, as may be approved by your Bank.
2. Any and all security which as been furnished and that to be furnished
in the future to your Bank for specific obligations shall constitute
security that covers and secures not only such obligations, but also
any and all other obligations which I/we at present or in the future
may owe your Bank.
3. Your Bank may collect or dispose of security in the manner, at the
time, and for the price, etc. generally deemed proper, not necessarily
following the procedures prescribed by law, and deduct expenses from
the proceeds and appropriate the remainder to the payment of my/our
obligations regardless of the priority prescribed by law; and in the
event any obligations still remain, I/we shall pay them forthwith.
4. In cases in which I/we fail to perform any obligations which I/we owe
your Bank may collect or dispose of my/our movables, Bills and Notes,
and other instruments and securities in your Bank's possession; and in
such cases, I/we shall agree to your Bank's handling the matter
mutatis mutandis in the manner set forth in preceding Paragraph.
Article 5 (Acceleration of Payment)
1. In case any one of the following events occurs to me/us, any and all
obligations I/we owe your Bank shall immediately become due and
payable without any notice or demand, etc. from your Bank and; I/we
shall pay such obligations forthwith: (1) When I/we have become unable
to pay debts or application or petition is submitted for bankruptcy,
commencement of composition of creditors, commencement of corporate
re-organization proceedings, commencement of company arrangement, or
commencement of special liquidation (2) When the Clearing House in
observance of its rules takes procedures for suspension of my/our
transactions with banks and similar institutions. (3) When order or
notice of provisional attachment, preservative attachment or
attachment is dispatched in respect of my/our or the guarantor"
deposits and/or any other credits with your Bank. (4) When my/our
whereabouts become unknown to your Bank due to my/our failure to
notify your Bank of change of my/our address or any other causes
attributable to me/us.
2. In any of the following cases, upon your Bank's demand, any and all
obligations I/we owe your Bank shall immediately become due and
payable; and I/we shall pay them forthwith.
(1) When I/we fail to pay any of my/our obligations to your Bank when
it is due.
(2) When property offered to your Bank as security is attached or
public auction procedure is commenced is respect of such
property.
(3) When I/we violate the stipulations of any transactions with your
Bank.
(4) When the guarantor falls under any one of the items of the
preceding Paragraph or this Paragraph.
(5) In addition to each of the preceding items, when a reasonable and
probable cause necessitates the preservation of your Bank's
rights.
Article 6 (Repurchase of Discounted Bills and Notes)
1. In cases in which I/we have had Bills and Notes discounted by
your Bank and any one of the items in Paragraph (1) of the
preceding Article occurs to me/us, then pertaining to all such
Bills and Notes, or in cases in which the principal obligors of
my/our discounted Bills and Notes fail to pay them on due dates
or any one of the items in Paragraph (1) of the preceding Article
occurs to the principal obligors, then pertaining to the Bills
and Notes wherein such persons are the principal obligors, I/we
shall assume as a matter of course the repurchasing obligations
for the face value of my/our discounted Bills and Notes without
any notice or demand, etc. from your Bank; and I/we shall pay
them forthwith.
2. In cases other than those provided for in the preceding
Paragraph, in which a reasonable and probable cause necessitates
the preservation of your Bank's rights pertaining to the Bills
and Notes which your Bank has discounted, I/we shall assume, upon
your Bank's demand, the repurchasing obligations for the face
value of my/our discounted Bills and Notes; and I/we shall pay
them forthwith.
3. As long as I/we do not perform the obligations set forth in the
preceding two Paragraphs, your Bank may exercise any all rights
as holder of the Bills and Notes.
Article 7 (Deductions in Accounts)
1. In cases in which I/we must perform any obligations owed to your
Bank because they become due or because of acceleration of
payment or because I/we have assumed the repurchasing obligations
or because your Bank has acquired the right of claiming
compensation from me/us or for any other causes, your Bank may
set off against any such obligations at any time any of my/our
deposits and/or any other credits with your Bank irrespective of
the due dates of such deposits and/or other credits.
2. In cases in which your Bank is able to effect a setoff as
mentioned in the preceding Paragraph, your Bank any also obtain
withdrawals from my/our deposits in lieu of my/our doing so, and
may appropriate any such withdrawals to payments of my/our
obligations, omitting any advance notice and also not adhering to
established procedures.
3. In cases in which your Bank makes any deductions in accounts
according to the provisions of the preceding two Paragraphs,
interest on my/our credits and obligations, discount charges and
damages, etc. shall be calculated up to the date on which the
actual calculation is made by your Bank for the purpose eof
deductions, and the rate of interest and tariffs shall be in
accordance with those fixed by your Bank; and with regard to the
foreign exchange rate, the rate quoted at your Bank at the time
when the actual calculation is made by your Bank shall apply.
Article 7-2 (Ditto)
1. I/we may set off any obligations I/we owe your Bank against
my/our deposits and/or any other credits with your Bank which
have become due, even when such obligations have not yet become
due.
2. When I/we effect a setoff under the provision of the preceding
Paragraph with regard to the Bills and Notes which your Bank has
discounted and which have not yet become due, I/we may do so upon
assuming the repurchasing obligations for the face value of the
discounted Bills and Notes; provided, however, that I/we may not
effect a setoff with regard to Bills and Notes which your Bank
has discounted and assigned to a third party.
3. With regard to my/our credits or obligations in foreign currency
or in free yen, I/we may not, notwithstanding the provisions of
the preceding two Paragraphs, effect a setoff until and unless
they have become due and procedures required under foreign
exchange laws and regulations have been completed for them.
4. In cases in which I/we effect a setoff under the provisions of
the preceding three Paragraphs, a notice of the setoff shall be
made in writing and I/we shall affix my/our seal impression (or
signature) which has previously been filed with your Bank to the
certificate or passbook representing my/our deposits and/or other
credits with your Bank which I/we have set off against my/our
obligations and submit the same to your Bank forthwith.
5. In cases in which I/we effect a setoff, interest on my/our
credits and obligations, discount charges and damages, etc. shall
be calculated up to the date on which my/our notice of the setoff
arrives at your Bank, and the rate of interest and tariffs shall
be in accordance with those fixed by our Bank; and with regard to
the foreign exchange rate, the rate quoted at your Bank at the
time when the actual calculation is made by your Bank for the
purpose of setoffs shall apply. If there is an agreement
providing for special charges payable when obligations are paid
prior to their due dates, I/we shall abide by such agreement.
Article 8 (Presentment and Delivery of Bills an Notes)
1. In cases in which there exist Bills and Notes pertaining to
my/our obligations, and your Bank makes deductions in accounts as
set forth in Article 7 without exercising your Bank's rights on
the Bills and Notes, your Bank need not simultaneously return to
me/us any such Bills and Notes.
2. In cases in which there exist Bills and Notes which your Bank
returns to me/us as a result of deductions in accounts made by
your Bank or me/us under the preceding two Articles, I/we shall
appear at your Bank to receive such Bills and Notes without
delay; provided, however, that it such Bills and Notes have not
yet become due, your Bank may collect them without returning them
to me/us.
3. In cases in which your Bank makes deductions in accounts as set
forth in Article 7 by exercising your Bank's rights on the Bills
and Notes, your Bank need not present nor deliver any such Bills
and Notes to me/us in the cases enumerated below, and as for
my/our receiving such Bills and Notes, the provisions of the
preceding Paragraph shall apply mutatis mutandis:
(1) When your Bank does not known my/our whereabouts.
(2) When I/we have designated your Bank as the place at which
Bills and Notes are made payable.
(3) When it is deemed difficult to dispatch the Bills and Notes.
(4) When it is deemed that presentment or delivery of the Bills
and Notes can not be made for unavoidable reasons as use for
collection, etc.
4. In cases in which any of my/our obligations which require
immediate performance still exist after a deduction in accounts
has been effected as provided for in the preceding two Articles,
and there also exit obligors on the Bills and Notes besides
me/us, your Bank may retain such Bills and Notes, and after
collecting or disposing of them, your Bank may appropriate the
proceeds to the payment of my/our obligations.
Article 9 (Designation of Appropriation)
In the event I/we made payments or your Bank made deductions is
accounts as provided for in Article 7, and if in such cases the amount
of such payments made by me/us or my/our deposits and any other credits
with your Bank are insufficient to liquidate all of my/our obligations,
your Bank may appropriate the amount of such payments or such deposits
and other credits to satisfy my/our obligations in such order and in
such manner as your Bank deems proper and I/we shall raise no objection
to such appropriation.
Article 9-2 (Ditto)
1. In the event I/we effect a setoff in accordance with Article 7-2,
and if in such case my/our deposits and any other credits with
your Bank are insufficient to liquidate all of my/our
obligations, I/we may appropriate such deposits and other credits
to satisfy my/our obligations in such order and in such manner as
I/we designate.
2. In the event I/we fail to designate the order and manner of
appropriation under the preceding Paragraph, your Bank may
appropriate my/our deposits and other credits with your Bank to
satisfy my/our obligations in such order and in such manner as
your Bank deems proper and I/we shall raise no objection to such
appropriation.
3. In the event my/our designation under Paragraph (1) is likely to
interfere with the preservation of your Bank's rights, your Bank
may, upon lodging an objection thereto without delay, appropriate
my/our deposits and other credits with your Bank to satisfy
my/our obligations in such order and in such manner as your Bank
designates taking into consideration whether or not the
obligations are secured or guaranteed, the extent of coverage of
such security or guarantee, the degree of difficulty of
disposition of such security, their due dates, prospects for
settlement of discounted Bills and Notes, etc.
4. In case of appropriation by your Bank under the preceding two
Paragraphs, your Bank may designate the order and manner of
appropriation on the assumption that my/our obligations which are
in fact not due have become due or that I/we have assumed the
repurchasing obligations with regard to the Bills and Notes which
your Bank has discounted and which have not yet become due or
that I/we assumed in advance the obligations to compensate your
Bank with regard to the acceptances and guarantees.
Article 10 (Assumption or Risks, Hold Harmless Clause, etc.)
1. In cases in which Bills and Notes which I/we drawn, endorsed,
accepted, accepted by intervention or guaranteed, or instruments
which I have furnished to your Bank are lost, destroyed, damaged
or delayed in arrival due to unavoidable circumstances such as
incidents, calamities, accidents during transit, etc. I/we shall
pay my/our obligations as recorded on your Bank's books,
vouchers, etc.; and further, upon your Bank's demand, I/we shall
forthwith furnish your Bank with substitute Bills and Notes or
instruments. I/we shall make no claim whatsoever against your
Bank with regard to losses and damages arising in such cases.
2. In cases in which security which I/we have furnished to your Bank
is lost or damaged due to unavoidable circumstances as set forth
in the preceding Paragraph, I/we shall make no claim whatsoever
against your Bank.
3. Even if your Bank's rights on Bills and Notes are ineffective due
to lack of legal requirements in the Bills and Notes, or due to
invalidating entries thereon, or if your Bank's rights on the
Bills and Notes lapse due to inadequacy in the procedures for
preservation of your Bank's rights, I/we shall be liable for the
face value of such Bills and Notes.
4. In transactions in which your Bank has deemed my/our seal impress
(or signature) genuine after checking with reasonable care the
seal impression (or signature) on Bills and Notes or instruments
against my/our seal impression (or specimen signature) filed with
your Bank, I/we shall bear any loses and damages arising from
forgery, alternation, wrongful use of Bills and Notes,
instruments of seals (or signatures), and shall be liable in
accordance with the terms of any such Bills and Notes or
instruments.
5. I/we shall bear the expenses incurred in exercising or preserving
your Bank's rights against me/us, or in collecting or disposing
of any security; and I/we shall also bear any expenses required
in the event I/we request your Bank to cooperate with me/us for
the preservation of my/our rights.
Article 11 (Changes in Matters Filed)
1. In cases of a change in the matters filed with your Bank such as
my/our seal (or signature), name, trade name, representative,
address, etc., I/we shall forthwith notify your Bank thereof in
writing.
2. In case any notice given by your Bank or any documents, etc.
dispatched by your Bank are delayed or fail to reach me/us
because of my/our failure to notify your Bank in accordance with
the preceding Paragraph, the notice or documents, etc. shall be
deemed to have arrived at the time they normally should have
arrived.
Article 12 (Report and Investigation)
1. Upon your Bank's demand. I/we shall forthwith submit to your Bank
reports pertaining to my/our assets and liabilities, management
or the state of business; and I/we shall also furnish assistance
necessary for the investigation thereof.
2. In cases in which material change has occurred or is likely to
occur pertaining to my/our assets and liabilities, management or
the state of business, I/we shall forthwith submit to your Bank
reports thereof even in the absence of your Ban's demand.
Article 13 (Applicable Offices)
I/we agree that all of the terms and conditions of this Agreement shall
apply equally to all of may/our transactions with your Bank's head
office and branch offices.
Article 14 (Jurisdiction by Agreement)
In the event the institution of a lawsuit in connection with a
transaction covered by this Agreement becomes necessary, I/we shall
agree that the Court having the jurisdiction in the locale in which the
head office or ___________ branch office of your Bank is situated shall
be the competent Court.
(All questions that may arise within or without courts of law in regard to the
meaning of the words, provisions and stipulations of the Agreement shall be
decided in accordance with the Japanese text.)
<PAGE>
(Multicurrency-Cross Border) EXECUTION COPY
SCHEDULE to the MASTER AGREEMENT
Dated as of October 18, 1999 between
THE CHASE MANHATTAN BANK ("Party A")
And
TIFFANY & CO. JAPAN INC. ("Party B")
PART 1: Termination Provisions and Certain Other Matters
(a) "Specified Entity" means, in relation to Party A, for the purpose
of:
Section 5(a)(v), and Affiliate of Party A;
Section 5(a)(vi), none;
Section 5(a)(vii), none; and
Section 5(b)(iv), none;
and, in relation to Party B, for the purpose of:
Section 5(a)(v), any Affiliate of Party B;
Section 5(a)(vi), any Affiliate of Party B;
Section 5(a)(vii), any Affiliate of Party B; and
Section 5(b)(iv), any company directly or indirectly controlling Party
B.
(b) "Specified Transaction" will have the meaning specified in Section 14.
(c) The "Cross-Default" provisions of Section 5(a)(vi) will apply to Party
A and Party B. In connection therewith, "Specified Indebtedness" will have the
meaning specified in Section 14, except that such term shall not include
obligations in respect of deposits received in the ordinary course of such
party's banking business, and "Threshold Amount" means (i) with respect to Party
A, an amount equal to the greater of (x) $25,000,000 (or its equivalent in other
currencies) or (y) three percent of such party's shareholders' equity,
determined in accordance with generally accepted accounting principles in the
United States of America, consistently applied, as at the end of such party's
shareholder' equity, determined in accordance with generally accepted accounting
principles in the United States of America, consistently applied, as at the end
of such party's most recently completed fiscal year and (ii) with respect to
Party B, $25,000,000 (or its equivalent in other currencies).
<PAGE>
(d) The "Credit Event Upon Merger" provisions of Section 5(b)(iv) will
apply to Party A and Party B; provided, however, that, in respect of Party A,
the phrase "materially weaker" means (i) the senior long-term debt or deposits
of the resulting, surviving or transferee entity is or are, as the case may be,
rated less than investment grade by Standard & Poor's Corporation or Moody's
Investors Service, Inc., or (ii) in the event that there are no such Standard &
Poor's Corporation or Moody's Investors Service, Inc. ratings, the Policies (as
defined below) in effect at the time, of the party which is not the Affected
Party, would lead such non-Affected Party, solely as a result of a change in the
nature, character, identity or condition of the Affected Party, from its state
prior to such consolidation, amalgamation, merger or transfer, to decline to
make an extension of credit, or enter into a Transaction with, the resulting,
surviving or transferee entity, " Policies", for the purposes of this definition
means: (1)(A) internal credit limits applicable to individual entities or (B)
other limits on doing business with entities domiciled or doing business in
certain jurisdictions or engaging in certain activities, or (2) internal
restrictions on doing business with entities with whom the party which is not
the Affected Party has had prior adverse business relations.
(e) The "Automatic Early Termination" provision of Section 6(a) will not
apply to Party A or Party B.
(f) Payments on Early Termination. For the purpose of Section 6(e):
(i) Market Quotation will apply
(ii) The Section Method will apply.
(g) "Termination Currency" means United States Dollars
(h) Additional Termination Event. (i) The following shall constitute an
Additional Termination Event (with any event specified in the following
constituting an "Impossibility"):
With respect to Party A and Party B, due to the occurrence of a natural or
man-made disaster, armed conflict, act of terrorism, riot, labor disruption, act
of State, or any other similar circumstance beyond its control after the date on
which a Transaction is entered into, it becomes impossible (other than an result
of its own misconduct) for a party (which will be the Affected Party):
(1) to perform any absolute or contingent obligation, to make a payment or
delivery or to receive a payment or delivery in respect of a Transaction or
to comply with any other material provision of this Agreement relating to
such Transaction; or
2
<PAGE>
(2) to perform, or for any Credit Support Provider of such party to
perform, any contingent or other obligation which the party or such Credit
Support Provider has under and Credit Support Document relating to a
Transaction.
(ii) The definition of "Affected Transactions" in Section 14 of this
Agreement is amended by adding the word "Impossibility" immediately before
the "Illegality" in the first line thereof.
(iii)In an event or circumstance which would otherwise constitute or give
rise to an Event of Default also constitutes and Impossibility, it will be
treated as a Termination Event and will not constitute an Event of Default.
PART 2: Tax Representations
Not applicable
PART 3: Agreement to Deliver Documents
For the purpose of Section 4(a)(i) and (ii) of this Agreement, each party agrees
to deliver the following documents:
(a) Tax forms, documents or certificates to be delivered are: none.
(b) Other documents to be delivered are:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Party required Covered by
To deliver Form/Document/ Date by which Section 3(d)
Document Certificate to be delivered Representation
--------------- --------------------------- ---------------------- --------------
Party B Opinions of counsel Upon execution and No
satisfactory to Party A delivery of this
substantially in the form Agreement
of Exhibit I and Exhibit II
hereto
Party B Guaranty (as defined in Upon execution and Yes
Part 4(f) hereof) delivery of this
Agreement
Party B Certified copies of Upon execution and Yes
all corporate authorizations delivery of this
and any other documents Agreement
with respect to the
execution, delivery and
performance of this
Agreement and the
Guaranty
Party B Certificate of authority Upon execution Yes
and specimen and delivery of this
signatures of Agreement and
individuals executing thereafter upon
this Agreement, the request of Party A
Guaranty and
Confirmations
</TABLE>
3
<PAGE>
PART 4: Miscellaneous
-------------
(a) Address for Notices. For the purpose of Section 12(a) of this
Agreement:
Address for notice or communications to Party A:
Any notice relating to a particular Transaction shall be delivered to the
address or facsimile or telex number specified in the Confirmation of such
Transaction. Any notice delivered for purposes of Section 5 and 6 of this
Agreement shall be delivered to the following address:
The Chase Manhattan Bank
Attention : Legal Department-Capital Markets Group
270 Park Avenue, 40th Floor
New York, New York 10017-2070
Telex No.: 232337; Answerback: CBC UR
Facsimile No.: (212) 270-7468
Address for notice or communications to Party B:
Tiffany & Co. Japan Inc.
C/O Tiffany & Co.
Attention: Michael Connolly
15 Sylvan Way
Parsippany, New Jersey 07054
Facsimile No.: (973) 254-7645
(b) Process Agent. For the purpose of Section 13(c):
Party A appoints its Process Agent: Not applicable.
4
<PAGE>
Party B appoints as its Process Agent: Not applicable.
(c) Offices. The provisions of Section 10(a) will apply to this Agreement.
(d) Multibranch Party. For the purpose of Section 10 of this Agreement:
Party A is a Multibranch Party and may act through any Office specified in
a Confirmation.
Party B is not a Multibranch Party
(e) Calculation Agent. The Calculation Agent is Party A, unless otherwise
specified in a Confirmation in relation to the relevant Transaction.
(f) Credit Support Document. Details of any Credit Support Document: in
respect to Party B, the following shall be a Credit Support Document: the joint
and several guaranty (the "Guaranty") of each of Tiffany and Company, Tiffany &
Co. International and Tiffany & Co. (each a "Guarantor") dated as of the date
hereof and substantially in the form of Exhibit III hereto.
(g) Credit Support Provider. Credit Support Provider means, in relation to
Party B, each of the Guarantors.
(h) Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of New York (without reference to choice
of law doctrine).
(i) Netting of Payments. Subparagraph (ii) of Section 2(c) will not
apply to any Transaction unless specified in the relevant
Confirmation.
(j) "Affiliate" will have the meaning specified in Section 14 of this
Agreement.
PART 5: Other Provisions
(a) Set-off. Any amount (the "Early Termination Amount") Payable to one
party (the "Payee") by the other party (the "Payer") under Section 6(e), in
circumstances where there is a Defaulting Party or one Affected Party in the
case where a Termination Event under Section 5(b)(iv) has occurred, will, at the
option of the party (`X') other than the Defaulting Party or the Affected Party
(and without prior notice to the Defaulting Party or the Affected Party), be
reduced by its set-off against any amount(s) (the `Other Agreement Amount')
payable (whether at such time or in the future or upon the occurrence of a
contingency) by the Payee to the Payer (irrespective of the currency, place of
payment or booking office of the obligation) under any other agreement(s)
5
<PAGE>
between the Payee and the Payer or instrument(s) or undertaking(s) issued or
executed by one party to, or in favor of, the other party (and the Other
Agreement Amount will be discharged promptly and in all respects to the extent
it is so set-off). X will give notice to the other party of any set-off effected
under this section.
For the purposes of this provision, each party hereby agrees that, if necessary
to enable the other party to exercise the rights of set-off contemplated herein
with respect to an amount payable by it under this Agreement in a particular
currency, that amount shall be deemed converted to ( and constitute an
obligation hereunder in an amount equal to) its equivalent in the currency in
which any Early Termination Amount or the other Agreement Amount is denominated,
at a rate of exchange and otherwise in the manner applicable hereunder for
conversion of any amount to its Termination Currency Equivalent (as if the date
of the set-off were an Early Termination Date, and with the party entitled under
this provision to effect the set-off to make the determinations required for the
conversion).
If an obligation is unmatured or contingent, X may in good faith and in a
commercially reasonable manner estimate that obligation and set-off in respect
of the estimate, subject to X accounting to such other party when the obligation
is ascertained, and if the obligation is not owed until some time in the future,
the amount of the obligation will be discounted to present value at a reasonable
then current market discount rate. X hereby agrees to notify the other party of
any such set-off and application.
Nothing in this section shall be effective to create a charge or other security
interest. This section shall be without prejudice and in addition to any right
of set-off, combination of accounts, lien or other right to which any party is
at any time otherwise entitled (whether by operation of law, contract or
otherwise).
(b) Exchange of Confirmations. For each Transaction entered into hereunder,
Party A shall promptly send to Party B a Confirmation, via telex or facsimile
transmission. Party B agrees to respond to such Confirmation within 10 Business
Days (for this purpose, Business Days refers to Business Days in the location of
the recipient), either confirming agreement thereto or requesting a correction
of any error(s) contained therein. Failure by Party B to respond within such
period shall not affect the validity or enforceability of such Transaction. The
parties agree that any such exchange of telexes or facsimile transmissions shall
constitute a Confirmation of all purposes hereunder.
(c) Waiver of Right to Trial by Jury. Each party hereby irrevocably waives
any and all rights to trial by jury with respect to any legal proceeding arising
out of or relating to this Agreement or any Transaction contemplated hereby.
(d) Telephonic Recording. Each party (i) consents to the recording of the
telephone conversations of trading, marketing and operations personnel of the
parties and their Affiliates in connection with this Agreement or any potential
Transaction and (ii) agrees to obtain any necessary consent of, and give notice
of such recording to, such personnel of it and its Affiliates.
6
<PAGE>
(e) Further Representations. Each party represents to the other party
(which representation will be deemed to be repeated on each date on which a
Transaction is entered into) that it is an "eligible swap participant" as such
term is defined in Part 35 of Chapter I of Title 17 of the Code of Federal
Regulations, promulgated by the Commodity Futures Trading Commission, entitled
"Exemption of Swap Agreements."
(f) Relationship Between Parties. The following representation shall be
inserted as a new Section 3(g) of this Agreement:
(g) Relationship Between Parties. Each party will be deemed to represent to
other party on the date on which it enters into a Transaction that (absent a
written agreement between the parties that expressly imposes affirmative
obligations to the contrary for the Transaction):
(i) Non-Reliance. It is acting for its own account, and it has
made its own independent decisions to enter into that Transaction and
as to whether that Transaction is appropriate or proper for it based
upon its own judgement and upon advice from such advisers as it has
deemed necessary. It is not relying on any communication (written or
oral) of the other party as investment advice or as a recommendation
to enter into that Transaction; it being understood that information
and explanations related to the terms and conditions of a Transaction
shall not be considered investment advice or a recommendation to enter
into that Transaction. No communication (written or oral) received
from the other party shall be deemed to be an assurance or guarantee
as to the expected results of that transaction.
(ii) Assessment and Understanding. It is capable of assessing the
merits and understanding (on its own behalf or through independent
professional advice), and understands and accepts, the terms,
conditions and risks of that Transaction. It is also capable of
assuming, and assumes the risks of that Transaction.
(iii) Status of Parties. The other party is not acting as a
fiduciary for or an adviser to it in respect of that Transaction."
(g) Negative Interest Rates. (i) Floating Amounts. "Swap Transaction"
means, for the purposes of this provision concerning Negative Interest Rates, a
rate exchange or swap transaction, including transactions involving a single
currency or two or more currencies. Part A and Party B agree that, if with
respect to a Calculation Period for a Swap Transaction either party is obligated
to pay a Floating Amount that is a negative number (either due to a quoted
negative Floating Rate or by operation of a Spread that is subtracted from the
Floating Rate), the Floating Amount with respect to
7
<PAGE>
that party for that Calculation Period will be deemed to be zero, and the other
party will pay to that party the absolute value of the negative Floating Amount
as calculated in addition to any amounts otherwise owned by the other party for
that Calculation Period with respect to that Swap Transaction, on the Payment
Date that the Floating Amount would have been due if it had been a positive
number. Any amounts paid by the other party with respect to the absolute value
of a negative Floating Amount will be paid to such account as the receiving
party may designate (unless such other party gives timely notice of a reasonable
objection to such designation) in the currency in which the Floating Amount
would have been paid if it had been a positive number (and without regard of the
currency in which the other party is otherwise obligated to make payments).
(ii) Compounding. Party A and Party B agree that, if with respect to one or
more Compounding Periods for a Swap Transaction where "Compounding" or "Flat
Compounding" is specified to be applicable the Compounding Period Amount, the
Basic Compounding Period Amount or the Additional Compounding Period Amount is a
negative number (either due to a quoted negative Floating Rate or by operation
of a Spread that is subtracted from the Floating Rate), then the Floating Amount
for the Calculation Period in which that Compounding Period or those Compounding
Periods occur will be either the sum of all the Compounding Period Amounts or
the sum of all the Basic Compounding Period Amounts and all the Additional
Compounding Period Amounts in that Calculation Period (whether positive or
negative). If such sum is positive, then the Floating Rate Payer with respect to
the Floating Amount so calculated will pay that Floating Amount to the other
party. If such sum is negative, the Floating Amount with respect to the party
that would be obligated to pay that Floating Amount will be deemed to be zero,
and the other party will pay to that party the absolute value of the negative
Floating Amount as calculated, such payment to be made in accordance with (i)
above.
(h) "Credit Agreement" means the Credit Agreement, dated as of June 26,
1995, among Party B, Tiffany and Company, Tiffany & Co. International, the
Subsidiary Borrowers party thereto, the Lenders party thereto and the Bank of
New York, as Administrative Agent, as amended, supplemented or otherwise
modified from time to time and including any agreement which shall replace or
refinance such Credit Agreement. Capitalized terms defined therein and not
otherwise defined herein shall have the meanings assigned in the Credit
Agreement.
(i) Further Agreements of Tiffany & Co. Tiffany & Co. agrees with Party A
that Tiffany & Co. (i) will comply with each of the covenants set forth in
Sections 7 and 8 of the Credit Agreement (or the equivalent sections in any
agreement which shall replace or refinance the Credit Agreement) and (ii) will
not, at any time, permit Consolidated Net Worth to be less than the sum of (a)
$225,000,000 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
Tiffany & Co. ended after the date hereof. As used herein (A)
8
<PAGE>
"Consolidated Net Income" means, for any period, the net income (or loss) of
Tiffany & Co. 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 Tiffany & Co. and its subsidiaries and all other items
required to be eliminated in the course of the preparation of consolidated
financial of Tiffany & Co. and its subsidiaries in the accordance with GAAP and
(B) "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 Tiffany & Co. and its subsidiaries, plus (ii) the amount of
the paid-in capital and retained earnings of Tiffany & Co. 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
Tiffany & Co. 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.
(j) Additional event of Default. With respect to Party B, it shall
constitute an Event of Default under this Agreement if there shall occur and be
continuing any Event of Default under the Credit Agreement.
(k) Further Representation of Party B. Tiffany & Co. represents and
warrants to Party A (which representation will be deemed to be repeated by
Tiffany & Co. on each date on which a Transaction is entered onto) that each of
the representations and warranties made by Tiffany & Co. in Section 4 of the
Credit Agreement is true and correct and no Event of Default under the Credit
Agreement has occurred and is continuing.
(l) Credit Support Default. An Event of Default with respect to Party B as
a result of a Credit Support Default shall not be deemed to occur as a result of
a failure of the Party B's Credit Support Provider to pay an amount owing by
Party B under this Agreement until the end of the cure period (if any) allowed
to Party B as principal obligor under this Agreement.
PART 6: Foreign Exchange Transactions
(a) Definitions and Application. (i) This Agreement is subject to the 1998
FX and Currency Option Definitions (the "FX Definition"), as published by the
International Swaps and Derivatives Association, Inc., the Emerging Markets
Traders Association, and The Foreign Exchange Committee, as hereinafter amended.
In the event of any inconsistency between the FX Definitions and this Agreement,
this Agreement will govern. Unless otherwise agreed in writing by the parties,
each FX Transaction and Currency option Transaction, whether now existing or
hereafter entered into, between the parties shall be governed by this Agreement,
notwithstanding Section 1(b) of this Agreement, the absence of any reference to
this Agreement in the
9
<PAGE>
Confirmation in respect of any such FX Transaction or Currency Option
Transaction, or the reference to any other governing terms or law in such
Confirmation.
(ii) Section 3.4 of the FX Definitions is amended by addition the
following:
(c) Non-Payment. If any Premium is not received on the
Premium Payment Date, the Seller any elect either: (i) to accept a late payment
of such premium; (ii) to give written notice of such non-payment and, if such
payment shall not be received within three (3) Local Business Days (as defined
in this Agreement) of such notice, treat the related Currency Option Transaction
as void; or (iii) if such payment shall not be received within three (3) Local
Business Days of such notice, treat such non-payment as an Event of Default
under Section 5(a)(i) of this Agreement. If the Seller elects to act under
either clause (i) or (ii) of the preceding sentence, the Buyer shall pay all
out-of-pocket costs and actual damage incurred in connection with such unpaid or
late Premium or void Currency Option Transaction, including, without limitation,
interest on such Premium in the same currency as such Premium at the then
prevailing market rate and any other costs or expenses incurred by the Seller in
covering its obligations (including without limitation, a delta hedge) with
respect to such Currency Option Transaction:
(d) Discharge and Termination. Unless otherwise agreed, any
Call or any Put written by a party will automatically be terminated and
discharged, in whole or in part, as applicable, against a Call or a Put,
respectively, written by the other party, such termination and discharge to
occur automatically upon the payment in full of the last Premium payable in
respect of such Currency Option Transactions; provided that such termination and
discharge may only occur in respect of Currency Option Transactions:
(i) each being with respect to the same Put Currency and the same Call
Currency;
(ii) each having the same Expiration Date and Expiration Time;
(iii) each being the same style, i.e. either both being American style
Currency Option Transaction or both being European style Currency Option
Transactions;
(iv) each having the same Strike Price;
(v) neither of which shall have been exercised by delivery of a Notice
of Exercise; and
(vi) each having been transacted by the same pair of offices of the
Buyer and the Seller
and, upon the occurrence of such termination and discharge, neither
party shall have any further obligation to the other party in respect of the
relevant Currency Option Transactions or, as the case may be, parts thereof so
terminated and discharged. In the case of a partial termination and discharge
(i.e., where the relevant Currency Option
10
<PAGE>
Transactions are for different amounts of the Currency Pair), the remaining
portion of the Currency Option Transaction which is partially discharged and
terminated shall continue to be a Currency Option Transaction for all purposes
of this Agreement, including this Section 3.4(d).
(b) Confirmations. In respect of FX Transactions and Currency Option
transactions, the term "Confirmation" means a writing (including telex,
facsimile or other electronic means from which it is possible to produce a hard
copy) evidencing an FX Transaction or Currency Option Transaction, as the case
may be, notwithstanding the absence of any reference to this Agreement therein
or the reference therein to any other governing terms or law. In relation to
such Confirmations, unless either party objects to the terms contained in any
Confirmation within three (3) Business Days in its location of receipt thereof,
or such shorter time as may be appropriate given the Settlement Date of an FX
Transaction, the terms of such Confirmation shall be deemed correct and accepted
absent manifest error, unless a corrected Confirmation is sent by a party within
such three (3) Business Days, or shorter period, as appropriate, in which case
the party receiving such corrected Confirmation shall have three (3) Business
Days in its location, or shorter period, as appropriate, after receipt thereof
to object to the terms contained in such corrected Confirmation. In the event of
any conflict between the terms of such a Confirmation of an FX Transaction or a
Currency Option Transaction, as the case may be, and this Agreement, the terms
of this Agreement shall prevail, and the Confirmation shall not modify the terms
of this Agreement.
Accepted and Agreed:
THE CHASE MANHATTAN BANK TIFFANY & CO. JAPAN INC.
/s/ Henry J.S. Cheever /s/ Michael W. Connolly
By: ___________________________ By: _______________________________
Name: HENRY J.S. CHEEVER Name: Michael W. Connolly
Title MANAGING DIRECTOR Title: Vice President-Treasurer
Agreed (as to Part 5(i) and 5(k) above):
TIFFANY & CO.
/s/Michael W. Connolly
By: _______________________________
Name: Michael W. Connolly
Title Vice President-Treasurer
11
<PAGE>
GUARANTY
--------
GUARANTY, dated as of October 18, 1999, made by each of TIFFANY AND
COMPANY, a New York corporation, TIFFANY & CO. INTERNATIONAL, a Delaware
corporation and TIFFANY & CO., a Delaware corporation (collectively, the
"Guarantors", each a "Guarantor", in favor of THE CHASE MANHATTAN BANK
("Chase").
PRELIMINARY STATEMENT. Chase is planning to enter, or has entered, into
a Master Agreement, dated as of October 18, 1999 (said Agreement, as it may from
time to time be supplemented by any Transaction or otherwise amended from time
to time, being the "Agreement"; the terms defined therein and not otherwise
defined herein being used herein as therein defined) with Tiffany & Co. Japan,
Inc. a Delaware corporation (the "Counterparty"). The Agreement requires that
this Guaranty be executed by the Guarantors and delivered to Chase.
NOW, THEREFORE, in consideration of the premises and in order to induce
Chase to enter into the Agreement, each of the Guarantors hereby agrees as
follows:
SECTION 1. Guaranty. Each of the Guarantors hereby unconditionally
jointly and severally guarantees, as primary obligor and not merely as surety,
the punctual payment when due (whether at stated maturity, by acceleration, or
otherwise) of all amounts payable by the Counterparty to Chase under the
Agreement and each Transaction thereunder, including, without limitation, all
amounts payable by the Counterparty under Section 2 and Section 6(e) of the
Agreement, and all fees or expenses (such amounts being hereinafter referred to
as the "Obligations"), and agrees to pay any and all expenses including
reasonable counsel fees and expenses) incurred by Chase in enforcing any rights
under this Guaranty. Each of the Guarantors agrees that, as between the
Guarantors and Chase, the Obligations may be declared to be due and payable for
purposes of this Guaranty notwithstanding any stay, injunction, or other
prohibition which may delay, prevent, or vitiate any such declaration as against
the Counterparty and that in the event of any such declaration (or attempted
declaration), the Obligations (whether or not due and payable by the
Counterparty) shall forthwith become due and payable by the Guarantors for the
purposes of this Guaranty.
SECTION 2. Guaranty Absolute. Each of the Guarantors guarantees that the
Obligation will be paid strictly in accordance with the terms of the Agreement
and any Transaction, regardless of any law, regulation or order now or hereafter
in effect in any jurisdiction affecting any of such terms or the rights of Chase
with respect thereto. The liability of the Guarantors under this Guaranty shall
be absolute and unconditional irrespective of:
<PAGE>
(a) any lack of validity or enforceability of the Agreement or any
Transaction;
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations, or any other
amendment or waiver of or any consent to departure from the
Agreement or any Transaction or any release or transfer of, or
any other action or inaction with respect to, any collateral
security for the Obligations or any other guaranty of the
Obligations and any right under any of them or provided by law;
(c) any other circumstance which might otherwise constitute a defense
available to, or a discharge of, the Counterparty or a guarantor;
(d) the merger or consolidation of the Counterparty or any Guarantor
with or into another entity or any sale or transfer by the
Counterparty or any Guarantor of all or any part of its
respective assets;
(e) any order of any governmental entity purporting to reduce, amend,
or restructure any of the Obligations; or
(f) any lack of action to obtain any amount in respect of the
Obligations from the Counterparty, the obtaining of, or the
failure to obtain, any judgment against the Counterparty, or any
attempt, or failure to attempt, or to enforce any such judgment.
This Guaranty shall continue to be effective or be reinstated, as the case
may be, if at any time any payment of any of the Obligations is rescinded or
must otherwise be returned by Chase upon the insolvency, bankruptcy or
reorganization of the Counterparty or otherwise, all as though such payment had
not been made.
SECTION 3. Waiver. Each of the Guarantors hereby waives promptness,
diligence, notice of acceptance and any other notice with respect to any of
the Obligations and this Guaranty and any requirement that Chase exhaust any
right or take any action against the Counterparty or any other person or entity.
SECTION 4. Subrogation. No Guarantor will exercise any rights which it
may acquire by way of subrogation under this Guaranty, by any payment made
hereunder or otherwise, until all the Obligations shall have been paid in full.
If any amount shall be paid to any Guarantor on account of such subrogation
rights at any time when all the Obligations shall not have been paid in full,
such amount shall be held in trust for the benefit of Chase and shall forthwith
be paid to Chase to be credited and applied upon the Obligations in accordance
with the terms of the Agreement and any Transaction thereunder. If (i) any
Guarantor shall make payment to Chase of all or any part of the Obligations and
(ii) all the Obligations shall be paid in full, Chase will, at such
2
<PAGE>
Guarantor's request, execute and deliver to such Guarantor appropriate
documents, without recourse and without representation or warranty, necessary to
evidence the transfer by subrogation to such Guarantor of an interest in the
Obligations resulting from such payment by such Guarantor.
SECTION 5. Payments Free and Clear of Taxes, Etc. Except as otherwise
required by law, each payment made by the Guarantors hereunder shall be made
without deduction or withholding for or on account of Taxes (as defined in the
Agreement). If such deduction or withholding is so required of any Guarantor,
such Guarantor shall pay the amount required to be deducted or withheld to the
appropriate authority before penalties attach thereto or interest accrues
thereon and, in the case of deduction or withholding for or on account of Taxes
that are Indemnifiable Taxes (as defined in the Agreement), shall forthwith pay
Chase such additional amount as may be necessary to ensure that the net amount
actually received by Chase free and clear of Indemnifiable Taxes (including any
Indemnifiable Taxes on such additional amount) is equal to the amount the Chase
would have received had there been no such deduction or withholding. Such
Guarantor shall, on or before the sixtieth day of making such deduction or
withholding, forward to Chase an official receipt evidencing such deduction or
withholding (or a certified copy thereof).
SECTION 6. Representations. Each of the Guarantors hereby makes each of
the representations set forth in Section 3 of the Agreement (including the
Schedule thereto) as though such representations were set forth fully herein,
except that for this purpose all references to the Agreement shall be deemed to
be references to this Guaranty. Such representations shall be deemed to be
repeated on each date on which a Transaction is entered into.
SECTION 7. No Waiver; Remedies. No failure on the part of Chase to
exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
SECTION 8. Right of Set-off. Upon the occurrence and during the
continuance of any Event of Default, Chase is hereby authorized at any time and
from time to time, to the fullest extent permitted by law, to set off and apply
any and all deposits (general or special, time or demand, provisional or final)
at any time held and other indebtedness at any time owing by Chase to or for the
credit or the account of any Guarantor against any and all of the obligations of
such Guarantor now or hereafter existing under this Guaranty, irrespective of
whether or not Chase shall have made any demand under this Guaranty and although
such obligations may be contingent and unmatured. If an obligation is
contingent, Chase may in good faith estimate that obligation and set-off in
respect of the estimate, subject to Chase accounting to such Guarantor when the
obligation is ascertained, and if the obligation is not owed until some time in
the future, the amount of the obligation will be discounted to present value at
3
<PAGE>
a then current market discount rate. Chase agrees promptly to notify such
Guarantor after any such set-off and application, provided that the failure to
give such notice shall not affect the validity of such set-off and application.
The rights of Chase under this Section are in addition to other rights and
remedies (including, without limitation, other rights of set-off) which Chase
may have.
SECTION 9. Continuing Guaranty. This Guaranty is a continuing guaranty
and shall (i) remain in full force and effect until payment in full of the
Obligations and all other amounts payable under this Guaranty, (ii) be binding
upon each Guarantor and their respective successors and assigns, and (iii) inure
to the benefit of and be enforceable by Chase and its permitted successors,
transferees and assigns.
SECTION 10. Transfer. The obligations of the Guarantors under this
Guaranty may not be assigned or delegated without the prior written consent of
Chase. Chase may not assign the benefits of this Guaranty except in connection
with a permitted assignment by Chase of its interest in the Agreement.
SECTION 11. Contractual Currency. The provisions in the Agreement
relating to payments and judgments in the Contractual Currency (as defined in,
or for purposes of, the Agreement), including all of Section 8, shall apply to
all payments by the Guarantors under this Guaranty as though such provisions
were set forth in full herein, except that references in such provisions to the
Agreement shall be deemed to be references to this Guaranty.
SECTION 12. Miscellaneous. The provisions of or incorporated in the
Agreement relating to Entire Agreement, Amendments, Survival of Obligations,
Remedies Cumulative, No Waiver of Rights, Headings, Notices, Governing Law,
Jurisdiction, Service of Process and Waiver of Immunities shall also apply to
this Guaranty as though such provisions were set forth in full herein (except
that references in such provisions to the parties and the Agreement shall be
deemed to be references to the Guarantors (and, if applicable, Chase) and this
Guaranty, respectively and that the addresses for notices shall be as specified
in Section 13 hereof).
SECTION 13. Addresses for Notices. Any notice or communication in
respect of this Guaranty should be give (i) if to Chase, at the address
specified for such party in Part 4 of the Schedule to the Agreement and (ii) if
to the Guarantors, at the address set forth below each Guarantor's signature to
this Guaranty.
SECTION 14. Waiver of Right to Trial By Jury. Each of the Guarantors
hereby irrevocably waives any and all rights to trial by jury with respect to
any legal proceeding arising out of or relating to this Guaranty.
4
<PAGE>
IN WITNESS WHEROF, each of the Guarantors has caused this Guaranty to
be duly executed and delivered by its officer thereunto duly authorized as of
the date first above written.
TIFFANY AND COMPANY
By: /s/ Michael W. Connolly
Name: Michael W. Connolly
Title: Vice President-Treasurer
Address for notices:
TIFFANY & CO. INTERNATIONAL
By: /s/ Michael W. Connolly
Name: Michael W. Connolly
Title: Vice President-Treasurer
Address for notices:
Attention: Michael Connolly
15 Sylvan Way
Parsippany, New Jersey 07054
Facsimile No. (973) 254-7645
5
<PAGE>
CONFIRMATION
SWAP TRANSACTION
October 29, 1999
TIFFANY & CO, JAPAN INC.
TOKYO
JAPAN
ATTN: MARK KIRSCH
973-254-7699
973-254-7694
RE: SWAP TRANSACTION (OUR REF. NO. 0004358723 / 52274027)
LADIES AND GENTLEMEN:
THE PURPOSE OF THIS LETTER AGREEMENT IS TO CONFIRM THE TERMS AND CONDITIONS OF
THE TRANSACTION ENTERED INTO BETWEEN US ON THE TRADE DATE BELOW. IT CONSTITUTES
A "CONFIRMATON" AS REFERRED TO IN THE ISDA MASTER AGREEMENT DESCRIBED BELOW.
THE DEFINITIONS AND PROVISIONS CONTAINED IN THE 1991 ISDA DEFINITIONS (AS
SUPPLEMENTED BY THE 1998 SUPPLEMENT), (THE "DEFINITIONS") AS PUBLISHED BY THE
INTERNATIONAL SWAP DEALERS ASSOCIATION, INC. NOW KNOWN AS THE INTERNATIONAL
SWAPS AND DERIVATIVES ASSOCIATION, INC. ("ISDA"), ARE INCORPORATED INTO THIS
CONFIRMATION. IN THE EVENT OF ANY INCONSISTENCY BETWEEN THOSE DEFINITIONS AND
PROVISIONS AND THIS CONFIRMATION, THIS CONFIRMATION WILL GOVERN. EACH PARTY
REPRESENTS AND WARRANTS TO THE OTHER THAT (I) IT IS DULLY AUTHORIZED TO ENTER
INTO THE TRANSACTION TO WHICH THIS CONFIRMATION RELATES AND TO PERFORM ITS
OBLIGATIONS HEREUNDER AND (II) THE PERSON EXECUTING THIS CONFIRMATION IS DULY
AUTHORIZED TO EXECUTE AND DELIVER IT.
1. THIS CONFIRMATION EVIDENCES A COMPLETE AND BINDING AGREEMENT BETWEEN YOU
AND US AS TO THE TERMS OF THE TRANSACTION TO WHICH THIS CONFIRMATION
RELATES. IN ADDITION, YOU AND WE AGREE TO USE ALL REASONABLE EFFORTS
PROMPTLY TO NEGOTIATE, EXECUTE, AND DELIVER AN AGREEMENT IN THE FORM OF THE
ISDA MASTER AGREEMENT (MULTICURRENCY- CROSS BORDER) (THE "ISDA FORM"), WITH
SUCH MODIFICATIONS AS YOU AND WE WILL IN GOOD FAITH AGREE. UPON THE
EXECUTION BY YOU AND WE OF SUCH AN AGREEMENT, THIS CONFIRMATION WILL
SUPPLEMENT, FORM A PART OF, AND BE SUBJECT TO, THAT AGREEMENT. ALL
PROVISIONS CONTAINED OR INCORPORATED BY REFERENCE IN THAT AGREEMENT UPON
ITS EXECUTION WILL GOVERN THIS CONFIRMATION EXCEPT AS EXPRESSLY MODIFIED
BELOW. UNTIL YOU AND WE EXECUTE THAT AGREEMENT, THIS CONFIRMATION, TOGETHER
WITH ALL OTHER DOCUMENTS REFERRING TO THE ISDA FORM (EACH A "CONFIRMATION")
CONFIRMING TRANSACTIONS (EACH A "TRANSACTION") ENTERED INTO BETWEEN YOU AND
WE (NOTHWITHSTANDING ANYTHING TO THE CONTRARY IN A CONFIRMATION), SHALL
SUPPLEMENT, FORM A PART OF, AND BE SUBJECT TO AN AGREEMENT IN THE FORM OF
THE ISDA FORM AS IF YOU AND WE HAD EXECUTED AN AGREEMENT IN SUCH FORM (BUT
WITHOUT ANY SCHEDULE EXCEPT FOR THE ELECTION OF THE LAWS OF THE STATE OF
NEW YORK AS THE GOVERNING LAW AND UNITED STATES
<PAGE>
CONFIRMATION
SWAP TRANSACTION
October 29, 1999
TIFFANY & CO, JAPAN INC.
TOKYO
JAPAN
ATTN: MARK KIRSCH
973-254-7699
973-254-7694
RE: SWAP TRANSACTION (OUR REF. NO. 0004358723 / 52274027)
CONTINUATION - (1)
DOLLARS AS THE TERMINATION CURRENCY) ON THE TRADE DATE OF THE FIRST SUCH
TRANSACTION BETWEEN YOU AND WE IN THE EVENT OF ANY INCONSISTENCY BETWEEN
PROVISIONS OF THAT AGREEMENT AND THIS CONFIRMATION, THIS CONFIRMATION WILL
PREVAIL FOR THE PURPOSE OF THE TRANSACTION TO WHICH THIS CONFIRMATION
RELATES.
THE PARTIES OF THIS CONFIRMATION ARE THE CHASE MANHANTTAN BANK ("CHASE")
AND TIFFANY & CO., JAPAN INC (THE "COUNTERPARTY").
2. TERMS OF THE TRANSACTION TO WHICH THIS CONFIRMATION RELATES ARE AS FOLLOWS:
NOTIONAL AMOUNT: JPY 5,500,000,000.00
TRADE DATE: OCTOBER 22, 1999
EFFECTIVE DATE: OCTOBER 26, 1999
TERMINATION DATE: OCTOBER 26, 2004
SUBJECT TO ADJUSTMENT IN ACCORDANCE
WITH THE MODIFIED FOLLOWING BUSINESS
DAY CONVENTION
FIXED AMOUNTS:
FIXED RATE PAYER: THE COUNTERPARTY
FIXED RATE PAYER PAYMENT DATES, SUBJECT TO ADJUSTMENT IN ACCORDANCE WITH THE
MODIFIED FOLLOWING BUSINESS DAY CONVENTION: ARPIL 26, OCTOBER 26, OF EACH YEAR
PRIOR TO AND INCLUDING THE TERMINATION DATE, COMMENCING WITH APRIL 26, 2000.
FIXED RATE AND FIXED RATE DAY COUNT FRACTION 1.815%; ACTUAL/360
FLOATING AMOUNTS
FLOATING RATE PAYER: CHASE
<PAGE>
CONFIRMATION
SWAP TRANSACTION
October 29, 1999
TIFFANY & CO, JAPAN INC.
TOKYO
JAPAN
ATTN: MARK KIRSCH
973-254-7699
973-254-7694
RE: SWAP TRANSACTION (OUR REF. NO. 0004358723 / 52274027)
CONTINUATION - (2)
FLOATING RATE PAYER PAYMENT DATES, SUBJECT TO ADJUSTMENT IN ACCORDANCE WITH THE
MODIFIED FOLLOWING BUSINESS DAY CONVENTION: APRIL 26, OCTOBER 26 OF EACH YEAR
PRIOR TO AND INCLDUING THE TERMINATION DATE, COMMENCING WITH APRIL 26, 2000.
FLOATING RATE OPTION: JPY-LIBOR-BBA
FLOATING RATE FOR INITIAL
CALCULATION PERIOD: 0.22625 PER CENT
DESIGNATED MATURITY: 6 MONTHS
SPREAD: PLUS 0.5%
FLOATING RATE DAY COUNT FRACTION: ACTUAL/360
RESET DATES: THE FIRST DAY OF EACH CALCULATION
PERIOD FOR THE FLOATING RATE PAYER.
BUSINESS DAY FOR PAYMENTS BY
BOTH PARTIES: TOKYO, LONDON
CALCULATION AGENT: CHASE
3. ACCOUNT DETAILS
PAYMENTS TO CHASE
ACCOUNT FOR PAYMENTS IN JPY:
CHASE MANHATTAN BANK
TOKYO
FAVOR: CHASE NEW YORK
PAYMENTS TO COUNTERPARTY
ACCOUNT FOR PAYMENTS IN JPY:
TO BE AVISED
<PAGE>
CONFIRMATION
SWAP TRANSACTION
October 29, 1999
TIFFANY & CO, JAPAN INC.
TOKYO
JAPAN
ATTN: MARK KIRSCH
973-254-7699
973-254-7694
RE: SWAP TRANSACTION (OUR REF. NO. 0004358723 / 52274027)
CONTINUATION - (3)
4. OFFICE AND ADDRESS FOR NOTICES IN CONNECTION WITH THIS SWAP TRANSACTION:
(A) CHASE: ITS HEAD OFFICE IN NEW YORK AT 4 CHASE METROTECH CENTER, 17TH
FLOOR, BROOKLYN, NY 11245, ATTN: GLOBAL DERIVATIVE OPERATIONS.
(B) COUNTERPARTY: ITS OFFICE IN TOKYO, JAPAN, ATTN: MARK KIRSCH,
973-254-7699, 973-254-7694.
5. DOCUMENTS TO BE DELIVERED:
(I) EACH PARTY SHALL DELIVER TO THE OTHER, AT THE TIME OF ITS EXECUTION OF
THIS CONFIRMATION, EVIDENCE OF THIE INCUMBENCY AND SPECIMEN SIGNATURE OF
THE PERSON(S) EXECUTING THIS CONFIRMATION, UNLESS SUCH EVIDENCE HAS BEEN
PREVIOUSLY SUPPLIED AND REMAINS TRUE AND IN EFFECT.
(II) IN CONNECTION WITH THE AGREEMENT TO BE EXECUTED BY THE PARTIES
REFERRED TO IN PART 1 HEREOF, COUNTERPARTY AGREES TO DELIVER TO CHASE AN
OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO CHASE.
6. GOVERNING LAW.
THE LAWS OF THE STATE OF NEW YORK, PROVIDED, HOWEVER, THAT UPON EXECUTION
OF THE AGREEMENT REFERRED TO IN PART 1 HEREOF, THIS CONFIRMATION SHALL BE
GOVERNED BY THE LAW GOVERNING SUCH AGREEMENT.
7. EACH PARTY WILL BE DEEMED TO REPRESENT TO THE OTHER PARTY ON THE DATE ON
WHICH IT ENTERS INTO A SWAP TRANSACTION THAT (ABSENT A WRITTEN AGREEEMNT
BETWEEN THE PARTIES THAT EXPRESSLY IMPOSES AFFIRMATIVE OBLIGATIONS TO THE
CONTRARY FOR THAT SWAP TRANSACTION):
(A) NON RELIANCE. IT IS ACTING FOR ITS OWN ACCOUNT, AND IT HAS MADE ITS OWN
INDEPENDENT DECISIONS TO ENTER INTO THAT SWAP TRANSACTION AND AS TO WHETHER
THAT SWAP TRANSACTION IS APPROPRIATE OR PROPER FOR IT BASED UPON ITS OWN
JUDGEMENT AND UPON ADVICE FROM SUCH ADVISERS AS IT HAS DEEMED
<PAGE>
CONFIRMATION
SWAP TRANSACTION
October 29, 1999
TIFFANY & CO, JAPAN INC.
TOKYO
JAPAN
ATTN: MARK KIRSCH
973-254-7699
973-254-7694
RE: SWAP TRANSACTION (OUR REF. NO. 0004358723 / 52274027)
CONTINUATION - (4)
NECESSARY. IT IS NOT RELYING ON ANY COMMUNICAITON (WRITTEN OR ORAL) OF THE
OTHER PARTY AS INVESTMENT ADVICE OR AS A RECOMMENDATION TO ENTER INTO THAT
SWAP TRANSACTION: IT BEING UNDERSTOOD THAT INFORMATION AND EXPLANATIONS
RELATED TO THE TERMS AND CONDITIONS OF A SWAP TRANSACTION SHALL NOT BE
CONSIDERED INVESTMENT ADVICE OR A RECOMMENDATION TO ENTER INTO THAT SWAP
TRANSACTION, NO COMMUNICATION (WRITTEN OR ORAL) RECEIVED FROM THE OTHER
PARTY SHALL BE DEEMED TO BE AN ASSURANCE OR GUARANTEE AS TO THE EXPECTED
RESULTS OF THAT SWAP TRANSACTION.
(B) ASSESSMENT AND UNDERSTANDING. IT IS CAPABLE OF ASSESSING THE MERITS OF AN
UNDERSTANDING (ON ITS OWN BEHALF OR THROUGH INDEPENDENT PROFESSIONAL
ADVICE), AND UNDERSTANDS AND ACCEPTS, THE TERMS, CONDITIONS AND RISKS OF
THAT SWAP TRANSACTION. IT ALSO IS CAPABLE OF ASSUMING, AND ASSUMES, THE
RISKS OF THAT SWAP TRANSACTION.
(C) STATUS OF PARTIES THE OTHER PARTY IS NOT ACTING AS A FIDUCIARY FOR OR AN
ADVISER TO IT IN RESPECT OF THAT SWAP TRANSACTION.
PLEASE CONFIRM THAT THE FOREGOING CORRECTLY SETS FORTH THE TERMS OF OUR
AGREEMENT BY EXECUTING THE COPIES OF THIS CONFIRMATION ENCLOSED FOR THAT PURPOSE
AND RETURNNG THEM TO US.
FOR INQUIRIES REGARDING THIS CONFIRMATION PLEASE CALL:
CUSTOMER SERVICE AT (718) 242-7553/8218/3100/3092 OR
FAX (718) 242-4809/9263/4811/6154
YOURS SINCERELY,
THE CHASE MANHATTAN BANK
BY: /S/Carmine Pilla
------------------------
AUTHORIZED SIGNATURE
Carmine Pilla
VP
CONFIRMED AS OF THE DATE FIRST
<PAGE>
CONFIRMATION
SWAP TRANSACTION
October 29, 1999
TIFFANY & CO, JAPAN INC.
TOKYO
JAPAN
ATTN: MARK KIRSCH
973-254-7699
973-254-7694
RE: SWAP TRANSACTION (OUR REF. NO. 0004358723 / 52274027)
CONTINUATION - (5)
ABOVE WRITTEN:
CHASE REF NO. (0004358723 / 52274027)
TIFFANY AND CO. JAPAN INC.
BY: /s/ Michael W. Connolly
-----------------------
NAME: Michael W. Connolly
TITLE: Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Note: The amount reported for EPS basic and fully diluted is in compliance
with Statement of Financial Accounting Standards No. 128, "Earnings
Per Share" and represents the Basic and Diluted calculation as
required by this standard.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-2000
<PERIOD-START> AUG-01-1999
<PERIOD-END> OCT-31-1999
<CASH> $155,937,000
<SECURITIES> 0
<RECEIVABLES> 116,182,000
<ALLOWANCES> 9,176,000
<INVENTORY> 575,962,000
<CURRENT-ASSETS> 903,658,000
<PP&E> 362,388,000
<DEPRECIATION> 145,384,000
<TOTAL-ASSETS> 1,262,391,000
<CURRENT-LIABILITIES> 274,935,000
<BONDS> 0
0
0
<COMMON> 724,000
<OTHER-SE> 677,473,000
<TOTAL-LIABILITY-AND-EQUITY> 1,262,391,000
<SALES> 322,706,000
<TOTAL-REVENUES> 322,706,000
<CGS> 141,216,000
<TOTAL-COSTS> 283,224,000
<OTHER-EXPENSES> 2,257,000
<LOSS-PROVISION> 352,000
<INTEREST-EXPENSE> 3,898,000
<INCOME-PRETAX> 37,225,000
<INCOME-TAX> 15,263,000
<INCOME-CONTINUING> 21,962,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,962,000
<EPS-BASIC> .30
<EPS-DILUTED> .29
</TABLE>
