<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-2.
</TABLE>
Tiffany & Co.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-12.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
April 7, 2000
TIFFANY & CO.
727 Fifth Avenue
New York, N.Y. 10022
William R. Chaney
Chairman of the Board
Michael J. Kowalski
President and Chief Executive Officer
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
of Tiffany & Co. on Thursday, May 18, 2000, at 10:00 a.m. in the Roof/Penthouse
of the St. Regis Hotel, 2 East 55th Street at Fifth Avenue, New York, New York.
We hope that you can join us at this meeting. As a stockholder, your
participation in the affairs of Tiffany & Co. is important, regardless of the
number of shares that you hold. Therefore, whether or not you are able to
personally attend, please vote your shares by completing and returning the
enclosed proxy card or by calling the telephone number listed on the card as
soon as possible.
Enclosed are Tiffany & Co.'s 1999 Annual Report and Proxy Statement. We
hope you find it informative reading.
Thank you for your interest in Tiffany & Co.
Sincerely,
William R. Chaney
Michael J. Kowalski
<PAGE> 3
2000 Annual Meeting of Stockholders
Proxy Statement
[graphic]
Tiffany & Co.
<PAGE> 4
PROXY STATEMENT FOR THE
2000 ANNUAL MEETING OF STOCKHOLDERS
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
Attendance and Voting Matters......................................................... 1
Introduction................................................................. 1
Matters To Be Voted On at the 2000 Annual Meeting............................ 1
How To Vote Your Shares...................................................... 1
The Number of Votes That You Have .......................................... 2
What a Quorum Is............................................................. 2
What a Broker Non-Vote Is.................................................... 3
What Vote Is Required To Approve Each Proposal .............................. 3
Proxy Voting on Proposals in the Absence of Instructions..................... 4
How Proxies Are Solicited.................................................... 5
Ownership of Tiffany & Co............................................................. 5
Stockholders Who Own At Least Five Percent of Tiffany & Co................... 5
Ownership by Executive Officers and Directors................................ 6
Compliance of Directors, Executive Officers and Greater-Than-Ten-
Percent Stockholders with Section 16(a) Beneficial Ownership
Reporting Requirements.............................................. 7
Tiffany & Co.'s Board of Directors and Executive Officers............................. 7
The Board of Directors, In General .......................................... 7
Committees of the Board of Directors......................................... 8
Compensation of Directors................................................... 10
Compensation of the CEO and Other Executive Officers........................ 11
Compensation Committee Report on Executive Compensation..................... 19
Performance of Tiffany & Co. Stock................................................... 22
Discussion of Proposals Presented by the Board....................................... 23
Item I - Election of the Board of Directors................................. 23
Item II - Increase in the Number of Authorized Shares of Common Stock....... 25
Item III - Amendment of Stock Option Plan....................................27
Item IV - Appointment of Independent Accountants............................ 36
Other Matters........................................................................ 37
Stockholder Proposals, In General........................................... 37
Stockholder Proposals for Inclusion in the Proxy Statement
for the 2001 Annual Meeting........................................ 37
Reminder to Vote............................................................ 37
Appendix............................................................................. 38
</TABLE>
<PAGE> 5
ATTENDANCE AND VOTING MATTERS
INTRODUCTION
The Annual Meeting of the stockholders of Tiffany & Co. will be held on
Thursday, May 18, 2000, at 10:00 a.m. in the Roof/Penthouse of the St. Regis
Hotel, 2 East 55th Street at Fifth Avenue, New York, New York.
You are entitled to vote at our 2000 Annual Meeting because you were a
stockholder, or held Tiffany & Co. stock through a broker, bank or other
nominee, at the close of business on March 24, 2000, the record date for this
year's Annual Meeting. That is why you were sent this Proxy Statement and
accompanying material.
We have also enclosed for your review a copy of our 1999 Annual Report
to Stockholders. This Report contains financial and other information about our
business during our last fiscal year (February 1, 1999, to January 31, 2000).
MATTERS TO BE VOTED ON AT THE 2000 ANNUAL MEETING
There are four matters scheduled to be voted on at this year's Annual
Meeting:
- the election of the Board of Directors,
- the amendment of our Restated Certificate of Incorporation to
increase the number of authorized shares of common stock from
120,000,000 to 240,000,000,
- the amendment of our 1998 Employee Incentive Plan to increase
the number of shares of common stock that may be delivered to
participating employees by 2,000,000, and
- the approval of independent accountants to examine our fiscal
2000 financial statements.
HOW TO VOTE YOUR SHARES
You can vote your shares at the Annual Meeting in one of two ways.
The first way is by having one or more individuals who will be at the
Annual Meeting vote your shares for you. These individuals are called "proxies"
and using them to cast your ballot at the Annual Meeting is called voting "by
proxy."
If you wish to vote by proxy, you must do one of the following:
- complete the enclosed form, called a "proxy card," and mail it
in the envelope provided, or
- call the telephone number listed on the proxy card and follow
the pre-recorded instructions.
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<PAGE> 6
If you do one of the above, you will have designated three officers of
Tiffany & Co. to act as your proxies at the 2000 Annual Meeting. One of them
will then vote your shares at the Annual Meeting in accordance with the
instructions you have given them on the proxy card or over the telephone with
respect to each of the proposals presented in this Proxy Statement.
While we know of no other matters to be acted upon at this year's
Annual Meeting, it is possible that other matters may be presented at the
meeting. If that happens and you have voted by proxy, your proxy will vote on
such other matters in accordance with his or her best judgment.
If you decide to vote by proxy, you can revoke - that is, change or
cancel - your vote at any time before your proxy casts his or her vote at the
Annual Meeting. Revoking your vote by proxy may be accomplished in one of three
ways:
- you can send an executed, later-dated proxy card to the
Secretary of the Company or call in different instructions,
- you can notify the Secretary of Tiffany & Co. in writing that
you wish to revoke your proxy, or
- you can attend the Annual Meeting and vote in person.
Alternatively, you can vote your shares by attending the Annual
Meeting and voting in person. You will be given a ballot at the meeting to
complete and return.
A special note for those who plan to attend the Annual Meeting and vote
in person: if your shares are held in the name of a broker, bank or other
nominee, you must bring a statement or letter from the person or entity in whose
name the shares are registered indicating that you are the beneficial owner of
those shares as of the record date. If you do not bring such a statement or
letter, your vote at the meeting will not be counted.
THE NUMBER OF VOTES THAT YOU HAVE
Each share of Tiffany & Co. common stock has one vote. The number of
shares, or votes, that you have at this year's Annual Meeting is indicated on
the enclosed proxy card.
WHAT A QUORUM IS
A "quorum" is the minimum number of shares that must be present at an
Annual Meeting for a valid vote. For our stockholder meetings, a majority of
shares outstanding on the record date must be present.
2
<PAGE> 7
The number of shares outstanding at the close of business on March 24,
2000, the record date, was 72,535,551. Therefore, 36,267,776 shares must be
present at our 2000 Annual Meeting for a quorum to be established.
To determine if there is a quorum, we consider a share "present" if:
- the stockholder who owns the share is present at the Annual
Meeting, whether or not he or she chooses to cast a ballot on
any proposal, or
- the stockholder is represented by proxy at the Annual Meeting.
If a stockholder is represented by proxy at the Annual Meeting, his or
her shares are deemed present for purposes of a quorum, even if:
- the stockholder withholds his or her vote or marks "abstains"
for one or more proposals; or
- there is a "broker non-vote" on one or more proposals.
WHAT A "BROKER NON-VOTE" IS
Shares held in a broker's name may be voted by the broker, but only in
accordance with the rules of the New York Stock Exchange. Under those rules,
your broker must follow your instructions. If you do not provide instructions to
your broker, your broker may vote your shares based on its own judgment or it
may withhold a vote. Whether your broker votes or withholds its vote is
determined by the New York Stock Exchange rules and depends on the proposal
being voted upon.
If your broker withholds its vote, that is called a "broker non-vote."
As stated above, broker non-votes are counted as present for a quorum.
WHAT VOTE IS REQUIRED TO APPROVE EACH PROPOSAL
Directors are elected by a plurality of the votes cast for directors at
the Annual Meeting. Of all nominees, the top eight in terms of "for" votes
received will be elected directors.
You may withhold your vote "for" any nominee, but there is no means for
you to vote "against" any nominee. To withhold your vote "for" any or all of the
nominees named in this Proxy Statement, you can so mark your proxy card or
ballot or, if you call in your vote, so indicate by telephone. A broker non-vote
is the same as a withheld vote; neither will have any effect on the outcome of
the election of directors.
The proposal to approve the amendment to our Restated Certificate of
Incorporation requires the affirmative vote of a majority of the issued and
outstanding shares of Tiffany & Co. common stock. That means that holders of
3
<PAGE> 8
36,267,776 shares of common stock must vote "for" the proposal in order to
increase the number of authorized shares from 120,000,000 to 240,000,000. For
this proposal, broker non-votes and abstentions will have the same effect as a
vote "against" the proposal.
To approve the amendment to our 1998 Employee Incentive Plan two things
must happen. First, a majority of shares outstanding as of March 24, 2000, must
actually vote on the proposal. For this purpose, abstentions will count as votes
cast but broker non-votes will not. Second, a majority of those shares actually
voting on the proposal must vote in favor of it. For this purpose, abstentions
will have the same legal effect as a vote "against" the proposal and broker
non-votes will be disregarded. That means that holders of 36,267,776 shares of
common stock must actually vote "for" or "against" the proposal (or submit their
proxies but "abstain" from voting on the proposal) and at least a majority of
those voting must vote "for" the proposal in order to increase the number of
shares of common stock that may be delivered to participating employees and
their beneficiaries by 2,000,000.
The proposal to ratify the approval of PricewaterhouseCoopers LLP as
independent accountants for fiscal 2000 will be decided by a plurality of the
votes cast "for" or "against" the proposal. Therefore, if you "abstain" from
voting on this matter - in other words, you do not vote on the matter or you
indicate "abstain" on the proxy card or by telephone, it will not affect the
outcome of votes on this proposal. That is because only votes cast "for" or
"against" this proposal will be counted in determining whether or not it has
been approved. Broker non-votes on this proposal will be treated the same as
abstentions; neither will have any effect on the vote on the proposal.
PROXY VOTING ON PROPOSALS IN THE ABSENCE OF INSTRUCTIONS
If you complete a proxy card or you call the telephone number on the
card and enter your control number, but do not give any instructions as to how
your shares are to be voted, your proxies will vote your shares in accordance
with the following recommendations of the Board of Directors:
- FOR the election of all eight nominees for director named in
this Proxy Statement,
- FOR approval of an amendment to our Restated Certificate of
Incorporation increasing the number of authorized shares of
common stock from 120,000,000 shares to 240,000,000 shares,
- FOR approval of an amendment to our 1998 Employee Incentive
Plan increasing the number of shares of common stock that may
be delivered to participating employees and their
beneficiaries by 2,000,000, and
- FOR approval of the appointment of PricewaterhouseCoopers LLP
as independent accountants to examine our fiscal 2000
financial statements.
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<PAGE> 9
Shares held in the Company's Employee Profit Sharing and Retirement
Savings Plan will not be voted by the plan's trustee unless specific
instructions for voting are given by plan participants to whose accounts such
shares have been allocated.
HOW PROXIES ARE SOLICITED
We have hired the firm of Georgeson Shareholder Communications Inc. to
assist in the solicitation of proxies on behalf of the Board of Directors.
Georgeson Shareholder Communications Inc. has agreed to perform this service for
a fee of not more than $6,000 plus out-of-pocket expenses.
Employees of Tiffany and Company, a subsidiary of Tiffany & Co., may
also solicit proxies on behalf of the Board of Directors. These employees will
not receive any additional compensation for their work soliciting proxies and
any costs incurred by them in doing so will be paid for by Tiffany and Company.
This particular solicitation is being made by mail, but proxies may
also be solicited in person, by facsimile, by telephone or by electronic mail
(e-mail).
In addition, we will pay for any costs incurred by brokerage houses and
others for forwarding proxy materials to beneficial owners.
OWNERSHIP OF TIFFANY & CO.
STOCKHOLDERS WHO OWN AT LEAST FIVE PERCENT OF TIFFANY & CO.
The following table shows all persons who were known to us to be
"beneficial owners" of at least five percent of Tiffany & Co. stock as of March
24, 2000. Footnote 1 below provides a brief explanation of what is meant by the
term "beneficial ownership." This table is based upon reports filed with the
Securities and Exchange Commission, commonly referred to as the SEC. These
reports are publicly available. You may therefore obtain copies of them from the
SEC, if you so desire.
<TABLE>
<CAPTION>
Name and Address Amount and Percent
of Nature of Beneficial of
Beneficial Owner Ownership (1) Class
- ---------------- ------------- -----
<S> <C> <C>
Jennison Associates LLC
466 Lexington Avenue
New York, New York 10017 7,537,400 10.4
</TABLE>
(1) "Beneficial ownership" is a term broadly defined by the SEC and includes
more than the typical form of stock ownership, that is, stock held in the
person's name. The term also includes what is referred to as "indirect
ownership" such as where, for example, the person has or shares the power to
vote the stock, sell it or acquire it within 60 days. Accordingly, some of the
shares reported as beneficially owned in this table may actually be held by
other persons or organizations. Those other persons and organizations are
described in the reports filed with the SEC.
5
<PAGE> 10
OWNERSHIP BY EXECUTIVE OFFICERS AND DIRECTORS
The following table shows the number of shares of Tiffany & Co. common
stock beneficially owned as of March 24, 2000 by executive officers, including
the Chief Executive Officer (the "CEO") and the four next most highly
compensated executive officers, and directors of Tiffany & Co. as of the end of
the last fiscal year (January 31, 2000).
<TABLE>
<CAPTION>
Amount and Percent
Nature of Beneficial of
Name Ownership Class (1)
- ---- --------- ---------
<S> <C> <C>
DIRECTORS:
William R. Chaney (Executive Officer) 727,500 (2) 1.0
Rose Marie Bravo 10,608 (3) *
Samuel L. Hayes III 92,626 (4) *
Michael J. Kowalski (CEO) 458,500 (5) *
Charles K. Marquis 94,406 (6) *
James E. Quinn (Executive Officer) 233,064 (7) *
William A. Shutzer 86,431 (8) *
Geraldine Stutz 101,131 (9) *
EXECUTIVE OFFICERS:
Beth O. Canavan 40,761 (10) *
James N. Fernandez 82,064 (11) *
ALL EXECUTIVE OFFICERS AND
DIRECTORS AS A GROUP (15 PERSONS): 2,155,592 (12) 3.0
</TABLE>
(1) An asterisk (*) is used to indicate less than 1% of the class outstanding.
(2) Includes 127,500 shares issuable upon the exercise of "Vested Stock
Options" which are stock options that either are exercisable as of March 24,
2000, or will become exercisable within 60 days of that date, and 100,000 shares
held by Mr. Chaney's wife.
(3) Includes 8,608 shares issuable upon the exercise of Vested Stock Options.
(4) Includes 27,000 shares held in trust for the benefit of children of Prof.
Hayes, Barbara L. Hayes, his wife, as trustee and 1,184 shares held by Prof.
Hayes's wife. Also Includes 64,406 shares issuable upon the exercise of Vested
Stock Options.
(5) Includes 382,500 shares issuable upon the exercise of Vested Stock Options.
(6) Includes 64,406 shares issuable upon the exercise of Vested Stock Options.
(7) Includes 215,000 shares issuable upon the exercise of Vested Stock Options;
64 shares credited to Mr. Quinn's account under the Tiffany & Co. Employee
Profit Sharing and Retirement Savings Plan; and 16,000 shares held by Mr.
Quinn's wife.
(8) Includes 16,438 shares issuable upon the exercise of Vested Stock Options
and 26,200 shares held by or for Mr. Shutzer's minor children.
6
<PAGE> 11
(9) Includes 64,406 shares issuable upon the exercise of Vested Stock Options.
(10) Includes 40,500 shares issuable upon the exercise of Vested Stock Options
and 261 shares credited to Mrs. Canavan's account under the Tiffany & Co.
Employee Profit Sharing and Retirement Savings Plan.
(11) Includes 76,000 shares issuable upon the exercise of Vested Stock Options
and 64 shares credited to Mr. Fernandez's account under the Tiffany & Co.
Employee Profit Sharing and Retirement Savings Plan.
(12) Includes 1,280,264 shares issuable upon the exercise of Vested Stock
Options and 789 shares held in the Tiffany & Co. Employee Profit Sharing and
Retirement Savings Plan.
COMPLIANCE OF DIRECTORS, EXECUTIVE OFFICERS AND GREATER-THAN-TEN-PERCENT
STOCKHOLDERS WITH SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING REQUIREMENTS
Section 16(a) of the Securities Exchange Act of 1934 requires Tiffany &
Co.'s directors, executive officers and greater-than-ten-percent stockholders to
file reports of ownership and changes in ownership with the SEC and the New York
Stock Exchange. These persons are also required to provide us with copies of
those reports.
Based on our review of those reports and of certain other documents we
have received, we believe that, during and with respect to our last fiscal year
(February 1, 1999, to January 31, 2000), all filing requirements under Section
16(a) applicable to our directors, executive officers and
greater-than-ten-percent stockholders were satisfied except as follows: Samuel
L. Hayes, III filed two late reports comprising four transactions that were not
reported on a timely basis; Beth O. Canavan filed one late report comprising one
transaction not reported on a timely basis due to clerical error on the part of
the Company.
TIFFANY & CO.'S BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
THE BOARD OF DIRECTORS, IN GENERAL
Tiffany & Co. is a Delaware corporation. Our principal subsidiary is
Tiffany and Company, a New York corporation. In this Proxy Statement, Tiffany &
Co. will be referred to as "Tiffany & Co." or "the Company" and Tiffany and
Company will be referred to as simply "Tiffany."
Our Board of Directors is currently comprised of eight members.
Directors are required by our By-laws to be less than age 72 when
elected or appointed unless the Board of Directors waives that provision with
respect to an individual director whose continued service is deemed uniquely
important to Tiffany & Co. The Board of Directors can also fill vacancies and
newly created directorships as well as amend the By-laws to provide for a
greater or lesser number of directors.
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<PAGE> 12
The Board of Directors met seven times during fiscal 1999. With respect
to the eight nominees for director, their attendance rate at Board and committee
meetings averaged over 99% in fiscal 1999.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has an Audit Committee, a Compensation
Committee, a Stock Option Subcommittee and a Nominating Committee.
The Board of Directors has adopted and approved a charter for the Audit
Committee. Under the charter, which is attached as Appendix 1, the Audit
Committee's responsibilities include:
- reviewing the adequacy of our system of internal financial
controls,
- recommending to the Board of Directors the appointment of
independent accountants and evaluating their proposed audit
scope, performance and fee arrangement,
- conducting a post-audit review of our financial statements and
audit findings in advance of filing, and
- reviewing in advance proposed changes in our accounting
methods.
Prof. Hayes, Mr. Marquis and Mr. Shutzer currently serve as members of
the Audit Committee. During fiscal 1999, there were three meetings of this
committee. The Board of Directors has determined that all members of the Audit
Committee are "independent," as that term is defined in Section 303.02(D) of the
New York Stock Exchange's listing standards.
Following is the report of the Audit Committee:
Included in the Company's Annual Report to Stockholders are the
consolidated balance sheets of the Company and its subsidiaries as of January
31, 2000 and 1999, and the related consolidated statement of earnings,
stockholders' equity and cash flows for each of the three years in the period
ended January 31, 2000. These statements (the "Audited Financial Statements")
are the subject of a report by the Company's independent accountants,
PricewaterhouseCoopers LLP. The Audited Financial Statements are also included
by reference in the Company's Annual Report on Form 10-K filed with the
Securities and Exchange Commission.
The Audit Committee reviewed and discussed the Audited Financial
Statements with the Company's management and with the independent accountants
prior to publication and filing.
The Audit Committee also reviewed and discussed with the independent
accountants the matters required to be discussed by Statement of Accounting
Standards No. 61.
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<PAGE> 13
The Audit Committee received from the independent accountants the
written disclosure and letter required by Independence Standards Board Standard
No. 1 and has discussed with the independent accountants their independence
with respect to the Company.
Based upon the review and discussions referred to above, the Audit
Committee recommended to the Company's Board of Directors that the Audited
Financial Statements be included in the Company's Annual Report to Stockholders
and incorporated by reference in the Company's Annual Report on Form 10-K for
the fiscal year ended January 31, 2000 for filing with the Securities and
Exchange Commission.
Signed:
Samuel L. Hayes III
Charles K. Marquis
William A. Shutzer
Members of the Audit Committee
The functions performed by the Compensation Committee include
- approval of remuneration arrangements for executive officers,
and
- approval of compensation plans in which officers and employees
of Tiffany are eligible to participate.
Ms. Bravo, Prof. Hayes, Mr. Marquis, Mr. Shutzer and Ms. Stutz
currently serve as members of the Compensation Committee. In fiscal 1999, there
were six meetings of this committee.
The Stock Option Subcommittee, a subcommittee of the Compensation
Committee, determines the grant of options and other matters under our 1998
Employee Incentive Plan.
Prof. Hayes, Ms. Bravo and Ms. Stutz currently serve as members of the
Stock Option Subcommittee. The Stock Option Subcommittee met six times in fiscal
1999.
The role of the Nominating Committee is to recommend to the Board of
Directors
- policies on the composition of the Board of Directors,
- criteria for the selection of nominees for election to the
Board of Directors,
- nominees to fill vacancies on the Board of Directors, and
- nominees for election to the Board of Directors.
Prof. Hayes, Mr. Marquis, Mr. Shutzer, Ms. Bravo and Ms. Stutz
currently serve as members of the Nominating Committee. This committee had one
meeting in fiscal 1999.
9
<PAGE> 14
COMPENSATION OF DIRECTORS
Directors who are not employees of Tiffany & Co. or its subsidiaries
are paid or provided with the following for their service on the Board:
- an annual retainer of $41,000,
- an additional annual retainer of $2,500 if the director is
also a chairperson of the Compensation, Audit or Nominating
Committee,
- a per-meeting-attended fee of $2,000 for meetings attended in
person, except that no fee is paid for attendance at any
committee or subcommittee meetings which occur on the same day
as a meeting of the full Board of Directors,
- a fee of $500 for each telephonic meeting in which the
director participates,
- stock options, as discussed below, and
- a retirement benefit, also discussed below.
Under Tiffany's Amended and Restated Executive Deferral Plan, directors
may defer up to one hundred percent (100%) of their cash compensation and invest
the amounts they defer in various accounts and funds established under the plan.
Tiffany & Co. also reimburses directors for expenses they incur in
attending Board and committee meetings, including expenses for travel, food and
lodging.
As indicated above, non-employee directors may receive options to
purchase shares of Tiffany & Co. common stock. These options vest in two equal
installments - 1/2 after one year of service on the Board following the grant of
the option, and the balance, after two years of service. However, as explained
below, all installments become immediately exercisable in the event there is a
"change in control" of Tiffany & Co.
These options typically expire after 10 years, but they expire sooner
if, before the end of that 10-year period, the director leaves the Board. The
option's exercise price is the fair market value of Tiffany & Co. common stock
on the date of grant, which is calculated as the average of the highest and
lowest sales prices of the stock on the New York Stock Exchange on the date of
grant.
Current policy provides that new non-employee directors will be granted
options to purchase 5,000 shares of Tiffany & Co. common stock upon their
election or appointment to the Board.
Non-employee directors with five or more years of Board service when
they retire are also entitled to receive an annual retirement benefit equal to
the lesser of the annual retainer in effect during the year in which they retire
or $38,000. Subject to
10
<PAGE> 15
adjustment for partial years served, this benefit is payable quarterly and
continues for a period of time equal to the director's length of service on the
Board. However, this particular benefit will not apply to any new director
appointed or elected after January 1, 1999.
Messrs. Chaney, Kowalski and Quinn are employees of Tiffany. They
therefore receive no separate compensation for their service as directors.
COMPENSATION OF THE CEO AND OTHER EXECUTIVE OFFICERS
This section includes a summary of salaries, bonuses and other
compensation paid to our CEO and each of the four (4) next highest paid
executive officers during the last three fiscal years. Also presented in this
section are options granted to and exercised by each of them in fiscal 1999,
retirement benefits currently available to them and any special employment,
termination or change-in-control arrangements that have been made with any of
them.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
------------------------ ---------------
Name and Securities Underlying All Other
Principal Position(1) Year Salary Bonus(2) Options/SARs(3) Compensation
- ---------------- ------ ---------- ---------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Michael J. Kowalski 1999 $598,389 $900,000 75,000 shares $ 41,248(4)
President and CEO 1998 $466,628 $337,500 100,000 shares $ 72,905(5)
1997 $387,572 $209,000 35,000 shares $ 55,397(6)
William R. Chaney 1999 $510,740 $250,000 15,000 shares $ 76,223(7)
Chairman of the 1998 $636,172 $780,000 15,000 shares $183,113(8)
Board 1997 $556,962 $484,000 50,000 shares $180,018(9)
James E. Quinn 1999 $473,725 $475,000 50,000 shares $ 47,210(10)
Vice Chairman 1998 $382,048 $254,000 75,000 shares $ 58,693(11)
1997 $328,347 $161,000 25,000 shares $ 47,799(12)
Beth Owen Canavan 1999 $274,262 $190,000 25,000 shares $ 31,963(13)
Executive Vice President 1998 $228,423 $ 85,000 10,000 shares $ 37,336(14)
1997 $200,537 $ 68,000 14,000 shares $ 29,516(15)
James N. Fernandez 1999 $398,926 $360,000 35,000 shares $ 48,413(16)
Executive Vice President 1998 $316,418 $186,000 50,000 shares $ 43,519(17)
and Chief Financial Officer 1997 $264,845 $106,000 20,000 shares $ 35,690(18)
</TABLE>
(1) Titles are as of the end of fiscal year 1999 (January 31, 2000). On
February 1, 1999, Mr. Kowalski assumed the title and duties of Chief
Executive Officer.
11
<PAGE> 16
(2) Bonus amounts include cash incentive awards made for fiscal year 1999 to
Messrs. Kowalski, Quinn and Fernandez under the 1998 Employee Incentive
Plan on the basis of achieved Performance Goals, specifically, increases
above target amounts for the Company's consolidated earnings per share for
fiscal 1999.
(3) Share amounts have not been restated to take into account the two-for-one
stock split that was effected by means of a stock dividend in July 1999.
If adjusted to take into account the stock split, the 1998 and 1997 share
amounts would be doubled in each case.
(4) Represents $34,346 attributable to split-dollar life insurance premiums,
$2,376 attributable to premiums for executive long-term disability
insurance and $4,526 for the Company's matching contributions to the
401(k) feature of the Company's Employee Profit Sharing and Retirement
Savings Plan. The split-dollar life insurance provided to Mr. Kowalski and
other executive officers is discussed below under "Other Compensation
Arrangements."
(5) Represents $65,313 attributable to split-dollar life insurance premiums,
$2,592 attributable to premiums for executive long-term disability
insurance and $5,000 for the Company's matching contributions to the
401(k) feature of the Company's Employee Profit Sharing and Retirement
Savings Plan.
(6) Represents $48,487 attributable to split-dollar life insurance premiums,
$2,160 attributable to premiums for executive long-term disability
insurance and $4,750 for the Company's matching contributions to the
401(k) feature of the Company's Employee Profit Sharing and Retirement
Savings Plan.
(7) Represents $73,487 attributable to split-dollar life insurance premiums
and $2,736 attributable to premiums for executive long-term disability
insurance. Mr. Chaney's deferred compensation arrangement is discussed
below under "Other Compensation Arrangements."
(8) Represents $100,000 contributed to Mr. Chaney's deferred compensation
account, $80,521 attributable to split-dollar life insurance premiums and
$2,592 attributable to premiums for executive long-term disability
insurance.
(9) Represents $100,000 contributed to Mr. Chaney's deferred compensation
account, $77,858 attributable to split-dollar life insurance premiums and
$2,160 attributable to premiums for executive long-term disability
insurance.
(10) Represents $39,840 attributable to split-dollar life insurance premiums,
$2,376 attributable to premiums for executive long-term disability
insurance and $4,994 for the Company's matching contributions to the
401(k) feature of the Company's Employee Profit Sharing and Retirement
Savings Plan.
(11) Represents $51,173 attributable to split-dollar life insurance premiums,
$2,592 attributable to premiums for executive long-term disability
insurance and $4,928 for the Company's matching contributions to the
401(k) feature of the Company's Employee Profit Sharing and Retirement
Savings Plan.
(12) Represents $40,889 attributable to split-dollar life insurance premiums,
$2,160 attributable to premiums for executive long-term disability
insurance and $4,750 for the Company's matching contributions to the
401(k) feature of the Company's Employee Profit Sharing and Retirement
Savings Plan.
12
<PAGE> 17
(13) Represents $24,665 attributable to split-dollar life insurance premiums,
$2,307 attributable to premiums for executive long-term disability
insurance and $4,991 for the Company's matching contributions to the
401(k) feature of the Company's Employee Profit Sharing and Retirement
Savings Plan.
(14) Represents $30,529 attributable to split-dollar life insurance premiums,
$2,006 attributable to premiums for executive long-term disability
insurance and $4,801 for the Company's matching contributions to the
401(k) feature of the Company's Employee Profit Sharing and Retirement
Savings Plan.
(15) Represents $23,214 attributable to split-dollar life insurance premiums,
$1,552 attributable to premiums for executive long-term disability
insurance and $4,750 for the Company's matching contributions to the
401(k) feature of the Company's Employee Profit Sharing and Retirement
Savings Plan.
(16) Represents $41,054 attributable to split-dollar life insurance premiums,
$2,376 attributable to premiums for executive long-term disability
insurance and $4,983 for the Company's matching contributions to the
401(k) feature of the Company's Employee Profit Sharing and Retirement
Savings Plan.
(17) Represents $36,105 attributable to split-dollar life insurance premiums,
$2,592 attributable to premiums for executive long-term disability
insurance and $4,822 for the Company's matching contributions to the
401(k) feature of the Company's Employee Profit Sharing and Retirement
Savings Plan.
(18) Represents $28,840 attributable to split-dollar life insurance premiums,
$2,100 attributable to premiums for executive long-term disability
insurance and $4,750 for the Company's matching contributions to the
401(k) feature of the Company's Employee Profit Sharing and Retirement
Savings Plan.
<TABLE>
<CAPTION>
OPTION GRANTS IN FISCAL YEAR 1999
Percent of
Total Options
Granted to all
Employees in Per
Fiscal Share
Options Year Exercise Expiration Grant Date
Name Granted (1) 1999 Price (2) Date (3) Present Value (4)
- -------- ------------ ----- -------- --------- ----------
<S> <C> <C> <C> <C> <C>
Michael J. Kowalski 75,000 shares 8.1 $84.1563 1/20/2010 $2,417,888
William R. Chaney 15,000 shares 1.6 $84.1563 1/20/2010 $ 483,578
James E. Quinn 50,000 shares 5.4 $84.1563 1/20/2010 $1,611,925
Beth O. Canavan 25,000 shares 2.7 $84.1563 1/20/2010 $ 805,963
James N. Fernandez 35,000 shares 3.8 $84.1563 1/20/2010 $1,128,348
</TABLE>
(1) Options vest (become exercisable) over a four-year period in four equal
annual installments, each contingent on continued employment. However, all
installments immediately vest if there is a "change in control." The term
"change in control" is discussed below.
13
<PAGE> 18
(2) The exercise price for each share is its fair market value on the date of
grant. This is determined by averaging the highest and lowest sales prices of
Tiffany & Co. common stock on the New York Stock Exchange on the date of grant.
(3) Normally, these options expire on the 10th anniversary of their grant date.
However, they expire earlier if, before that 10th anniversary, the officer dies,
becomes disabled, retires or leaves Tiffany.
(4) The amounts stated are hypothetical values calculated under the
Black-Scholes model, a mathematical formula used to value options covering
securities traded on stock exchanges. This formula considers a number of factors
in estimating an option's present value, including the stock's volatility rate
(33.2%), expected term (5 years), interest rate (6.7%) and dividend yield
(0.7%). The actual value, if any, that the executive officer will realize from
these options will depend solely on the increase of the stock price over the
$84.1563 per share exercise price when the options are exercised.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1999
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Value of
Shares Unexercised Options In-The-Money Options
Acquired Value at Fiscal Year-End (1) at Fiscal Year-End (1)
Name on Exercise Realized Exercisable/Unexercisable Exercisable/Unexercisable
- -------------- ------- ------ -------------------- --------------------
<S> <C> <C> <C> <C>
Michael J. Kowalski 40,000 $1,328,115 382,500 / 272,500 $22,031,944 / $8,894,684
William R. Chaney 415,000 $10,887,809 127,500 / 102,500 $6,856,212 / $4,424,101
James E. Quinn 32,000 $991,482 215,000 / 195,000 $12,054,121 / $6,504,099
Beth O. Canavan 8,000 $216,651 38,500 / 58,500 $2,050,376 / $1,578,437
James N. Fernandez 20,000 $573,626 76,000 / 135,000 $3,866,328 / $4,513,983
</TABLE>
(1) Options are deemed "exercisable" in this table if they are exercisable as
of January 31, 2000, or will become exercisable within 60 days of that
date.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As indicated above, the following directors served as members of the
Compensation Committee during the 1999 fiscal year: Ms. Bravo, Professor Hayes,
Messrs. Marquis and Shutzer and Ms. Stutz. None of the members of the
Compensation Committee was, at any time either during or before such fiscal
year, an employee of Tiffany & Co. or any of its subsidiaries.
14
<PAGE> 19
PENSION PLAN AND SUPPLEMENTAL RETIREMENT INCOME PLAN
Tiffany has established two separate retirement plans for eligible
employees: a Pension Plan and a Supplemental Retirement Income Plan.
The Pension Plan is a "qualified plan," that is, it is designed to
comply with those provisions of the Internal Revenue Code applicable to
retirement plans. The Pension Plan provides participants with a retirement
benefit based on the participant's "average final compensation" multiplied by
his or her years of service with Tiffany. The amount of the benefit payable
under the Pension Plan is subject to Internal Revenue Code limitations.
The Supplemental Retirement Income Plan is not a qualified plan and is
not subject to Internal Revenue Code limitations on the amount of benefits it
may pay. It was established to supplement the Pension Plan and Social Security
by providing additional payments upon a participant's retirement.
Payments under the Supplemental Retirement Income Plan, together with
payments under the Pension Plan and from Social Security, would equal a variable
percentage of the participant's "average final compensation." This assumes that
the vesting requirements under the Supplemental Retirement Income Plan are met.
Depending upon the participant's years of service with Tiffany, the
combined benefit under the Pension Plan and the Supplemental Retirement Income
Plan and from Social Security would be as follows:
<TABLE>
<CAPTION>
Combined Benefit as a
Percentage of
Years of Service Average Final Compensation
---------------- --------------------------
<S> <C>
less than 10 0%
10-14 20%
15-19 30%
20-24 40%
25-29 50%
30 or more 60%
</TABLE>
A participant's "average final compensation" is the average annual
compensation he or she received over the five highest paid plan years (January 1
to December 31) during his or her last 10 years of service. In general,
compensation reported in the Summary Compensation Table above as "Salary" and
"Bonus" is compensation for purposes of the Pension Plan and the Supplemental
Retirement Income Plan; amounts attributable to the exercise of stock options
are not included.
15
<PAGE> 20
The following table sets forth the estimated combined annual benefit
payable on retirement to participants under the Supplemental Retirement Income
Plan, Pension Plan and Social Security.
<TABLE>
<CAPTION>
Annual Total Benefit for Years of Service
----------------------------------------------------------------------------------------
Average Final
Compensation 15 20 25 30 35
- ------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$125,000 $37,500 $50,000 $62,500 $75,000 $75,000
$150,000 $45,000 $60,000 $75,000 $90,000 $90,000
$175,000 $52,500 $70,000 $87,500 $105,000 $105,000
$200,000 $60,000 $80,000 $100,000 $120,000 $120,000
$225,000 $67,500 $90,000 $112,500 $135,000 $135,000
$250,000 $75,000 $100,000 $125,000 $150,000 $150,000
$300,000 $90,000 $120,000 $150,000 $180,000 $180,000
$400,000 $120,000 $160,000 $200,000 $240,000 $240,000
$450,000 $135,000 $180,000 $225,000 $270,000 $270,000
$500,000 $150,000 $200,000 $250,000 $300,000 $300,000
$600,000 $180,000 $240,000 $300,000 $360,000 $360,000
$700,000 $210,000 $280,000 $350,000 $420,000 $420,000
$800,000 $240,000 $320,000 $400,000 $480,000 $480,000
$900,000 $270,000 $360,000 $450,000 $540,000 $540,000
$1,000,000 $300,000 $400,000 $500,000 $600,000 $600,000
</TABLE>
All executive officers except Mr. Chaney are eligible to participate in
the Pension Plan and the Supplemental Retirement Income Plan. At the end of the
last fiscal year (January 31, 2000), the current years of creditable service and
average final compensation under both plans for each of the eligible executive
officers named in the Summary Compensation Table were as follows:
<TABLE>
<CAPTION>
Name Years of Service Average Final Compensation
- ---- ---------------- --------------------------
<S> <C> <C>
Michael J. Kowalski 21 $615,001
James E. Quinn 13 $513,162
Beth O. Canavan 12 $267,813
James N. Fernandez 21 $380,408
</TABLE>
OTHER COMPENSATION ARRANGEMENTS
As indicated above, Mr. Chaney is not eligible for benefits under either
the Pension Plan or the Supplemental Retirement Income Plan. An alternative
arrangement to fund retirement benefits for Mr. Chaney was in effect until he
retired as Chief Executive Officer. Prior to his retirement as Chief Executive
Officer, Tiffany credited $25,000 per calendar quarter, plus accrued interest at
a prime rate, to an account in his favor. This was done under the terms of a
deferred compensation agreement entered into with Mr. Chaney in December 1989.
The account is maintained on the books of Tiffany as a liability to Mr. Chaney.
16
<PAGE> 21
Upon Mr. Chaney's resignation as Chief Executive Officer on January 31,
1999, the deferred compensation agreement was amended to provide for the
discontinuance of accruals to his account after December 31, 1998. As of
February 1, 1999, the balance in this account was $2,644,701.78. Commencing in
March of 1999, Tiffany became obligated under the Agreement to pay Mr. Chaney a
monthly annuity of $22,449.35 from the account. This obligation terminates on
Mr. Chaney's death. On his death, the excess, if any, of the balance in his
account as of February 1,1999, over the sum of all annuity payments actually
made will be paid to Mr. Chaney's estate.
The Company and Tiffany have entered into retention agreements with
four executive officers. These agreements would provide a covered executive with
compensation if he should incur an "involuntary termination" after a "change in
control." The purpose of these agreements is to keep our management team in
place and focused on their job duties should discussions of a "change in
control" ever occur. An "involuntary termination" does not include a termination
for cause, but does include a resignation for good cause.
When, if ever, a "change in control" occurs, the covered executives
would have fixed, or guaranteed, terms of employment under their retention
agreements as follows: two years in the case of Mr. Fernandez, and three years
in the case of Mr. Kowalski and Mr. Quinn. If the executive incurs an
involuntary termination during his term, compensation, keyed to the length of
his term, would be payable to the executive as follows:
- two or three times salary and bonus as severance,
- a payment equal to the present value of two or three years of
additional years of service credit under the Supplemental
Retirement Income Plan, and
- two or three years of benefits continuation under Tiffany's
health and welfare plans.
The covered executives may receive other benefits in connection with a
"change in control," such as accelerated vesting of stock options or pension
benefits under the Supplemental Retirement Income Plan. Because a covered
executive's receipt of payments and benefits in connection with a "change in
control" may trigger a 20% excise tax under Section 280G of the Internal Revenue
Code, the retention agreements contain "gross-up" provisions. Under these
provisions, the Company or Tiffany must pay the covered executive's excise tax
and any additional income tax resulting from the gross-up provisions. If the
gross-up provisions are triggered, the Company or Tiffany, as the case may be,
will be unable to deduct most of the "change in control" payments and benefits.
Tiffany maintains split-dollar life insurance agreements with some of
its executive officers, including Mr. Kowalski, Mr. Chaney, Mr. Quinn, Mrs.
Canavan and Mr. Fernandez. Under those agreements, Tiffany pays the premiums for
17
<PAGE> 22
executive life insurance and will be repaid for those premium payments from the
death benefit.
Until there is a "change in control," Tiffany has the right to
terminate those split-dollar agreements. If there is a "change in control,"
Tiffany loses that right, and will then be bound to continue to pay premiums
until the maturity date of each executive's agreement, which is when the
executive reaches age 65, or age 75 in the case of Mr. Chaney. At the maturity
date, the cash value of each policy will be sufficient for the following
purposes:
- to repay Tiffany its premium investment, and
- to continue the policy in force, without payment of further
premiums, with a death benefit equivalent to twice the
executive's average annual salary and bonus compensation for
the last three calendar years prior to termination of
employment.
In the event of a "change in control" of Tiffany & Co., all options
granted under its various stock option plans become exercisable in full. In
addition, all benefits under the Supplemental Retirement Income Plan become
vested and payable at retirement age, but only if, at the time of the "change in
control," benefits are also vested under the Pension Plan.
For purposes of the split-dollar agreements, the Supplemental Retirement
Income Plan and the stock options, the term "change in control" means that one
of the following events has occurred:
- any person or group of persons acting in concert, and by
person we mean an individual or organization, acquires
thirty-five percent or more in voting power or stock of
Tiffany & Co., including the acquisition of any right, option,
warrant or other right to obtain such voting power or stock,
whether or not presently exercisable, unless the acquisition
is authorized or approved by the Board of Directors;
- a majority of the Board of Directors is, for any reason, not
made up of individuals who were either on the Board on January
21, 1988, or, if they became members of the Board after that
date, were approved by the directors; or
- any other circumstance which the Board deems to be a "change
in control."
For purposes of the retention agreements, a "change in control" includes
the above events, as well as additional events amounting to a change in control
of the Company or Tiffany, even if the Board has approved of such events. Such
events could include a so-called "friendly" acquisition of the Company or
Tiffany.
18
<PAGE> 23
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The following is the Compensation Committee's report on executive
compensation:
The Committee's overall compensation policy is to provide a
reward structure that will motivate the officers to assist the
Company's achievement of its strategic and financial goals, retain and
attract competent personnel and link the interests of management with
those of the stockholders through stock-based compensation.
(i) Cash Bonuses
The Committee believes that the portion of an officer's
compensation that is "at risk" (subject to adjustment for corporate
and/or individual performance factors) should vary proportionally to
the amount of responsibility the officer bears for the Company's
success. The Committee adheres to that philosophy in establishing
target bonuses.
Each January, the Committee establishes target bonuses for
executive officers for the fiscal year that will begin on the first day
of February.
For most officers, a bonus equal to or in excess of the target
is paid if the Company achieves its business plan and if the
individual's personal and/or business unit performance meets or exceeds
expectations. If the Company fails to achieve its business plan, or if
the individual's personal and/or business unit performance fails to
meet expectations, the bonus is reduced or eliminated.
In January of 2000, the Stock Option Subcommittee (the
"Subcommittee") made a different arrangement for Mrs. Canavan and
Messrs. Kowalski, Quinn and Fernandez. Their fiscal 2000 bonuses will
be calculated solely on the basis of the increase or decrease in the
Company's consolidated net earnings in accordance with a formula. This
arrangement is an "Incentive Award" under the provisions of the 1998
Employee Incentive Plan. For this reason, the entire bonus payable to
Mrs. Canavan and to Messrs. Kowalski, Quinn and Fernandez will be
deductible under the provisions of Section 162(m) of the Internal
Revenue Code (see below).
For fiscal 2000, Mr. Kowalski's target bonus under the
Incentive Award arrangement is 75% of his salary. Target bonuses for
the other executive officers for fiscal 2000 range from 35% to 50% of
salary and average approximately 38%.
For fiscal 1999, target bonuses under Incentive Award
Arrangements were 75%, 50% and 45% of base salary for Messrs. Kowalski,
Quinn and Fernandez. The actual bonuses paid to those employees were
$900,000, $475,000 and $360,000, respectively, or
19
<PAGE> 24
200% of the target amount in each case. These awards were calculated by
the Subcommittee solely on the basis of the increase in the Company's
consolidated net earnings in accordance with a formula established by
the Subcommittee in January of 1999.
Target bonuses for the other executive officers for fiscal
year 1999 ranged from 35% to 50% of salary and averaged approximately
34% of salary. No target bonus was set for Mr. Chaney. The actual bonus
paid for fiscal 1999 to each executive officer was determined by the
Committee in January of 2000. At that time, the Committee compared the
Company's projected fiscal 1999 performance to its business and
strategic plans, and the performance of each executive officer (other
than of Mr. Kowalski himself) was reviewed for the Committee by Mr.
Kowalski. Mr. Chaney also contributed to these evaluations (other than
with respect to himself). Bonuses actually awarded to the executive
officers (other than Messrs. Kowalski, Quinn, Fernandez and Chaney)
averaged 195% of the target amounts.
In awarding bonuses for fiscal 1999 to the executive officers
(other than Messrs. Kowalski, Quinn and Fernandez) the Committee
applied the following measures of corporate financial performance: the
success that the Company had in meeting and exceeding its 1999
objectives for profitability, expense control, sales results and
staffing. The Committee also considered, where applicable, the
financial results of any business unit for which the officer was
responsible. Finally, the Committee considered the following subjective
factors: the judgments of Mr. Chaney and Mr. Kowalski and the members
of the Committee concerning the officer's leadership, development of
creative business opportunities and motivation and development of
staff.
(ii) Salaries and Benefits
The Committee believes that the Company's compensation and
benefits program for its executives is competitive with the program
generally offered by comparable retailers and direct marketing
organizations. This program enables the Company to retain and attract
competent management personnel.
To assess the competitiveness of the compensation offered to
the Company's executive officers, the Committee reviewed an analysis
prepared by a nationally recognized compensation consulting firm. That
analysis included data concerning compensation provided by companies in
the Peer Company Group included in the performance graph set forth
below. It also included Compensation data available from other publicly
traded retail companies and survey data for companies of comparable
size and, where available, in comparable businesses. Data from
companies other than those included in the Peer Company Group were
reviewed, including data from firms much larger than the Company. The
Committee believes that a competitive market for the services of retail
executives exists, even among firms that are not peers of the Company
or that operate in a different line of business.
20
<PAGE> 25
Executive salaries are reviewed by the Committee in January of
each year and typically are adjusted on the basis of merit and relevant
competitive factors.
(iii) Stock Options
Options to purchase the common stock of the Company are
granted to executive officers in January of each year, and may be
exercised, when vested, to purchase common stock at its fair market
value as of the date of the option grant. Options vest and become
exercisable in four equal annual installments beginning with the first
anniversary of the grant date; non-vested installments are forfeited if
the option holder leaves the Company.
Option grants are authorized by the Subcommittee. The
Subcommittee believes that the greater the officer's position and level
of responsibility within the Company, the greater the desirability for
compensation that is linked to the long-term interests of the
stockholders. For that reason, the size of option grants is generally
tied to the individual's level of responsibility within the Company. In
determining the size of each option grant the Subcommittee also
considers, in certain cases, subjective factors, such as the
individual's potential for further growth within the Company and his or
her past performance.
(iv) Limitation Under Section 162(m) of the Internal Revenue
Code
Section 162(m) of the Internal Revenue Code generally denies a
federal income-tax deduction to a publicly-held corporation for
compensation in excess of $1 million per year paid to certain persons.
These include persons who were, as of the last day of the corporation's
taxable year, (i) the chief executive officer or (ii) among the four
highest-compensated officers. This denial of deduction is subject to an
exception for certain "performance-based compensation," including the
stock options and Incentive Awards discussed above. Under current
arrangements, the Company will be entitled to deduct all compensation
paid to its executive officers. However, the Board of Directors does
not believe that it would be in the best interests of the Company to
adopt a policy that would preclude compensation arrangements that might
in the future be subject to deduction limitations.
Signed:
Rose Marie Bravo
Samuel L. Hayes III
Charles K. Marquis
William A. Shutzer
Geraldine Stutz
Members of the Compensation Committee
21
<PAGE> 26
PERFORMANCE OF TIFFANY & CO. STOCK
The following graph compares changes in the cumulative total
shareholder return on Tiffany & Co.'s stock for the previous five fiscal years
to returns on the Standard & Poor's 500 Stock Index and a peer group index for
the same period. Cumulative shareholder return is defined as changes in the
closing price of our stock on the New York Stock Exchange, adjusted to reflect
two-for-one stock splits that occurred in July of 1996 and 1999, plus the
reinvestment of any dividends paid on our stock.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG
TIFFANY & CO., S&P 500 INDEX AND PEER GROUP INDEX
[COMPARISON LINE GRAPH]
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
1/31/1995 1/31/1996 1/31/1997 1/31/1998 1/31/1999 1/31/2000
Tiffany & Co. 100.00 191.54 259.93 271.14 406.51 1,048.58
Standard & Poors 500 100.00 138.62 175.47 222.82 294.72 322.94
Peer Group 100.00 109.33 137.96 144.42 210.62 199.94
</TABLE>
ASSUMES AN INVESTMENT OF $100 ON JANUARY 31, 1995 IN TIFFANY & CO. STOCK AND
EACH OF THE TWO INDICES AND THE REINVESTMENT OF ANY SUBSEQUENT DIVIDENDS.
TOTAL RETURNS ARE BASED ON MARKET CAPITALIZATION; INDICES ARE WEIGHTED AT THE
BEGINNING OF EACH PERIOD FOR WHICH A RETURN IS INDICATED.
PEER COMPANY GROUP: A.T. Cross Co.; Gucci Group NV; Jostens, Inc.; Lazare Kaplan
International Inc.; The Neiman-Marcus Group, Inc.; Nordstrom, Inc.; Reeds
Jewelers, Inc.; Sotheby's Holdings; Williams-Sonoma Inc.; and Zale Corporation.
(Saks Holdings Inc., which in past Proxy Statements has been included in this
group, has been deleted as a result of its acquisition in 1998 by another
company.)
22
<PAGE> 27
DISCUSSION OF PROPOSALS PRESENTED BY THE BOARD
ITEM I - ELECTION OF THE BOARD OF DIRECTORS
Each year, we elect directors at an Annual Meeting of Stockholders. At
the 2000 Annual Meeting, eight directors will be elected. Each of them will
serve until he or she is succeeded by another qualified director or until his or
her earlier resignation or removal from office.
It is not anticipated that any of this year's nominees will be unable
to serve as a director, but if that should occur before the Annual Meeting, the
Board may either propose another nominee or reduce the number of directors to be
elected. If another nominee is proposed, you or your proxy will have the right
to vote for that person at the Annual Meeting.
Information concerning each of the nominees is set forth below:
William R. Chaney Mr. Chaney, 67, is the Chairman of the Board of
Directors. Mr. Chaney joined Tiffany in January 1980
as a member of its Board of Directors and was named
Chairman and Chief Executive Officer of Tiffany & Co.
in August 1984. He resigned as Chief Executive
Officer effective February 1, 1999. Prior to joining
Tiffany, he served as an executive officer of Avon
Products, Inc. Mr. Chaney also serves on the Boards
of Directors of The Bank of New York and the Atlantic
Mutual Companies.
Rose Marie Bravo Ms. Bravo, 49, is Worldwide Chief Executive of
Burberry Limited and is a member of its Board of
Directors. Ms. Bravo previously served as President
of Saks Fifth Avenue from 1992 to 1997. Ms. Bravo
became a director of Tiffany & Co. in October 1997
when she was selected by the Board of Directors to
fill a newly created directorship.
23
<PAGE> 28
Samuel L. Hayes III Prof. Hayes, 65, has been the Jacob H. Schiff
Professor of Investment Banking at the Harvard
Business School since 1975. In 1998, he accepted
emeritus status. He was elected a director of Tiffany
& Co. in 1984. He also serves on the boards of the
Eaton Vance Group of Funds and the Kobrick Funds.
Michael J. Kowalski Mr. Kowalski, 48, is President and Chief Executive
Officer of Tiffany & Co. Prior to his appointment as
President in January 1996, he was an Executive Vice
President of Tiffany & Co., a position he had held
since March 1992. Mr. Kowalski also served as Tiffany
& Co.'s Chief Operating Officer from January 1997
until his appointment as Chief Executive Officer
became effective in February 1999. He became a
director of Tiffany & Co. in January 1995.
Charles K. Marquis Mr. Marquis, 57, is a Senior Advisor to Investcorp
International, Inc. From 1974 through 1998, he was a
partner in the law firm of Gibson, Dunn & Crutcher
L.L.P. He was elected a director of Tiffany & Co. in
1984. Mr. Marquis also serves on the Board of
Directors of CSK Auto Corporation, Harborside
Healthcare Corporation and Werner Holding Co.
James E. Quinn Mr. Quinn, 48, is Vice Chairman of Tiffany & Co.,
responsible for sales throughout the world. Prior to
his appointment as Vice Chairman in January 1998, Mr.
Quinn was an Executive Vice President of Tiffany &
Co., a position he had held since March 1992. He
became a director of Tiffany & Co. in January 1995.
He is also a member of the Boards of Directors of BNY
Hamilton Funds, Inc. and Mutual of America Capital
Management.
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<PAGE> 29
William A. Shutzer Mr. Shutzer, 53, is a Partner in Thomas Weisel
Partners LLC, a merchant banking firm. He previously
served as Executive Vice President of ING Baring
Furman Selz LLC from 1998 through 1999, President of
Furman Selz Inc. from 1995 through 1997 and as a
Managing Director of Lehman Brothers and its
predecessors from 1978 through 1994. He was elected a
director of Tiffany & Co. in 1984. Mr. Shutzer is
also a member of the Boards of Directors of The
Fortress Group and internet.com Corporation and
serves on the Advisory Board of E&J Gallo Winery.
Geraldine Stutz Ms. Stutz, 71, has been the principal partner of GSG
Group since 1993. She was previously the Publisher of
Panache Press at Random House Inc. and the President
of Henri Bendel, the New York specialty store. She
became a director of Tiffany & Co. in July 1987. Ms.
Stutz is also a member of the Board of Directors of
Jones Apparel Group, Inc.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF ALL
EIGHT NOMINEES FOR DIRECTOR.
ITEM II - INCREASE IN THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
The Board of Directors asks that the stockholders approve an amendment
to the Company's Certificate of Incorporation to increase the number of
authorized shares of common stock from 120,000,000 shares to 240,000,000 shares.
If the proposed amendment is approved the first paragraph of Article
FOURTH of the Certificate of Incorporation would be revised to read as follows:
"FOURTH: The Corporation shall be authorized to issue two classes of
shares of stock to be designated, respectively, "Preferred Stock" and
"Common Stock"; the total number of shares which the Corporation shall
have authority to issue is TWO HUNDRED FORTY-TWO MILLION (242,000,000);
the total number of shares of Preferred Stock shall be Two Million
(2,000,000) and each such share shall have a par value of $.01; and the
total number of shares of Common Stock shall be TWO HUNDRED FORTY
MILLION (240,000,000)
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<PAGE> 30
and each such share of Common Stock shall have a par value of $.01."
(BOLD indicates new material)
Of the 120,000,000 shares currently authorized for issuance, 40,754,930
shares were available for issuance as of March 24, 2000, after taking into
account 6,709,519 shares reserved for issuance under the Company's various
stock option plans.
The Board of Directors and management believe that the Company should
have additional authorized shares available for issuance. Such additional shares
could be used for any one or more of the following purposes:
- common stock splits,
- dividends payable in common stock,
- financing and acquisition transactions,
- dividend reinvestment plans,
- employee benefit plans, and
- other general corporate purposes.
Having such shares available for issuance in the future would give the Company
greater flexibility and allow shares of common stock to be issued without the
expense and delay of a special stockholders meeting.
If the proposed amendment is approved by the stockholders, the Board
will consider a split of the Company's common stock. However, the Board's
decision on that question will depend on the market value of the Company's
common stock. The Board believes that, in view of the recent market value of
the Company's common stock, such a split is desirable as it would result in a
price per share that is more attractive to a broader range of investors.
Except as described above, as of the date of this Proxy Statement, the
Board of Directors has neither approved nor is contemplating any transaction
which would require the issuance of shares of common stock in excess of the
amount currently authorized.
If the proposed amendment is adopted, the additional authorized shares,
when and if properly issued, would have the same voting and other rights as the
presently issued and outstanding shares of common stock.
Existing stockholders do not have and will not have preemptive rights
to subscribe for any additional stock of the Company which in the future may be
approved for issuance. For that reason, the rights of existing stockholders may
be diluted by the issuance of additional common stock. Whether or not such
dilution occurs will depend upon the particular circumstances in which
additional common stock is issued. No dilution would occur in the case of a
stock split, as described above.
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<PAGE> 31
When and if the amendment to the Restated Certificate of Incorporation
becomes effective, the additional shares of common stock will be available for
issuance without further action by the stockholders except in circumstances
where stockholder action is required by law or the rules of any stock exchange
on which the common stock may then be listed.
When and if the additional shares are issued, the Company will seek to
register those shares as may be required by federal securities laws. The Company
will also make an application to list the additional shares that are issued as
may be required by the New York Stock Exchange and/or other exchanges on which
the common stock is then listed.
The proposed amendment might discourage a person or entity seeking to
gain control of the Company from acquiring shares of common stock for that
purpose. The proposed amendment could have that effect because the Board of
Directors could use the additional authorized shares to oppose a takeover bid if
deemed by the Board to be in the best interests of the stockholders. For
example, such additional shares could be used:
- to create voting impediments,
- to dilute the stock ownership of the person seeking to gain
control,
- for sale to those who might side with the Board of Directors
in opposition to such a takeover, or
- in connection with the Company's Amended and Restated
Stockholder Rights Plan, which is described in Note M to the
Consolidated Financial Statements included in the Company's
1999 Annual Report to Stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE AMENDMENT TO THE
COMPANY'S RESTATED CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF
AUTHORIZED SHARES OF COMMON STOCK FROM 120,000,000 TO 240,000,000.
ITEM III - APPROVAL OF AN AMENDMENT TO THE 1998 EMPLOYEE INCENTIVE PLAN
The Company's 1998 Employee Incentive Plan (the "Incentive Plan") was approved
by the stockholders at their 1998 Annual Meeting.
On January 20, 2000, the Board of Directors adopted an amendment to the
Incentive Plan. If that amendment is approved by the stockholders at their 2000
Annual Meeting, the Company will have the authority to issue an additional two
million shares of the Company's common stock under the Incentive Plan.
If the proposed amendment is approved, the formal text of subsection 4.2 of the
Incentive Plan will be modified to read as follows:
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<PAGE> 32
"4.2 Shares Subject to Plan.
(a) (i) Subject to the following provisions of this subsection 4.2, the
maximum number of Shares that may be delivered to Participants and
their beneficiaries under the Plan shall be equal to the sum of: (I)
FOUR MILLION (4,000,000) Shares; (II) any Shares available for future
awards under the Company's 1986 Stock Option Plan, as amended (the
"1986 Plan") as of May 1, 1998; (III) any Shares that are represented
by awards granted under the 1986 Plan which are forfeited, expire or
are canceled without delivery of Shares or which result in the
forfeiture of Shares back to the Company; and (IV) up to Five Hundred
Thousand (500,000) Shares, to the extent authorized by the Board, which
are reacquired in the open market or in a private transaction after the
Effective Date, provided, however that the aggregate number of shares
available under categories (II), (III), and (IV), shall not exceed One
Million and Five Hundred Thousand (1,500,000) Shares." (BOLD indicates
new material) (text of Incentive Plan previously amended to reflect
adjustments required for the two-for-one stock split that became
effective in July 1999)
The Board of Directors believes the Incentive Plan is advantageous to the
Company and that the amendment should be approved because the plan:
- - provides flexible and competitive compensation programs that retain and
attract employees for the Company and its subsidiaries,
- - motivates key employees to achieve the Company's operating and
strategic goals, and
- - links the interests of key employees with those of the Company's other
stockholders.
FOLLOWING IS A SUMMARY OF THE MATERIAL FEATURES OF THE INCENTIVE PLAN.
In the summary that follows, all share numbers and option prices have been
adjusted as necessary to reflect the two-for-one split of the Company's common
stock that became effective in July 1999.
Increase in Maximum Number of Shares. The maximum number of shares of common
stock that may be issued under all Incentive Plan awards is now 3,500,000
shares. If the amendment to the Incentive Plan is approved by the Company's
stockholders, the maximum number of shares of common stock that may be issued
under all Incentive Plan awards will be increased to 5,500,000 shares. This
maximum is subject to adjustment. See Maximum Number of Shares and Adjustments
for Corporate Transactions below.
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<PAGE> 33
Stock Options Already Granted Under the Plan. To date, only awards of
non-qualified stock options ("NQSOs") and cash have been made.
The following table provides information concerning NQSOs that have been granted
through March 24, 2000 to employees of the Company's subsidiaries under the
Incentive Plan:
<TABLE>
<CAPTION>
AGGREGATE PERCENT OF WEIGHTED
SHARES SUBJECT SHARES GRANTED AVERAGE
PERSON OR GROUP GRANTED NQSOs TO GRANTS TO ALL EMPLOYEES EXERCISE PRICE
- ----------------------------- --------- ---------------- --------------
<S> <C> <C> <C>
Michael J. Kowalski 275,000 11% $44.7359
President and CEO
William R. Chaney 45,000 2% $48.0209
Chairman
James E. Quinn 200,000 8% $43.5040
Vice Chairman
Beth O. Canavan 49,000 2% $57.6078
Executive Vice President
James N. Fernandez 135,000 6% $44.0059
Executive Vice President and
Chief Financial Officer
All Executive Officers as a Group 876,000 36% $46.5359
All Employees Who Are Not Executive
Officers as a Group 1,564,900 64% $49.7753
TOTAL 2,440,900 100% $48.6128
</TABLE>
As of March 24, 2000, there were 1,127,675 shares remaining available for grant
under the Incentive Plan.
Market Value Per Share. As of March 24, 2000, the market value of one share of
the Company's Common Stock, $0.01 par value, was $76.0938, calculated as the
mean between the lowest and highest reported sales price of such a share on
such date as reported in the New York Stock Exchange Composite Transactions
Index.
Administration of the Incentive Plan. The Incentive Plan is administered by the
Stock Option Subcommittee of the Compensation Committee which consists of two or
more directors selected by the Board of Directors (the "Committee"). The
Committee has the authority to determine:
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<PAGE> 34
- - employees to whom awards are granted,
- - the size and type of awards, and
- - the terms and conditions of such awards.
Number and Identity of Future Participants and Form of Awards Not Yet
Determined. The number and identity of participants to whom awards will
eventually be made has not yet been determined. The form of such awards is at
the discretion of the Committee. It is not possible at this time to provide
specific information as to actual future award recipients or the form of such
awards.
Awards Available under the Incentive Plan. Following are summaries of the
various awards available under the Incentive Plan.
Options and SARs
The grant of a stock option entitles the holder to purchase a specified
number of shares of the Company's Common Stock at an exercise price
specified at the time of grant.
Stock options may be granted in the form of NQSOs or incentive stock
options ("ISOs"). Grants of ISOs must fulfill the requirements
applicable to an "incentive stock option" described in Section 422(b)
of the Internal Revenue Code.
The grant of a stock appreciation right ("SAR") entitles the holder to
receive the appreciation value, if any, for a specific number of shares
of the Company's common stock over a specific time period. The
Committee may provide the appreciation value in cash or in shares. The
appreciation value is equal to all or a portion of the growth in the
fair market value over an exercise price specified at the time of
grant.
The Incentive Plan limits the discretion of the Committee with respect
to Options and SARs as follows:
- the term of an option or SAR may not exceed 10 years,
- the per-share exercise price of each option or SAR must be
established at the time of grant or determined by a formula
established at the time of grant,
- the exercise price may not be less than 100% of fair market value as
of the "pricing date",
- the per-share exercise price may not be decreased after grant except
for adjustments made to reflect stock splits and other corporate
transactions (see Maximum Number of Shares and Adjustments for
Corporate Transactions below),
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<PAGE> 35
- neither an option nor an SAR may be surrendered for a new option or
SAR with a lower exercise price and
- the pricing date must generally be the grant date, subject to limited
exceptions.
Stock Awards
A stock award is the grant of shares of the Company's Common Stock or a
right to receive such shares, their cash equivalent or a combination of
both. Each stock award shall be subject to such conditions,
restrictions and contingencies as the Committee shall determine.
Cash Incentive Awards
Cash awards may be granted as determined by the Committee. Terms of
cash awards must be set out by agreement, which may specify performance
periods and goals. The Committee has the discretion to adjust
pre-established performance goals under certain circumstances.
Settlement of Awards, Deferred Settlements Tax Withholding and Dividend
Equivalents. The Committee has the discretion to settle awards through cash
payments, delivery of Common Stock, the grant of replacement awards or any
combination thereof.
The Committee may permit the payment of the option exercise price to be made as
follows:
- in cash,
- by the tender of the Company's shares of Common Stock, or
- by irrevocable authorization to a third party to sell shares received
upon exercise of the option and remit the exercise price.
Before distribution of any shares pursuant to any award, the Committee may
require the participant to remit funds for any required tax withholdings.
Alternatively, the Committee's may withhold shares to satisfy such tax
requirements. All cash payments made under the Incentive Plan may be net of any
required tax withholdings.
The Committee may provide for the deferred delivery of stock upon the exercise
of an option or SAR or upon the grant of a stock award. Such deferral can be
evidenced by use of "Stock Units" - bookkeeping entries equivalent to the fair
market value, from time to time, of a specified number of shares. Stock Units
are settled at the end of the applicable deferral period by delivery of shares
or as otherwise determined by the Committee.
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<PAGE> 36
The Committee has the discretion to provide participants with the right to
receive dividends or dividend equivalent payments with respect to the underlying
shares of Common Stock.
Duration of the Incentive Plan. No award may be granted under the Incentive Plan
after March 19, 2008. However, the plan shall remain in effect as long as any
awards are outstanding.
Maximum Number of Shares and Adjustments for Corporate Transactions. Subject to
further adjustments for corporate transactions, as discussed below, the maximum
number of shares of the Company's Common Stock available for delivery to
participants under the Incentive Plan is 3,500,000. If the proposed amendment is
approved, this maximum will be increased to 5,500,000 shares.
Shares subject to an award that are not delivered because of forfeiture,
cancellation or cash settlement become available for further grant. If a
participant exercises an option by delivery of previously-owned shares in
payment of the exercise price, only the excess of the shares issued to the
employee above the number of shares delivered in payment will be counted against
the maximum.
The maximum number of shares which may be delivered under the Incentive Plan is
subject to further adjustment for corporate transactions, such as:
- stock splits, stock dividends and stock distributions,
- any other transaction in which outstanding shares of Common Stock are
increased, decreased, changed or exchanged, or
- a transaction in which cash, property, Common Stock or other securities
are distributed in respect of outstanding shares.
If such a corporate transaction occurs, the Committee will make appropriate
adjustments in:
- the number and/or type of shares for which awards may be granted under
the Incentive Plan after such transaction, and
- the number and/or type of shares or securities for which awards then
outstanding under the Incentive Plan may be exercised after such
transaction - such adjustments would be made without changing the
aggregate exercise price applicable to the unexercised portions of
outstanding options or SARs.
For example, to adjust for the last corporate transaction - the two-for-one
stock split that became effective in July 1999 - the Committee doubled the
maximum number of shares that could be issued under the Incentive Plan. The
Committee also doubled the number of unexercised shares that were the subject of
outstanding options and cut the corresponding per-share exercise price in half.
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<PAGE> 37
Other Limits Under the Incentive Plan. Subject to further adjustment for
corporate transactions, as discussed above, the Incentive Plan imposes the
following limits:
- - shares that may be issued as ISOs -- 500,000,
- - shares that may be issued as stock awards -- 500,000,
- - shares that may be granted in any one fiscal year to any one
participant pursuant to any and all awards -- 200,000, and
- - maximum aggregate cash pay-out in any one fiscal year for cash awards
to a "covered executive" -- $2,000,000.
The last two limits mentioned above will not apply if the Committee determines
that the award(s) in question to a "covered executive" will not be designed to
be tax deductible (see Section 162(m) of the Code below).
Amendment of Incentive Plan. The Board of Directors may, at any time, amend or
terminate the Incentive Plan. However, the approval of the Company's
stockholders will be required for any amendment (other than adjustments for
corporate transactions) which would:
- - increase the maximum number of shares that may be delivered under the
Incentive Plan as described in Maximum Number of Shares and Adjustments
for Corporate Transactions above,
- - increase any of the limits described above under Other Limits Under the
Incentive Plan, or
- - decrease the minimum exercise price for an option or SAR or permit the
surrender of an option or an SAR as consideration in exchange for a new
award with a lower exercise price, each as described above under
Options and SARs, or
- - increase the maximum term of an Option or SAR as described above under
Options and SARs.
Federal Income Tax Consequences of Incentive Plan Awards. The Company believes
that under present law and regulations the federal income tax treatment of the
various awards that may be made under the Incentive Plan will be as described
below. In general, the Company's and its subsidiaries' right to claim a
deduction is subject to the requirements of Section 162(m) of the Code (see
Section 162(m) of the Code below).
The grant of an NQSO will not have any tax consequence to the Company
nor to the participant. The exercise of an NQSO will require the
participant to include in his or her taxable ordinary income the amount
by which the fair market value of the acquired shares on the exercise
date exceeds the option price. Upon a subsequent sale or taxable
exchange of shares acquired upon the option exercise, the participant
will recognize long- or short-term capital
33
<PAGE> 38
gain or loss equal to the difference between the amount realized on the
sale and the tax basis of such shares (the fair market value on the
exercise date). The Company will be entitled to a deduction at the same
time and in the same amount as the participant is in receipt of income
in consequence of his or exercise of an NQSO.
The grant of an ISO will not have any tax consequence to the Company
nor to the participant. The exercise of an ISO will not cause the
participant to realize ordinary taxable income nor permit the Company
to take a deduction unless the participant disposes of the acquired
shares within the later of two years after the grant of the option and
one year after the date of the exercise. (However, for purposes of
computing the participant's alternative minimum tax liability, the
spread between the option price and the stock's fair market value on
the date of the ISO exercise is treated as income.) If the participant
fails to achieve that minimum holding period before deposition, the
participant will be treated as though he or she had exercised a NQSO
for tax purposes and the Company will be treated as though the
participant had exercised a NQSO (see NQSOs above). If the participant
achieves the minimum holding period, any gain or loss that is realized
on the subsequent disposition of such shares will be treated as
long-term capital gain or loss.
The grant of an SAR will not have any tax consequence to the Company
nor to the participant. The exercise of an SAR will require the
participant to include in his or her taxable ordinary income the amount
of any cash received plus the fair market value of any shares issued as
the result of the exercise. Upon a subsequent sale or taxable exchange
of shares, if any, acquired upon an SAR exercise, the participant will
recognize long- or short-term capital gain or loss equal to the
difference between the amount realized on the sale and the tax basis of
such shares (the fair market value on the exercise date). The Company
will be entitled to a deduction at the same time and in the same amount
as the participant is in receipt of income in consequence of his or
exercise of an SAR.
The grant of a stock award will not have any tax consequence to the
Company nor to the participant if, at the time of the grant, the shares
provided to the participant are subject to a substantial risk of
forfeiture, and provided further that the participant chooses not to
elect to recognize income. The participant may, however, elect to
recognize taxable ordinary income at the time of grant equal to the
fair market value of the stock awarded. Failing such an election, as of
the date the shares provided to a participant under a stock award are
no longer subject to a substantial risk of forfeiture, the participant
will recognize taxable ordinary income equal to the fair market value
of the stock. The Company will be entitled to a deduction at the same
time and in the same amount as the participant is in receipt of income
in consequence of the grant of an SAR.
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<PAGE> 39
The participant will recognize taxable ordinary income when he or she
is in receipt or constructive receipt of a cash award. The Company will
be entitled to a deduction at the same time and in the same amount as
the participant is in receipt of income in consequence of the grant of
a cash award.
Section 162(m) of the Code. The Company's and its subsidiaries' right to claim a
tax deduction with respect to compensation provided under the Incentive Plan to
covered executives may be subject to the limitations of Section 162(m) of the
Code. Section 162(m) provides that no deduction shall be allowed for applicable
employee remuneration with respect to any covered executive in excess of
$1,000,000 for a taxable year. However, qualified performance-based compensation
is not subject to this $1,000,000 limitation. "Covered executives" are the
Company's chief executive officer and the four other employees whose
compensation is required to be reported to its stockholders under the Securities
Exchange Act of 1934.
Options and SARs granted under the Incentive Plan will be qualified
performance-based compensation if:
- - the exercise price is no less than fair market value on the date of the
grant,
- - if such plan is approved by the stockholders of the Company (the
Incentive Plan was approved in 1998), and
- - if the members of the Committee are all "outside directors" as defined
under the Section 162(m) and the regulations promulgated thereunder.
Stock and cash awards under the Incentive Plan may be designed by the Committee
to be qualified performance-based compensation. The Committee must specify
objective performance goals to be attained over a performance period as a
condition to the award. For such awards, the measures of performance used to
determine attainment of performance goals over any performance period shall be
the Company's consolidated net earnings and/or consolidated earnings per share
on a diluted basis. The Committee retains the right to make post-award
adjustments to reflect certain extraordinary events.
It is the current intention of the Board of Directors that the Committee shall
at all times be composed of persons qualifying as "outside directors" and that
the Committee shall consider the effect of Section 162(m) in designing and
making awards under the Incentive Plan to covered executives. However, under the
Incentive Plan, the Committee has the discretion to make awards that will not be
so qualified and may find it in the best interest of the Company to do so from
time to time.
The Incentive Plan is not the exclusive means available to the Company to
provide incentive compensation to employees of the Company and its subsidiaries.
35
<PAGE> 40
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL.
ITEM IV - APPOINTMENT OF INDEPENDENT ACCOUNTANTS
Upon the recommendation of its Audit Committee, the Board of Directors
has appointed PricewaterhouseCoopers LLP as independent accountants to examine
the Company's consolidated financial statements for fiscal year 2000. We are
asking you to ratify our selection.
PricewaterhouseCoopers LLP is the successor to the firm formerly known
as Coopers & Lybrand L.L.P. Before becoming a part of PricewaterhouseCoopers
LLP, Coopers & Lybrand L.L.P. and its predecessor Coopers & Lybrand served as
the Company's independent accountants since 1984.
A representative of PricewaterhouseCoopers LLP will be in attendance at
the Annual Meeting to respond to appropriate questions raised by stockholders
and will be afforded the opportunity to make a statement at the meeting, if he
or she desires to do so.
The Board of Directors may review its selection if its appointment is
not approved by the stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF THE
SELECTION OF PRICEWATERHOUSECOOPERS LLP AS TIFFANY & CO.'S INDEPENDENT
ACCOUNTANTS FOR FISCAL YEAR 2000.
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<PAGE> 41
OTHER MATTERS
STOCKHOLDER PROPOSALS, IN GENERAL
If you would like to submit the name of a candidate for the Nominating
Committee to consider as a nominee for director, you may send your proposal at
any time to the Nominating Committee, c/o Mr. Patrick B. Dorsey, Secretary,
Tiffany & Co., 727 Fifth Avenue, New York, New York 10022.
If you would like to nominate a candidate for director or bring other
business before the stockholders at the 2001 Annual Meeting, which is currently
expected to take place on May 17, 2001, you must comply with the following
requirements:
- - you must notify the Secretary of Tiffany & Co. in writing no earlier
than January 18, 2001, and no later than February 17, 2001,
- - if the matter you wish to present is other than the nomination of a
candidate for director, your proposal must be a proper matter for
stockholder action under the General Corporation Law of the State of
Delaware, and
- - your proposal must contain all of the information required under our
By-laws, a copy of which is available, at no charge, from the
Secretary.
STOCKHOLDER PROPOSALS FOR INCLUSION IN THE PROXY STATEMENT FOR THE 2000 ANNUAL
MEETING
If you wish to submit a proposal to be included in the Proxy Statement
for our 2001 Annual Meeting, we must receive it no later than December 9, 2000.
Proposals should be sent to Tiffany & Co. at 727 Fifth Avenue, New York, New
York, 10022, addressed to the attention of Patrick B. Dorsey, Secretary.
REMINDER TO VOTE
Please be sure to either complete, sign and mail the enclosed proxy
card in the return envelope provided or call in your instructions as soon as you
can so that your vote may be recorded and counted.
BY ORDER OF THE BOARD OF DIRECTORS
Patrick B. Dorsey
Secretary
New York, New York
April 7, 2000
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<PAGE> 42
Appendix 1
TIFFANY & CO.
AUDIT COMMITTEE CHARTER
(Adopted by the Board of Directors: March 16, 2000)
PURPOSE: the purpose of the Audit Committee is to oversee and monitor, on behalf
of the Board of Directors, the Company's financial reporting process and systems
of internal controls regarding finance, accounting and legal compliance.
SCOPE: the Audit Committee's role is one of oversight. The Board of Directors
recognizes that the Company's management is responsible for preparing the
Company's financial statements and that outside auditors are responsible for
auditing those financial statements. In fulfilling this responsibility, the
outside auditors are ultimately accountable to the Board of Directors of the
Company and its Audit Committee. In order to fulfill it's oversight
responsibility to shareholders and the investment community, the Audit Committee
must be capable of conducting free and open discussions with management,
internal and outside auditors, employees and others regarding the quality of the
financial statements and the system of internal controls.
RESPONSIBILITIES: the responsibilities of the Audit Committee shall be as
follows:
1. to review the adequacy of the Company's system of internal accounting and
financial controls;
2. to select and evaluate outside auditors and to review the performance of same
and to recommend to the Board of Directors the appointment or replacement of
outside auditors; to review fee arrangements in connection with such
appointments and recommend such arrangements to the Board of Directors;
3. to ensure the independence of the outside auditors by: (i) reviewing, and
discussing with the Board of Directors any relationships between the auditors
and the Company, or any other relationship, that may adversely affect the
independence of the auditor; (ii) ensuring that the outside auditors submit on a
periodic basis to the Audit Committee a formal written statement delineating all
relationships between the auditors and the Company ; (iii) actively engaging in
a dialogue with the outside auditors with respect to any disclosed relationships
or services that may impact the objectivity and independence of the outside
auditors; and (iv) recommending that the Board of Directors take appropriate
action in response to the outside auditors' report to satisfy itself of the
outside auditors' independence;
4. to require that the outside auditors have confirmed their understanding of
the following: that the outside auditors are ultimately accountable to the Board
of Directors of the Company and its Audit Committee;
5. to review annually the outside auditors' proposed audit scope and approach;
6. to review annually the results of the internal audit department's findings,
including the results of the Company's Business Conduct program, and proposed
audit plans;
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<PAGE> 43
7. to conduct a post-audit, pre-issuance review of the financial statements,
discuss such statements with the officers of the Company and outside auditors,
and, if such statements are found acceptable, to recommend to the Board of
Directors that such statements be included in the Company's annual report on
Form 10-K to conduct a review of audit findings, the quality of internal
accounting and financial controls as well as any other matters required to be
discussed under Statements of Auditing Standards No. 61;
8. to annually review this Audit Committee Charter and to propose necessary or
appropriate revisions to the Board of Directors; and
9. to perform such other oversight and special investigatory functions as deemed
necessary or as requested by the full Board of Directors.
REPORTING RESPONSIBILITIES: the Audit Committee shall report its conclusions and
concerns to the Board of Directors.
AUTHORITY: the Audit Committee and each of its members is authorized by the
Board of Directors to communicate directly and/or privately with members of the
Company's management, employees, internal and independent audit staff members,
counsel and third parties in the performance of Audit Committee functions. The
Chairman of the Audit Committee is hereby authorized to commit Company funds in
order to obtain legal counsel, investigatory services or expert advice necessary
or desirable in connection with Audit Committee functions.
COMMITTEE MEMBERSHIP: the membership of the Audit Committee shall consist of
three or more directors each of whom: (i) shall have been appointed by the Board
of Directors; (ii) shall be free of any relationship to the Company which, in
the opinion of the Board of Directors, may interfere with the exercise of their
independence from management and the Company; (iii) shall be or shall become
(within a reasonable period of time after his or her appointment) "financially
literate," as such qualification is interpreted by the Board of Directors; and
(iv) shall otherwise meet the requirements of independence as set forth in
subparagraph 303.01(3) of the New York Stock Exchange Listed Company Manual, as
amended from time to time. In addition, at least one member of the Audit
Committee shall have accounting or related financial management expertise. The
Board of Directors reserves all authority permitted under paragraphs 303.01 and
303.02 of said Listed Company Manual in connection with the determination of
independence.
MEETINGS: the Audit Committee shall meet as often as necessary to fulfill its
functions, but no less than three times annually.
39
<PAGE> 44
The Board of Directors recommends: a vote FOR all nominees for director in Item
1, FOR approval of an increase in the number of authorized shares of common
stock in Item 2, FOR approval of the amendment to the 1998 Employee Incentive
Plan in Item 3, FOR approval of the appointment of PricewaterhouseCoopers LLP as
independent accountants in Item 4. Shares represented by this proxy will be so
voted unless otherwise indicated, in which case they will be voted as marked.
Please mark [X]
your vote as
indicated in
this example.
<TABLE>
<CAPTION>
FOR ALL WITHHELD FOR NOMINEES
NOMINEES NAMED BELOW
<S> <C> <C>
Item 1: Election of the following nominees as directors: [ ] [ ]
01 William R. Chaney, 02 Rose Marie Bravo,
03 Samuel L. Hayes III, 04 Michael J. Kowalski,
05 Charles K. Marquis, 06 James E. Quinn,
07 William A. Shutzer and 07 Geraldine Stutz.
WITHHELD FOR (write in each nominee's name in the space provided below):
- ------------------------------------------------------------------------
Item 2: Approval of an amendment to the Company's Restated FOR AGAINST ABSTAIN
Certificate of Incorporation to increase the number [ ] [ ] [ ]
of authorized shares of common stock, $.01 par
value, from 120,000,000 to 240,000,000.
Item 3: Approval of an amendment to the Company's 1998 FOR AGAINST ABSTAIN
Employee Incentive Plan to increase the maximum [ ] [ ] [ ]
number of shares of common stock, $.01 par value,
that may be delivered to participants and their
beneficiaries under the plan from 2,000,000 to
4,000,000.
Item 4. Approval of the appointment of PricewaterhouseCoopers [ ] [ ] [ ]
LLP as independent accountants of the Company's fiscal
2000 financial statements.
YES
I PLAN TO ATTEND THE ANNUAL MEETING. [ ]
THIS PROXY IS CONTINUED ON THE REVERSE SIDE.
</TABLE>
Signature Signature Date
------------------------- --------------------- ---------
NOTE: Please date and sign exactly as your name appears printed on this card.
When shares are held by joint owners, all should sign. When signing as fiduciary
(e.g. attorney, executor, administrator, conservator, trustee or guardian),
please give title. If a corporation or partnership, please sign in corporate or
partnership name by an authorized person.
- --------------------------------------------------------------------------------
[UP ARROW] FOLD AND DETACH HERE [UP ARROW]
[TELEPHONE GRAPHIC] VOTE BY TELEPHONE [TELEPHONE GRAPHIC]
QUICK *** EASY *** IMMEDIATE
YOUR VOTE IS IMPORTANT! YOU CAN VOTE IN ONE OF TWO WAYS:
1. TO VOTE BY PHONE: Call toll-free 1-800-840-1208 on a touch tone telephone
24 HOURS A DAY-7 DAYS A WEEK.
There is NO CHARGE to you for this call. Have your proxy card in hand.
You will be asked to enter a Control Number, which is located in the box in the
lower right hand corner of this form
OPTION 1: To vote as the Board of Directors recommends on ALL proposals,
press 1,
When asked, please confirm by pressing 1.
OPTION 2: If you choose to vote on each proposal separately, press 0. You will
hear these instructions:
Item 1 - To vote FOR ALL nominees, press 1; to WITHHOLD FOR ALL nominees, press
9; to WITHHOLD FOR AN INDIVIDUAL nominee, press 0 and listen to the
instructions.
Item 2 - To vote FOR, press 1; AGAINST, press 9; ABSTAIN, press 0.
Item 3 - To vote FOR, press 1; AGAINST, press 9; ABSTAIN, press 0.
Item 4 - To vote FOR, press 1; AGAINST, press 9; ABSTAIN, press 0.
WHEN ASKED, PLEASE CONFIRM BY PRESSING 1.
OR
2. TO VOTE BY MAIL: Mark, sign and date your proxy card and return promptly in
the enclosed envelope.
NOTE: If you vote by telephone, THERE IS NO NEED TO MAIL BACK YOUR PROXY CARD.
THANK YOU FOR VOTING.
<PAGE> 45
TIFFANY & CO.
PROXY FOR ANNUAL MEETING
SOLICITED BY THE BOARD OF DIRECTORS FOR USE AT THE ANNUAL MEETING OF
STOCKHOLDERS OF TIFFANY & CO. ("THE COMPANY") TO BE HELD MAY 18, 2000, AT 10:00
A.M. NEW YORK TIME IN THE ROOF/PENTHOUSE OF THE ST. REGIS HOTEL, 2 EAST 55TH
STREET AT FIFTH AVENUE, NEW YORK, NEW YORK. THE BOARD OF DIRECTORS RECOMMENDS: A
VOTE "FOR" ALL NOMINEES FOR DIRECTOR IN ITEM 1, "FOR" APPROVAL OF AN INCREASE IN
THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK IN ITEM 2, "FOR" APPROVAL OF AN
AMENDMENT TO THE 1998 EMPLOYEE INCENTIVE PLAN INCREASING THE MAXIMUM NUMBER OF
SHARES OF COMMON STOCK THAT MAY BE ISSUED UNDER THE PLAN IN ITEM 3, AND "FOR"
APPROVAL OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT
ACCOUNTANTS IN ITEM 4.
SHARES REPRESENTED BY THIS PROXY WILL BE SO VOTED UNLESS OTHERWISE INDICATED, IN
WHICH CASE THEY WILL BE VOTED AS MARKED. IF NO DIRECTION IS GIVEN, SUCH SHARES
WILL BE VOTED "FOR" ITEMS 1, 2, 3 AND 4. IF ANY NOMINEE NAMED ON THE REVERSE
SIDE OF THIS CARD IS UNABLE TO SERVE AS A DIRECTOR, THE BOARD OF DIRECTORS MAY
NOMINATE ANOTHER PERSON OR PERSONS IN SUBSTITUTION FOR SUCH NOMINEE AND THE
PROXIES NAMED BELOW WILL VOTE FOR THE PERSON OR PERSONS SO NOMINATED OR FOR SUCH
LESSER NUMBER OF DIRECTORS AS MAY BE PRESCRIBED BY THE BOARD OF DIRECTORS.
The undersigned hereby appoints W.R. CHANEY, J.N. FERNANDEZ, and P.B. DORSEY,
and each of them, proxies, with full power of substitution, to act for the
undersigned, and to vote all shares of common stock represented by this proxy
which the undersigned may be entitled to vote, at the 2000 Annual Meeting of
Stockholders (and any adjournment thereof) as directed and permitted on the
reverse side of this card and, IN THEIR JUDGMENT, on such matters as may be
incident to the conduct of or may properly come before the meeting.
IMPORTANT
THIS PROXY IS CONTINUED ON THE REVERSE SIDE.
- --------------------------------------------------------------------------------
[UP ARROW] FOLD AND DETACH HERE [UP ARROW]
TIFFANY & CO.
727 Fifth Avenue
New York, N.Y. 10022
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD
THURSDAY, MAY 18, 2000
The Annual Meeting of Stockholders of Tiffany & Co. (the "Company") will be
held in the Roof/Penthouse of The St. Regis Hotel, 2 East 55th Street at Fifth
Avenue, New York, New York on May 18, 2000, at 10:00 a.m. New York time to
consider and take action on the following:
1. Election of eight (8) directors to hold office until the next annual meeting
of stockholders and until their respective successors have been elected and
qualified:
2. Approval of an amendment to the Company's Restated Certificate of
Incorporation to increase the number of authorized shares of common stock,
$.01 par value, from 120,000,000 to 240,000,000;
3. Approval of an amendment to the Company'S 1998 Employee Incentive Plan to
increase the maximum number of shares of common stock, $.01 par value, that may
be delivered to participants and their beneficiaries under the plan from
2,000,000 to 4,000,000; and
4. Approval of the appointment of PricewaterhouseCoopers LLP as independent
accountants of the Company's fiscal 2000 financial statements.
All stockholders are cordially invited to attend, although only those
stockholders of record as of the close of business on March 24, 2000, will be
entitled to notice of and to vote at the meeting of any adjournments thereof.
The transfer books will not be closed.
A list of stockholders entitled to vote will be available for inspection by
interested stockholders at the offices of the Company, 727 Fifth Avenue, New
York, New York commencing on April 30, 2000, during ordinary business hours.
BY ORDER OF THE BOARD OF DIRECTORS
Patrick B. Dorsey
Secretary
New York, New York
April 7, 2000
YOUR VOTE IS IMPORTANT, EVEN IF IT IS YOUR DESIRE TO ATTEND THE ANNUAL MEETING,
PLEASE CALL IN YOUR VOTE OR SIGN AND RETURN THE ENCLOSED PROXY IN THE
ACCOMPANYING POSTAGE PAID ENVELOPE.
-----------------------------------------------
