Tiffany & Co.
Report on Form 8-K Dated February 2, 2009
[Form of 2009 Retention Agreement]
[Tiffany & Co. Letterhead]
[Name of Executive]
600 Madison Avenue
New York, NY 10022
Re: Retention Agreement
Tiffany and Company and Tiffany & Co. (respectively, "Employer" and
"Parent,") wish to take steps to retain key management, it being recognized that
future discussions concerning a Change of Control or a decision to cooperate in
or effect a Change of Control could result in the departure or distraction of
key management at a time when Parent and Employer Board would require the clear
and focused attention of experienced management, unafflicted with concerns for
personal financial and job security. Accordingly, in order to induce you to
remain in the employ of the Employer, Parent and Employer have determined to
enter into this letter agreement (this "Agreement") which addresses the terms
and conditions of your employment in the event of a Change of Control.
This Agreement will provide you with certain payments and benefits should
you incur an Involuntary Termination after a Change of Control Date.
An "Involuntary Termination" means (i) your termination of employment by
Employer during the Term without Cause or (ii) your resignation of employment
with the Employer within one (1) year of the Change of Control Date for Good
Reason. The terms "Change of Control Date," "Term," "Cause," "Good Reason" and
other initially capitalized words and phrases used in this letter agreement
shall have the meanings ascribed to them in Appendix I attached. With respect to
your specific situation, you would also have "Good Reason" to resign from
employment with Employer if any of the following occurs after a Change of
Control Date and within one (1) year of such Change of Control Date:
(A) at any time you are not the [insert basic description of
Executive's job] of the Successor Entity or the Controlling
(B) any similar material adverse change on or after the Change in
Control Date in your position or reporting responsibilities.
1. Term of Employment under This Agreement. The Term of your employment
under this Agreement shall not commence unless and until a Change in Control
Date occurs and shall continue thereafter until the second anniversary of the
Change in Control Date.
2. Cash Payments in the Event of Involuntary Termination during the Term;
Timing of Payments. In the event of your Involuntary Termination during the Term
you will be paid the following amounts in cash by the Employer:
(a) your Earned Compensation; and
(b) subject to Section 8 below, a severance payment equal to the sum
of (i) two times your Reference Salary and (ii) two times your
Payments under (a) and (c) above will be made within ten (10) days of your Date
3. Benefit Continuation in the Event of Involuntary Termination During the
Term. In the event of your Involuntary Termination during the Term Employer
shall maintain all Benefit Plans in full force and effect, for the continued
benefit of you and your eligible dependents for a maximum Benefits Continuation
Period of two years. Employer's obligation under this Section 3 is subject to
the following: (i) that your and your eligible dependent's continued
participation is possible under the general terms and provisions of such Benefit
Plans (and under the terms of any applicable funding media) and (ii) that you
continue to pay an amount equal to your regular contribution under such plans
for such participation. You and your eligible dependents continued participation
in such plans shall also be subject to the additional conditions stated in
4. Notice of Termination; Employer's Opportunity to Cure. Any termination
of your employment by Employer or by you during the Term shall be communicated
by a Notice of Termination to the other parties hereto. No event shall
constitute Good Reason for your resignation unless:
(i) your claim to that effect is communicated by you to Employer in
writing within the lesser of (a) sixty (60) days of the event alleged
by you to constitute Good Reason and (b) that number of days remaining
in the one-year period following the Change in Control date; and
(ii) such event is not corrected by Employer or Parent in a manner which is
reasonably satisfactory to you (including full retroactive correction
with respect to any monetary matter) within thirty (30) days of the
Employer's receipt of such
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written notice from you. For the avoidance of doubt, you will be required
to remain in employment during the aforesaid thirty-day cure period.
5. No Mitigation or Offset. You shall not be required to mitigate the
amount of any payment provided for in this Agreement by seeking other employment
or otherwise, nor shall the amount of any payment or benefit provided for in
this Agreement be reduced by any compensation earned by you as the result of
employment by another employer or by pension benefits paid by Employer or
Employer's plans after the Date of Termination or otherwise, except as provided
in the definition of "Benefit Continuation Period."
6. Legal Fees and Expenses Necessary to Enforce Agreement. The Employer
shall pay or reimburse you for all costs and expenses (including, without
limitation, court costs and reasonable legal fees and expenses which reflect
common practice with respect to the matters involved) incurred by you as a
result of any claim, action or proceeding (i) contesting, disputing or enforcing
any right, benefits or obligations under this Agreement or which you reasonably
claim to have or to be owed to you by Employer or Parent or (ii) arising out of
or challenging the validity, advisability or enforceability of this Agreement or
any provision hereof.
7. Employment during the Term. During the Term you shall be employed by
Employer on the terms and conditions on which you were employed immediately
prior to the Change in Control Date without any Substantial Change.
8. Limitation. Notwithstanding anything in this Agreement to the contrary,
your entitlement to a payment under Section 2(b) above shall be limited
(reduced) to the extent necessary so that no payment to be made to you on
account of your Involuntary Termination will be subject to the excise tax
imposed by Section 4999 of the Code, but only if, by reason of such limitation,
your Net After Tax Benefit shall exceed your Net After Tax Benefit if such
reduction were not made. "Net After Tax Benefit" means (i) the sum of all
payments and benefits that you are entitled to receive under Section 2(b) or
under any other plan or agreement that would constitute a "parachute payment"
within the meaning of Section 280G of the Code, less (ii) the amount of federal
income tax payable with respect to the payments and benefits described in clause
(i) above calculated at the maximum marginal income tax rate for each year in
which such payments and benefits shall be paid you (based upon the rate in
effect for such year as set forth in the Code at the time of the first payment
of the foregoing), less (iii) the amount of excise tax imposed with respect to
the payments and benefits described in clause (i) above by Section 4999 of the
9. Successors; Binding Agreement; Respective Responsibilities of Parent and
(a) Assumption by Successor. Parent and Employer will each require
their respective successors (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the
business or assets of either, to expressly
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assume and to agree to perform this Agreement for your benefit in the same
manner and to the same extent that the Parent or the Employer, as the case
may be, would be required to perform it if no such succession had taken
place; provided, however, that no such assumption shall relieve either the
Parent or the Employer of its obligations hereunder, and no failure to
expressly assume and agree to perform this Agreement shall relieve any
successor of its obligations under this Agreement by operation of law.
(b) Enforceability; Beneficiaries. This Agreement shall be binding
upon, inure to the benefit of and be enforceable by you (and your personal
or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees) and the Parent and Employer and any
Person(s) which succeeds to substantially all of the business or assets of
the Parent or Employer, whether by means of merger, consolidation,
acquisition of all or substantially all of the assets of the Parent or
Employer or otherwise, including, without limitation, as a result of a
Change in Control or by operation of law.
(c) Joint and Several Liability. Parent shall be jointly and severally
liable with Employer for all Employer's obligations hereunder and Employer
shall be jointly and severally liable with Parent for all Parent's
10. Notices. For the purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when hand-delivered or when mailed by United
States registered mail, return receipt requested, postage prepaid, addressed, if
to Parent or Employer, to the Boards of Directors, Tiffany & Co. and Tiffany and
Company, 600 Madison Avenue, New York, NY 10022, Attn. Legal Department, or, if
to you, to you at the address set forth on the first page of this Agreement, or
to such other address as either party may have furnished to the other in writing
in accordance herewith, except that notice of change of address shall be
effective only upon receipt.
(a) Amendments, Waivers, Etc. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or
discharge is agreed to in writing, No waiver by either party hereto any
time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provision or
conditions at the same or at any later or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter here have been made by either party which are not expressly
set forth in this Agreement and this Agreement shall supersede all prior
agreements, negotiations, correspondence, undertakings and communications
of the parties, oral or written, with respect to the subject matter hereof.
Without limiting the generality of the foregoing, this Agreement supersedes
all prior Retention Agreements between the parties, it being understood and
agreed that any such prior Retention Agreement shall be deemed voluntarily
surrendered by you in exchange for this Agreement. Parent, acting through
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Committee of the Parent Board, reserves the unilateral right to add
additional events that shall constitute a Change in Control to reflect
changing techniques for effecting corporate changes in control; such right
may not be exercised after the occurrence of such an event.
(b) Validity. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
(c) Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.
(d) No Contract of Employment. Nothing in this Agreement shall be
construed as giving you any right to be retained in the employ of Employer
or Parent nor shall it affect the terms and conditions of your employment
with Employer prior to the commencement of the Term hereof. Failing the
occurrence of a Change in Control Date your employment shall continue to be
"at will," meaning that either you or Employer may terminate your
employment with or without cause, for any reason or no reason, with or
(e) Withholding. Amounts paid to you hereunder shall be subject to all
applicable federal, state and local withholding taxes.
(f) Source of Payments. All payments provided under this Agreement,
other than payments made pursuant to a Benefit Plan which provides
otherwise, shall be paid in cash from the general funds of Employer or
Parent, and no special or separate fund shall be established, and no other
segregation of assets made, to assure payment. You will have no right,
title or interest whatsoever in or to any investments which Employer or
Parent may make to aid it in meeting its obligations hereunder. To the
extent that any person acquires a right to receive payments from Employer
or Parent hereunder, such right shall be no greater than the right of an
unsecured creditor of Parent or Employer, as the case may be.
(g) Headings. The headings contained in this Agreement are intended
solely for convenience of reference and shall not affect the rights of the
parties to this Agreement.
(h) Governing Law. The validity, interpretation, construction, and
performance of this Agreement shall be governed by the laws of the State of
New York applicable to contracts entered into and to be performed in this
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If this letter set forth our agreement on the subject matter hereof, kindly
sign and return to Employer the enclosed copy of this letter which will then
constitute the agreement among us on this subject.
TIFFANY & CO. ("Parent")
Name: Michael J. Kowalski
Title: Chairman and Chief Executive Officer
TIFFANY AND COMPANY ("Employer")
Name: Michael J. Kowalski
Title: Chairman and Chief Executive Officer
Agreed to as of this _____ day of _______ 200__
[Name of Executive]
Attachment: Appendices I through II
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Appendix I -- Definitions
For purposes of the Agreement, the following initially capitalized words shall
have the meanings set forth below:
"Affiliate" shall mean any Person that controls, is controlled by or is
under common control with, any other Person, directly or indirectly.
"Benefit Continuation Period" means the period beginning on your Date of
Termination and ending following the period of years stated in Section 3,
provided that such period shall earlier terminate on the commencement date of
equivalent benefits from your new employer or your attainment of age sixty-five
(65), whichever first occurs.
"Benefit Plan" mean all insured and self-insured employee medical and
dental welfare benefit plans in which you were entitled to participate
immediately prior to your Date of Termination.
"Cause" shall mean a termination of your employment during the Term which
is the result of:
(i) your conviction or plea of nolo contendere to a felony or any
other crime involving financial impropriety or which would tend
to subject Employer or any of its Affiliates to public criticism
or materially interfere with your continued service to Employer;
(ii) your willful violation of the Code of Conduct;
(iii) your willful failure or refusal to perform substantially all
such proper and achievable directives issued by your superior
(other than any such failure resulting from your incapacity due
to physical or mental illness, any such actual or anticipated
failure resulting from a resignation by you for Good Reason, or
any such refusal made by you in good faith because you believe
such directives to be illegal, unethical or immoral) after a
written demand for substantial performance is delivered to you on
behalf of Employer, which demand specifically identifies the
manner in which you have not substantially performed your duties,
and which performance is not substantially corrected by you
within ten (10) days of receipt of such demand;
(iv) your gross negligence in the performance of your duties and
responsibilities materially injurious to the Employer;
(v) your willful breach of any material obligation that you have to
Parent or Employer under any written agreement that you have with
either Parent or Employer;
(vi) your fraud or dishonesty with regard to Employer or any of its
(vii) your failure to reasonably cooperate in any investigation of
alleged misconduct by you or by any other employee of Parent,
Employer or any affiliate of Parent or Employer;
(viii) your death; or
(ix) your Disability.
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For purposes of the previous sentence, no act or failure to act on your part
shall be deemed "willful" unless done, or omitted to be done, by you in bad
faith toward, or without reasonable belief that your action or omission was in
the best interests of, Parent, Employer or an Affiliate of Parent or Employer.
Notwithstanding the foregoing, you shall not be deemed to have been terminated
for Cause with respect to items (i) through (vii) or item (ix) unless and until
there shall have been delivered to you a copy of a resolution duly adopted by
the affirmative vote of not less than three-fourths (3/4th) of the entire
membership of the Employer Board at a meeting called and held for such purpose
(after reasonable notice to you and an opportunity for you, together with your
counsel, to be heard before such Board), finding that, in the good faith opinion
of such Board, Cause exists as set forth in items (i), (ii), (iii), (iv), (v),
(vi), (vii) or (ix) above.
"Change in Control." A Change in Control shall be deemed to have occurred
(i) any Person, or any syndicate or group deemed to be a person under
Section 14(d)(2) of the Exchange Act, excluding Parent or any of
its Affiliates, a trustee or any fiduciary holding securities
under an employee benefit plan of Parent or any of its
Affiliates, an underwriter temporarily holding securities
pursuant to an offering of such securities or a corporation
owned, directly or indirectly by stockholders of Parent in
substantially the same proportion as their ownership of Parent,
is or becomes the "beneficial owner" (as defined in Rule 13d-3 of
the General Rules and Regulations under the Exchange Act),
directly or indirectly, of securities of Parent representing
Thirty-five percent (35%) or more of the combined voting power of
Parent's then outstanding securities entitled to vote in the
election of directors of Parent;
(ii) if the Incumbent Directors cease to constitute a majority of the
Parent Board; provided, however, that no person shall be deemed
an Incumbent Director if he or she was appointed or elected to
the Parent Board after having been designated to serve on the
Parent Board by a Person who has entered into an agreement with
Parent to effect a transaction described in clauses (i) through
(iv) of this definition;
(iii) there occurs a reorganization, merger, consolidation or other
corporate transaction involving Parent, in each case with respect
to which the stockholders of Parent immediately prior to such
transaction do not, immediately after such transaction, own more
than Fifty percent (50%) of the combined voting power of the
Parent or other corporation resulting from such transaction, as
the case may be;
(iv) all or substantially all of the assets of Parent or Employer are
sold, liquidated or distributed, except to an Affiliate of
"Change in Control Date" shall mean the date on which a Change of Control
"Code" shall mean the Internal Revenue Code of 1986, as amended, and any
successor provisions thereto.
"Code of Conduct" shall mean Parent's (i) Code of Business and Ethical
Conduct for Directors, the Chief Executive Officer, the Chief Financial Officer
and All Other Officers of the Company and (ii) Business Conduct Policy -
Worldwide, as amended from time to time prior to the Change of Control Date and
as in effect as of the Change of Control Date.
"Common Stock" shall mean the common stock of Parent.
"Controlling Entity" shall mean the Controlling Person of the Successor
Entity if such a Controlling Person exists; otherwise "Controlling Entity" shall
mean the Successor Entity.
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The "Controlling Person" of any Person shall mean the Person which
ultimately controls such first Person and all other Affiliates of such first
Person, directly or indirectly, through ownership of voting stock or otherwise.
Your "Date of Termination" shall mean:
(i) if your employment is terminated for Disability, thirty (30) days
after a Notice of Termination is given (provided that you shall
not have returned to the full-time performance of your duties
during such thirty (30) day period);
(ii) if your employment is terminated by Employer in an Involuntary
Termination, five (5) days after the date the Notice of
Termination is received by you;
(iii) if your employment is terminated by Employer for Cause (other
than Disability), the later of the date specified in the Notice
of Termination or ten (10) days following the date such Notice is
received by you;
(iv) if you resign and specify Good Reason, thirty (30) days after the
date your Notice of Termination is received by Employer unless
Employer has corrected the matter as provided for in Section
(v) if you resign and fail to specify Good Reason, the date set forth
in your Notice of Termination, which shall be no earlier than ten
(10) days after the date such notice is received by Employer.
"Disability" shall mean your incapacity due to physical or mental illness
which causes you to be absent from the full-time performance of your duties with
Employer for six (6) consecutive months provided, however, that you shall not be
determined to be subject to a Disability for purposes of this Agreement unless
you fail to return to full-time performance of your duties with Employer within
thirty (30) days after written Notice of Termination due to Disability is given
"Earned Compensation" shall mean:
(i) any earned but unpaid base salary through your Date of
Termination at the rate in effect at the time of the Notice of
Termination and any earned bonus or incentive award for any
completed fiscal year that remains unpaid;
(ii) all unused vacation time which you may have accrued as of your
Date of Termination; and
(iii) a portion of your Reference Bonus pro-rated for your service
during the fiscal year in which your Involuntary Termination
occurs, calculated on the assumption that all performance targets
(including your individual performance targets and sales and
earnings targets applicable to the Employer and/or to the
Successor Entity) have been or will be achieved.
"Employer" shall mean Tiffany and Company, a New York corporation, and any
successor to its business and/or assets by operation of law or otherwise.
"Employer Board" shall mean the Board of Directors of Employer.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
and any successor provisions thereto.
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"Excise Tax" shall mean the excise tax imposed by Section 4999 of the Code
and interest or penalties with respect to such excise tax.
"Good Reason" means, in addition to those reasons stated in the body of the
Agreement, your resignation from employment with Employer as a result of any of
(i) a meaningful and detrimental alteration in your position or the
nature or status of your responsibilities (including your
reporting responsibilities) from those in effect immediately
before the Change in Control Date;
(ii) a material failure by Employer to pay you a bonus or incentive
award commensurate with the bonus paid other key executives of
Employer at your level (expressed as a percentage of your target
bonus) unless such failure is justified by clear and objective
deficiencies of the business units for which you are responsible;
(iii) the relocation of the office of Employer where you were employed
immediately prior to the Change in Control Date to a location
which is more than 50 miles away or should Employer require you
to be based more than 50 miles away from such office (except for
required travel on the Employer's business to an extent
substantially consistent with your customary business travel
obligations in the ordinary course of business prior to the
Change in Control Date);
(iv) the failure of Employer and Parent to obtain an express agreement
reasonably satisfactory to you from their successors, if any, to
assume and agree to perform this Agreement, as contemplated in
Section 8(a) of the Agreement; or
(v) a material breach by Employer or Parent of this Agreement.
"Incumbent Directors" shall mean those individuals who were members of the
Board of Directors of Tiffany & Co., a Delaware corporation, as of the date of
this Agreement and those individuals whose later appointment to such Board, or
whose later nomination for election to such Board by the stockholders of Tiffany
& Co., was approved by a vote of at least a majority of those members of such
Board who either were members of such Board as of the date of this Agreement, or
whose election or nomination for election was previously so approved.
"Notice of Termination" shall mean a written notice indicating the specific
termination provision in this Agreement relied upon and setting forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of your employment under the provision so indicated.
"Parent" shall mean Tiffany & Co., a Delaware corporation, and any
successor to its business and/or assets by operation of law or otherwise.
"Parent Boar" shall mean the Board of Directors of Parent.
"Person" shall mean any individual, firm, corporation, partnership, limited
partnership, limited liability partnership, business trust, limited liability
company, unincorporated association or other entity, and shall include any
successor (by merger or otherwise) of such entity.
"Reference Bonus" shall mean the target annual bonus applicable to you for
the year in which your Involuntary Termination occurs. For this purpose, the
term "bonus" shall also refer to cash Incentive Award under the 2005 Employee
Incentive Plan or any successor plan thereto.
"Reference Salary" shall mean the greater of (i) the annual rate of your
base salary from Employer in effect immediately prior to the date of your
Involuntary Termination and (ii) the highest
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annual rate of your base salary from Employer in effect at any point during the
three-year period ended on the Change in Control Date.
"Regulations" shall mean regulations under Section 280G of the Code,
including proposed and temporary regulations, and any successor provisions
"Substantial Chang" means any material change in the terms or conditions
of your employment (including in your salary or target bonus) following a Change
of Control Date that is less favorable to you than those in effect previous to
the Change of Control Date other than (i) a change that has been made on an
across-the-board basis for substantially all of Employer's employees or (ii) a
change in equity-based compensation (including a the reduction or elimination
thereof) resulting from the Change in Control.
"Successor Entity" shall mean the Person who is in most immediate control,
whether through voting stock ownership of one or more subsidiaries or otherwise,
of the worldwide consolidated business of Parent's Affiliates, substantially as
such business existed immediately prior to the Change in Control Date whether or
not such Person is ultimately controlled by another Person.
"Taxes" shall mean the federal, state and local income taxes to which you
are subject at the time of determination, calculated on the basis of the highest
marginal rates then in effect, plus any additional payroll or withholding taxes
to which you are then subject.
"Term" shall mean the term of your employment under this Agreement as
defined in Section 1.
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Appendix II - Benefit Continuation
(A) In the event that your participation in any Benefit Plan is barred, Employer
shall, at its sole cost and expense, arrange to have issued for the benefit of
you and your eligible dependents individual policies of insurance providing
benefits substantially similar (on an after-tax basis) to those which you
otherwise would have been entitled to receive under such Benefit Plan pursuant
to Section 3 for the Benefit Continuation Period.
(B) In lieu of the benefits provided in (A) above, if, in the reasonable opinion
of Employer, such insurance is not available at a reasonable cost to the
Employer, the Employer shall directly provide you and your eligible dependents
with equivalent benefits (on an after-tax basis).
(C) In either of the circumstances described in (A) or (B), you shall not be
required to pay any premiums or other charges in an amount greater than that
which you would have paid in order participate in such Benefit Plan had your
Involuntary Termination not occurred.
(D) If at the end of the Benefit Continuation Period you have not reached age
sixty-five and you have not previously received or are not then receiving
equivalent benefits from a new employer, Employer shall arrange to enable you to
convert your and your eligible dependents' coverage under the Benefit Plans to
individual policies or programs upon the same terms as employees of the Employer
may apply for such conversions. Employer shall bear the cost of making such
conversions available to you; you shall bear the cost of coverage under such
converted policies or programs.
(E) For the purposes of Section 3 and this Appendix, a dependent will be deemed
"eligible" if, at the time in question, you would, if an employee of Employer,
be entitled to cover such dependent under the plan in question.
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Returned Retention Agreements
Michael J. Kowalski
James E. Quinn
Beth O. Canavan
James N. Fernandez
Patrick B. Dorsey
Jon M. King
Pamela H. Cloud
John S. Petterson
Note: Other Executive Officers are expected to sign and return the form.