Exhibit 10.127b
Tiffany & Co.
Report on Form 10-K
[Form of Retention Agreement]
[Name of Executive]
727 Fifth Avenue
New York, NY 10022
Re: RETENTION AGREEMENT
Dear [Executive]:
Tiffany and Company and Tiffany & Co. (respectively, "EMPLOYER" and
"PARENT,") wish to take steps to retain key management, it being recognized that
future discussions concerning a Change of Control or a decision to cooperate in
or effect a Change of Control could result in the departure or distraction of
key management at a time when Parent and Employer Board would require the clear
and focused attention of experienced management, unafflicted with concerns for
personal financial and job security. Accordingly, in order to induce you to
remain in the employ of the Employer, Parent and Employer have determined to
enter into this letter agreement (this "AGREEMENT") which addresses the terms
and conditions of your employment in the event of a Change of Control.
This Agreement will provide you with certain payments and benefits should
you incur an Involuntary Termination after a Change of Control Date.
An "Involuntary Termination" means (i) your termination of employment by
Employer during the Term without Cause or (ii) your resignation of employment
with the Employer during the Term for Good Reason. The terms "Change of Control
Date," "Term," "Cause," "Good Reason" and other initially capitalized words and
phrases used in this letter agreement shall have the meanings ascribed to them
in Appendix I attached. With respect to your specific situation, you would also
have "Good Reason" to resign from employment with Employer if any of the
following occurs after a Change of Control Date:
(A) at any time you are not the [insert basic description of
Executive's job] of the Successor Entity or the Controlling
Entity;
(B) any similar adverse change on or after the Change in Control
Date in your title, position or reporting responsibilities.
1. Term of Employment Under This Agreement. The Term of your employment
under this Agreement shall not commence unless and until a Change in Control
Date occurs and shall continue thereafter until the (SECOND) (THIRD) anniversary
of the Change in Control Date.
2. Cash Payments in the Event of Involuntary Termination During the Term.
In the event of your Involuntary Termination during the Term you will be paid
the following amounts in cash by the Employer:
(a) your Earned Compensation previously unpaid;
(b) a severance payment equal to the sum of (i) (TWO) (THREE)
times your Reference Salary and (ii) (TWO) (THREE) times your
Reference Bonus; and
(c) a Supplementary Pension Payment designed to provide you with
the present cash value of the added benefits you would have
received under the Defined Benefit Plans had you continued in
your employment for a Measuring Period of (TWO) (THREE) years;
and
(d) a Gross-Up Payment to defray your Excise Tax liability if,
following a Change in Control Date, it is determined that any
Payment(s) made to you is (are) subject to the Excise Tax.
Payments under subsections (a) and (b) will be made within five (5) days of your
Date of Termination and payment under subsection (c) will be made within
forty-five (45) days of your date of termination. All calculations necessary to
compute the Supplementary Pension Benefit Payment shall be done by the
Accounting Firm at Employer's expense. Appendix II sets forth the applicable
procedures relating to the Gross-Up Payment.
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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) (THREE) years. Employer's obligation under this Section 3 is
subject to the following: (i) that your and your eligible dependent's continued
participation is possible under the general terms and provisions of such Benefit
Plans (and under the terms of any applicable funding media) and (ii) that you
continue to pay an amount equal to your regular contribution under such plans
for such participation. You and your eligible dependents continued participation
in such plans shall also be subject to the additional conditions stated in
Appendix III.
4. Notice of Termination. Any termination of your employment by Employer
or by you during the Term shall be communicated by a Notice of Termination to
the other parties hereto.
5. No Mitigation or Offset; Employer's Opportunity to Correct. You shall
not be required to mitigate the amount of any payment provided for in this
Agreement by seeking other employment or otherwise, nor shall the amount of any
payment or benefit provided for in this Agreement be reduced by any compensation
earned by you as the result of employment by another employer or by pension
benefits paid by Employer or Employer's plans after the Date of Termination or
otherwise, except as provided in the definition of "Benefit Continuation
Period." No event shall constitute Good Reason for your resignation unless your
claim to that effect is communicated by you to Employer in writing and is not
corrected by Employer or Parent in a manner which is reasonably satisfactory to
you (including full retroactive correction with respect to any monetary matter)
within ten (10) days of the Employer's receipt of such written notice from you.
6. Legal Fees and Expenses Necessary to Enforce Agreement. The Employer
shall pay or reimburse you on an after-tax basis for all costs and expenses
(including, without limitation, court costs and reasonable legal fees and
expenses which reflect common practice with respect to the matters involved)
incurred by you as a result of any claim, action or proceeding (i) contesting,
disputing or enforcing any right, benefits or obligations under this Agreement
or which you reasonably claim to have or to be owed to you by Employer or Parent
or (ii) arising out of or challenging the validity, advisability or
enforceability of this Agreement or any provision hereof; provided, however,
that the amount of the payments and reimbursements under this Section 5 shall
not exceed ($50,000) ($100,000).
7. Employment During the Term. During the Term you shall be employed by
Employer on the terms and conditions on which you were employed immediately
prior to the Change in Control Date without any Substantial Change.
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8. Successors; Binding Agreement; Respective Responsibilities of Parent
and Employer.
(a) Assumption by Successor. Parent and Employer will each require
their respective successors (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business or
assets of either, to expressly assume and to agree to perform this Agreement for
your benefit in the same manner and to the same extent that the Parent or the
Employer, as the case may be, would be required to perform it if no such
succession had taken place; provided, however, that no such assumption shall
relieve either the Parent or the Employer of its obligations hereunder, and no
failure to expressly assume and agree to perform this Agreement shall relieve
any successor of its obligations under this Agreement by operation of law.
(b) Enforceability; Beneficiaries. This Agreement shall be binding
upon, inure to the benefit of and be enforceable by you (and your personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees) and the Parent and Employer and any
Person(s) which succeeds to substantially all of the business or assets of the
Parent or Employer, whether by means of merger, consolidation, acquisition of
all or substantially all of the assets of the Parent or Employer or otherwise,
including, without limitation, as a result of a Change in Control or by
operation of law.
(c) Joint and Several Liability. Parent shall be jointly and
severally liable with Employer for all Employer's obligations hereunder and
Employer shall be jointly and severally liable with Parent for all Parent's
obligations hereunder.
9. Notices. For the purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when hand-delivered or when mailed by United
States registered mail, return receipt requested, postage prepaid, addressed, if
to Parent or Employer, to the Boards of Directors, Tiffany & Co. and Tiffany and
Company, 727 Fifth Avenue, New York, NY 10022, Attn. Legal Department, or, if to
you, to you at the address set forth on the first page of this Agreement, or to
such other address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be effective
only upon receipt.
10. Miscellaneous.
(a) Amendments, Waivers, Etc. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing, No waiver by either party hereto any time of any breach by
the other party hereto of, or compliance with, any condition or provision of
this Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provision or conditions at the same or at any later or
subsequent time. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter here have been made by either party
which are not expressly set forth in this Agreement
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and this Agreement shall supersede all prior agreements, negotiations,
correspondence, undertakings and communications of the parties, oral or written,
with respect to the subject matter hereof.
(b) Validity. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
(c) Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
(d) No Contract of Employment. Nothing in this Agreement shall be
construed as giving you any right to be retained in the employ of Employer or
Parent nor shall it affect the terms and conditions of your employment with
Employer prior to the commencement of the Term hereof. Failing the occurrence of
a Change in Control Date your employment shall continue to be "at will," meaning
that either you or Employer may terminate your employment with or without cause,
for any reason or no reason, with or without notice.
(e) Withholding. Amounts paid to you hereunder shall be subject to
all applicable federal, state and local withholding taxes.
(f) Source of Payments. All payments provided under this Agreement,
other than payments made pursuant to a Benefit Plan which provides otherwise,
shall be paid in cash from the general funds of Employer or Parent, and no
special or separate fund shall be established, and no other segregation of
assets made, to assure payment. You will have no right, title or interest
whatsoever in or to any investments which Employer or Parent may make to aid it
in meeting its obligations hereunder. To the extent that any person acquires a
right to receive payments from Employer or Parent hereunder, such right shall be
no greater than the right of an unsecured creditor of Parent or Employer, as the
case may be.
(g) Headings. The headings contained in this Agreement are intended
solely for convenience of reference and shall not affect the rights of the
parties to this Agreement.
(h) Governing Law. The validity, interpretation, construction, and
performance of this Agreement shall be governed by the laws of the State of New
York applicable to contracts entered into and to be performed in this State.
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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.
Sincerely,
TIFFANY & CO. ("Parent")
By:___________________________________________________
Name: Michael J. Kowalski
Title: Chairman and Chief Executive Officer
TIFFANY AND COMPANY ("Employer")
By:___________________________________________________
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 III
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APPENDIX I -- DEFINITIONS
FOR PURPOSES OF THE AGREEMENT, THE FOLLOWING INITIALLY CAPITALIZED WORDS SHALL
HAVE THE MEANINGS SET FORTH BELOW:
"ACCOUNTING FIRM" shall mean PricewaterhouseCoopers LLP or, if such firm
is unable or unwilling to perform such calculations or provide such opinions as
are required under this Agreement, such other nationally recognized public
accounting firm as shall be designated by agreement of you and the Employer, or
failing such Agreement, as designated by PricewaterhouseCoopers LLP, provided,
however, that if PricewaterhouseCoopers LLP, or any firm designated by
PricewaterhouseCoopers LLP, is serving as accountant or auditor for the Person
or group effecting the Change of Control (other than for Parent or Employer),
you may appoint another nationally recognized public accounting firm as
Accounting Firm hereunder.
"AFFILIATE" shall mean any Person that controls, is controlled by or is
under common control with, any other Person, directly or indirectly.
"BENEFIT CONTINUATION PERIOD" means the period beginning on your Date of
Termination and ending following the period of years stated in Section 3,
provided that such period shall earlier terminate on the commencement date of
equivalent benefits from your new employer or your attainment of age sixty-five
(65), whichever first occurs.
"BENEFIT PLANS" mean all insured and self-insured employee welfare benefit
plans in which you were entitled to participate immediately prior to your Date
of Termination.
"CAUSE" shall mean a termination of your employment during the Term which
is the result of:
(i) your conviction or plea of nolo contendere to a felony
involving financial impropriety or a felony which would tend
to subject Employer or any of its Affiliates to public
criticism or materially interfere with your continued service
to Employer;
(ii) your willful disclosure of material trade secrets or other
material confidential information related to the business of
Employer or any of its Affiliates, which disclosure actually
results in substantive harm to such business or puts such
business at an actual competitive disadvantage;
(iii) your willful failure or refusal to perform substantially all
such proper and achievable directives issued by your superior
(other than any such failure resulting from your incapacity
due to physical or mental illness, any such actual or
anticipated failure resulting from a resignation by you for
Good Reason, or any such refusal made by you in good faith
because you believe such directives to be illegal, unethical
or immoral) after a written demand for substantial performance
is delivered to you on behalf of Employer, which demand
specifically identifies the manner in which you have not
substantially performed your duties, and which performance is
not substantially corrected by you within ten (10) days of
receipt of such demand;
(iv) your gross negligence in the performance of your duties and
responsibilities materially injurious to the Employer;
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(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
Affiliates;
(vii) your death; or
(viii) your Disability.
For purposes of the previous sentence, no act or failure to act on your part
shall be deemed "willful" unless done, or omitted to be done, by you in bad
faith toward, or without reasonable belief that your action or omission was in
the best interests of, Parent, Employer or an Affiliate of Parent or Employer.
Notwithstanding the foregoing, you shall not be deemed to have been terminated
for Cause with respect to items (i) through (vi) or item (viii) unless and until
there shall have been delivered to you a copy of a resolution duly adopted by
the affirmative vote of not less than three-fourths (3/4th) of the entire
membership of the Employer Board at a meeting called and held for such purpose
(after reasonable notice to you and an opportunity for you, together with your
counsel, to be heard before such Board), finding that, in the good faith opinion
of such Board, Cause exists as set forth in items (i), (ii), (iii), (iv), (v),
(vi) or (viii) above.
"CHANGE IN CONTROL" shall mean a change in control of Parent of a nature
that would be required to be reported in response to Item 6(e) of Schedule 14A
of Regulation 14A promulgated under the Exchange Act, whether or not Parent is
then subject to such reporting requirement; provided, however, that, anything in
this Agreement to the contrary notwithstanding, a Change in Control shall be
deemed to have occurred if:
(i) any Person, or any syndicate or group deemed to be a person
under Section 14(d)(2) of the Exchange Act, excluding Parent
or any of its Affiliates, a trustee or any fiduciary holding
securities under an employee benefit plan of Parent or any of
its Affiliates, an underwriter temporarily holding securities
pursuant to an offering of such securities or a corporation
owned, directly or indirectly by stockholders of Parent in
substantially the same proportion as their ownership of
Parent, is or becomes the "beneficial owner" (as defined in
Rule 13d-3 of the General Rules and Regulations under the
Exchange Act), directly or indirectly, of securities of Parent
representing Thirty-five percent (35%) or more of the combined
voting power of Parent's then outstanding securities entitled
to vote in the election of directors of Parent;
(ii) ten (10) days following the "Shares Acquisition Date" if any
Person has in fact become and then remains an "Acquiring
Person" under the Rights Plan;
(iii) if the Parent Board should resolve to redeem the "Rights"
under the Rights Plan in response to a proposal by any Person
to acquire, directly or indirectly, securities of Parent
representing Fifteen percent (15%) or more of the combined
voting power of Parent's then outstanding securities entitled
to vote in the election of directors of Parent;
(iv) if the Incumbent Directors cease to constitute a majority of
the Parent Board; provided, however, that no person shall be
deemed an Incumbent Director if he or she was appointed or
elected to the Parent Board after having been designated to
serve on the Parent Board by a Person who has entered into an
agreement with Parent to effect a transaction described in
clauses (i), (iii), (v), (vi), (vii), (viii) or (ix) of this
definition;
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(v) there occurs a reorganization, merger, consolidation or other
corporate transaction involving Parent, in each case with
respect to which the stockholders of Parent immediately prior
to such transaction do not, immediately after such
transaction, own more than Fifty percent (50%) of the combined
voting power of the Parent or other corporation resulting from
such transaction, as the case may be;
(vi) all or substantially all of the assets of Parent are sold,
liquidated or distributed, except to an Affiliate of Parent;
(vii) all or substantially all of the assets of Employer are sold,
liquidated or distributed, except to an Affiliate of Parent;
(viii) any Person, or any syndicate or group deemed to be a person
under Section 14(d)(2) of the Exchange Act, excluding Parent
or any of its Affiliates, a trustee or any fiduciary holding
securities under an employee benefit plan of Parent or any of
its Affiliates, an underwriter temporally holding securities
pursuant to an offering of such securities or a corporation
owned, directly or indirectly by stockholders of Parent in
substantially the same proportion as their ownership of
Parent, is or becomes the "beneficial owner" (as defined in
Rule 13d-3 of the General Rules and Regulations under the
Exchange Act), directly or indirectly, of securities of
Employer representing Fifty percent (50%) or more of the
combined voting power of Employer's then outstanding
securities entitled to vote in the election of directors of
Employer; or
(ix) there is a "change of control" or a "change in the effective
control" of Parent within the meaning of Section 280G of the
Code and the Regulations.
"CHANGE IN CONTROL DATE" shall mean the earliest of:
(i) the date on which a Change of Control occurs;
(ii) the date on which Parent executes an agreement or its
stockholders adopt a resolution, the consummation of which
would result in the occurrence of a Change of Control;
(iii) the date the Parent Board approves a transaction or series of
transactions, the consummation of which would result in a
Change in Control; and
(iv) the date Parent or Employer fails to satisfy the obligation to
have this Agreement expressly assumed by their respective
successors in accordance with Section 8(a) of the Agreement;
provided that if your employment with Employer terminates prior to any of the
dates specified in items (i) through (iv) of this definition and it is
reasonably demonstrated that your termination of employment (a) was at the
request of a third party who has taken steps reasonably calculated to effect a
Change in Control or (b) otherwise arose in connection with or in anticipation
of a Change in Control, then "Change in Control Date" shall mean the date
immediately prior to your Date of Termination.
"CODE" shall mean the Internal Revenue Code of 1986, as amended, and any
successor provisions thereto.
"COMMON STOCK" shall mean the common stock of Parent.
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"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.
The "CONTROLLING PERSON" of any Person shall mean the Person which
ultimately controls such first Person and all other Affiliates of such first
Person, directly or indirectly, through ownership of voting stock or otherwise.
Your "DATE OF TERMINATION" shall mean:
(i) if your employment is terminated for Disability, thirty (30)
days after a Notice of Termination is given (provided that you
shall not have returned to the full-time performance of your
duties during such thirty (30) day period);
(ii) if your employment is terminated by Employer in an Involuntary
Termination, five (5) days after the date the Notice of
Termination is received by you;
(iii) if your employment is terminated by Employer for Cause (other
than Disability), the later of the date specified in the
Notice of Termination or ten (10) days following the date such
Notice is received by you;
(iv) if you resign and specify Good Reason, ten (10) days after the
date your Notice of Termination is received by Employer; and
(v) if you resign and decline to specify Good Reason, the date set
forth in your Notice of Termination, which shall be no earlier
than ten (10) days after the date such notice is received by
Employer.
"DEFINED BENEFIT PLANS" shall mean, collectively, the Tiffany and Company
Pension Plan and the 1994 Tiffany and Company Supplemental Retirement Income
Plan.
"DISABILITY" shall mean your incapacity due to physical or mental illness
which causes you to be absent from the full-time performance of your duties with
Employer for six (6) consecutive months provided, however, that you shall not be
determined to be subject to a Disability for purposes of this Agreement unless
you fail to return to full-time performance of your duties with Employer within
thirty (30) days after written Notice of Termination due to Disability is given
to you.
"EARNED COMPENSATION" shall mean:
(i) any earned but unpaid base salary through your Date of
Termination at the rate in effect at the time of the Notice of
Termination;
(ii) all unused vacation time which you may have accrued as of your
Date of Termination; and
(iii) a pro rata portion of your target bonus or incentive award for
the fiscal year in which your Involuntary Termination occurs,
calculated on the assumption that all performance targets
(including your individual performance targets and sales and
earnings targets applicable to the Employer and/or to the
Successor Entity) have been or will be achieved.
"EMPLOYER" shall mean Tiffany and Company, a New York corporation, and any
successor to its business and/or assets by operation of law or otherwise.
"EMPLOYER BOARD" shall mean the Board of Directors of Employer.
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"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended,
and any successor provisions thereto.
"EXCISE TAX" shall mean the excise tax imposed by Section 4999 of the Code
and interest or penalties with respect to such excise tax.
"GOOD REASON" means, in addition to those reasons stated in the body of
the Agreement, your resignation from employment with Employer during the Term as
a result of any of the following:
(i) A meaningful and detrimental alteration in your position, your
titles, or the nature or status of your responsibilities
(including your reporting responsibilities) from those in
effect immediately before the Change in Control Date.
(ii) A reduction by Employer in your annual base salary as in
effect immediately prior to the Change in Control Date or as
the same may be increased from time to time thereafter; a
failure by the Employer to increase your salary at a rate
commensurate with that of other key executives of Employer; or
a reduction in your target bonus or incentive award (expressed
as a percentage of base salary) below the target in effect for
you prior to the Change in Control Date;
(iii) The failure by Employer to pay you a bonus or incentive award
commensurate with the bonus paid other key executives of
Employer (expressed as a percentage of your target bonus)
unless such failure is justified by clear and objective
deficiencies of the business units for which you are
responsible;
(iv) the relocation of the office of Employer where you were
employed immediately prior to the Change in Control Date to a
location which is more than 50 miles away or should Employer
require you to be based more than 50 miles away from such
office (except for required travel on the Employer's business
to an extent substantially consistent with your customary
business travel obligations in the ordinary course of business
prior to the Change in Control Date);
(v) the failure by Employer or Parent to continue in effect any
compensation plan in which you participated prior to the
Change in Control Date or made available to you after the
Change in Control Date, unless an equitable arrangement
(embodied in an ongoing substitute or alternative plan) has
been made with respect to such plan in connection with the
Change in Control, or the failure by Employer or Parent to
continue your participation therein on at least as favorable a
basis, both in terms of the amount of benefits provided and
the level of your participation relative to other
participants, as existed on the Change in Control Date;
(vi) the failure by Employer or Parent to continue to provide you
with benefits at least as favorable in the aggregate to those
enjoyed by you under the Defined Benefit Plans, the Benefit
Plan or Employer's or Parent's savings, life insurance,
disability and fringe benefit plans and programs in which you
were participating or had a right to participate immediately
prior to the Change in Control Date; or the failure by the
Company to provide you with the number of paid vacation days
to which you were entitled on the basis of years of service
with Employer in accordance with Employer's normal vacation
policy in effect immediately prior to the Change in Control
Date;
(vii) the failure of Employer and Parent to obtain an express
agreement reasonably satisfactory to you from their
successors, if any, to assume and agree to perform this
Agreement, as contemplated in Section 8(a) of the Agreement;
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(viii) any termination of your employment with Employer which is not
effected pursuant to the terms of this Agreement; or
(ix) a material breach by Employer or Parent of the provisions of
this Agreement.
"GROSS-UP PAYMENT" means a payment to you by the Employer such that after
payment by you of all Taxes (including any Excise Tax and any state or federal
income taxes) imposed upon the Gross-Up Payment, you retain an amount of the
Gross-Up Payment equal to the sum of (x) the Excise Tax imposed upon the
Payments which have triggered your right to a Gross-Up Payment and (y) the
product of any deductions disallowed you because of the inclusion of the
Gross-Up Payment in your adjusted gross income and the highest applicable
marginal rate of federal income taxation for the calendar year in which the
Gross-Up Payment is to be made.
"INCUMBENT DIRECTORS" shall mean those individuals who were members of the
Board of Directors of Tiffany & Co., a Delaware corporation, as of the date of
this Agreement and those individuals whose later appointment to such Board, or
whose later nomination for election to such Board by the stockholders of Tiffany
& Co., was approved by a vote of at least a majority of those members of such
Board who either were members of such Board as of the date of this Agreement, or
whose election or nomination for election was previously so approved.'-+*
"MEASUREMENT PERIOD" means the period of years after your Date of
Termination specified in Section 3.
"NOTICE OF TERMINATION" shall mean a written notice indicating the
specific termination provision in this Agreement relied upon and setting forth
in reasonable detail the facts and circumstances claimed to provide a basis for
termination of your employment under the provision so indicated.
"PARENT" shall mean Tiffany & Co., a Delaware corporation, and any
successor to its business and/or assets by operation of law or otherwise.
"PARENT BOARD" shall mean the Board of Directors of Parent.
"PAYMENT" means (i) any amount due or paid to you under this Agreement,
(ii) any amount that is due or paid to you under any plan, program or
arrangement of Parent or Employer (including, without limitation the Parent's
stock option plans) and (iii) any amount or benefit that is due or payable to
you under this Agreement or under any plan, program or arrangement of Parent or
Employer not otherwise covered under clause (i) or (ii) hereof which must
reasonably be taken into account under Section 280G of the Code and the
Regulation in determining the amount of "parachute payments" received by you,
including, without limitation, any amounts which must be taken into account
under the Code and Regulations as a result of (A) the acceleration of the
vesting of any option, restricted stock or other equity award granted under the
Parent's employee stock option plans or otherwise, (B) the acceleration of the
time at which any payment or benefit is receivable by you or (C) any contingent
severance or other amounts that are payable to you.
"PERSON" shall mean any individual, firm, corporation, partnership,
limited partnership, limited liability partnership, business trust, limited
liability company, unincorporated association or other entity, and shall include
any successor (by merger or otherwise) of such entity.
"REFERENCE BONUS" shall mean the greater of (i) the target annual bonus
applicable to you for the year in which your Involuntary Termination occurs and
(ii) the highest annual bonus paid to you in any of the three years ended prior
to the Change in Control Date. For this purpose, the term "bonus" shall also
refer to a cash Incentive Award under the 1998 Employee Incentive Plan.
"REFERENCE SALARY" shall mean the greater of (i) the annual rate of your
base salary from Employer in effect immediately prior to the date of your
Involuntary Termination and (ii) the highest
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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
thereto.
"RIGHTS PLAN" shall mean the Amended and Restated Rights Agreement Dated
as of September 22, 1998 by and between Parent and ChaseMellon Shareholder
Services L.L.C., as Rights Agent, as such Agreement may be further amended from
time to time.
"SUBSTANTIAL CHANGE" means any substantial change in the terms or
conditions of your employment following a Change of Control Date that is less
favorable to you than those in effect previous to the Change of Control Date.
"SUCCESSOR ENTITY" shall mean the Person who is in most immediate control,
whether through voting stock ownership of one or more subsidiaries or otherwise,
of the worldwide consolidated business of Parent's Affiliates, substantially as
such business existed immediately prior to the Change in Control Date whether or
not such Person is ultimately controlled by another Person.
"SUPPLEMENTARY PENSION PAYMENT" means the lump sum actuarial equivalent
(employing actuarial assumptions no less favorable to you than those in effect
under the Defined Benefit Plans prior to the Change in Control Date) of the
excess of the (i) aggregate benefits under the Defined Benefit Plans which you
would receive if your employment with Employer continued for the Measurement
Period over (ii) your vested accrued benefits payable under the Defined Benefit
Plans as of your Date of Termination. The following assumptions shall be used to
calculate such actuarial equivalent, that: (x) your accrued benefits under the
Defined Benefit Plans were fully vested, (y) in each of the years during the
Measurement Period your salary and bonus were equivalent to your Reference
Salary and Reference Bonus and (z) that you will begin to receive benefits under
Defined Benefit Plans at age 65, as calculated by the Accounting Firm with the
assistance of the actuaries for the Tiffany and Company Pension Plan.
"TAXES" shall mean the federal, state and local income taxes to which you
are subject at the time of determination, calculated on the basis of the highest
marginal rates then in effect, plus any additional payroll or withholding taxes
to which you are then subject.
"TERM" shall mean the term of your employment under this Agreement as
defined in Section 1.
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APPENDIX II - PROCEDURES RELATING TO GROSS UP PAYMENT
(A) Assumptions to be Used in Calculating the Gross-Up Payment. In determining
the amount of the Gross-Up Payment, you shall be deemed to:
(1) pay federal income taxes at the highest marginal rates of federal
income taxation for the calendar year in which the Gross-Up Payment is to
be made;
(2) pay applicable state and local income taxes at the highest marginal
rate of taxation for the calendar year in which the Gross-Up Payment is to
be made, net of the maximum reduction in federal income taxes which could
be obtained from deduction of state and local taxes; and
(3) have otherwise allowable deductions for federal income tax purposes at
least equal to those which could be disallowed because of the inclusion of
the Gross-Up Payment in your gross income.
(B) Calculation and Payment of Gross-Up Payment. Subject to the provisions set
out below, all determinations required under this Appendix, including whether a
Gross-Up Payment is required, the amount of the Payments constituting excess
parachute payments, and the amount of the Gross-Up Payment, shall be made by the
Accounting Firm. Any determination by the Accounting Firm shall be binding upon
you and the Employer. The Accounting Firm shall be instructed by the Employer to
provide detailed supporting calculations both to you and the Employer within
fifteen days of the Change of Control Date, your Date of Termination or any
other date reasonably requested by you or the Employer on which a determination
under this Appendix is necessary or advisable. The Employer shall pay to you the
initial amount of the Gross-Up Payment within five days of the receipt by you
and the Employer of the Accounting Firm's determination. If the Accounting Firm
determines that no Excise Tax is payable by you, the Employer shall cause the
Accounting Firm to provide you with an opinion that the Accounting Firm has
substantial authority under the Code and Regulations that you are not required
to report an Excise Tax on your federal income tax return. If the initial
Gross-Up Payment is insufficient to cover the amount of the Excise Tax that is
ultimately determined to be owing by you with respect to any Payment
(hereinafter an "UNDERPAYMENT"), the Employer, after exhausting its remedies
under (C) below, shall promptly pay to you an additional Gross-Up Payment in
respect of the Underpayment.
(C) Procedures Regarding Claims In Respect of Underpayments. If a claim is made
upon you by the Internal Revenue Service, that would, if successful, require the
Employer to make a Gross-Up Payment to you, you must notify the Employer as soon
as practicable after you know of the claim. Such notice must state the nature of
the claim and the date that payment is demanded. As a condition to your right to
a Gross-Up Payment in respect of such claim, you shall not pay such claim until
the expiration of a thirty (30) day period following the date on which you
notify the Employer of such claim, or such shorter period ending on the date the
Taxes in respect to such claim are due (the "NOTICE PERIOD"). If the Employer
notifies you in writing prior to the expiration of the Notice Period that it
desires to contest the claim, you shall:
(1) give the Employer any information reasonably requested by the Employer
relating to the claim;
(2) take such action in connection with the claim as the Employer may
reasonably request, including, without limitation, accepting legal
representation with respect to such claim by an attorney reasonably
selected by the Employer and reasonably acceptable to you;
(3) cooperate with the Employer in good faith in contesting the claim; and
(4) permit the Employer to participate in any proceedings relating to the
claim.
You shall permit the Employer to control all proceedings related to the claim
and, at its option, permit the Employer to pursue or forego any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim.
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If requested to do so by the Employer, you agree either to pay the tax claimed
and sue for a refund or contest the claim in any permissible manner and to
prosecute such contest to a determination before any administrative tribunal, in
a court of initial jurisdiction and in one or more appellate courts as the
Employer shall determine; provided, however, that, if the Employer directs you
pay such claim and pursue a refund, the Employer shall advance the amount of
such payment to you on an after-tax and interest-free basis (an "ADVANCE").
The Employer's control of the contest related to the claim shall be limited to
the issues related to the Gross-Up Payment and you shall be entitled to settle
or contest, as the case may be, any other issues raised by the Internal Revenue
Service or other taxing authority. If the Employer does not notify you in
writing prior to the end of the Notice Period of its desire to contest the
claim, the Employer shall pay to you an additional Gross-Up Payment in respect
of the excess parachute payments that are the subject of the claim, and you
agree to pay the amount of the Excise Tax that is the subject of the claim to
the applicable taxing authority in accordance with applicable law.
(D) Repayment of Advance. If, after receipt by you of an Advance, you become
entitled to a refund with respect to the claim to which such Advance relates,
you shall pay the Employer the amount of the refund (together with any interest
paid or credited thereon after Taxes applicable thereto). If, after receipt by
you of any Advance, a third-party determination is made that you are not
entitled to any refund with respect to the claim and the Employer does not
promptly notify you of its intent to contest the denial of refund, then the
amount thereof shall offset the amount of the additional Gross-Up Payment then
owing to you with respect to such claim.
(E) Indemnity and Costs Relating to Gross-Up Payments. The Employer shall
indemnify you and hold you harmless, on an after-tax basis, from any costs,
expenses, penalties, fines, interest or other liabilities ("Losses") incurred by
you with respect to the exercise by the Employer of any of its rights under this
Appendix II, including, without limitation, any Losses related to the Employer's
decision to contest a claim or any imputed income to you resulting from any
Advance or action taken on your behalf by the Employer hereunder. The Employer
shall pay all legal fees and expenses incurred by you under this Appendix II,
and shall promptly reimburse you for the reasonable expenses incurred by you in
connection with any actions taken by the Employer or required to be taken by you
hereunder. The Employer shall also pay all of the fees and expenses of the
Accounting firm, including, without limitation, the fees and expenses related to
the determination referred to in (B) above.
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APPENDIX III - BENEFIT CONTINUATION
(A) In the event that your participation in any Benefit Plan is barred, Employer
shall, at its sole cost and expense, arrange to have issued for the benefit of
you and your eligible dependents individual policies of insurance providing
benefits substantially similar (on an after-tax basis) to those which you
otherwise would have been entitled to receive under such Benefit Plan pursuant
to Section 3 for the Benefit Continuation Period.
(B) In lieu of the benefits provided in (A) above, if, in the reasonable opinion
of Employer, such insurance is not available at a reasonable cost to the
Employer, the Employer shall directly provide you and your eligible dependents
with equivalent benefits (on an after-tax basis).
(C) In either of the circumstances described in (A) or (B), you shall not be
required to pay any premiums or other charges in an amount greater than that
which you would have paid in order participate in such Benefit Plan had your
Involuntary Termination not occurred.
(D) If at the end of the Benefit Continuation Period you have not reached age
sixty-five and you have not previously received or are not then receiving
equivalent benefits from a new employer, Employer shall arrange to enable you to
convert your and your eligible dependents' coverage under the Benefit Plans to
individual policies or programs upon the same terms as employees of the Employer
may apply for such conversions. Employer shall bear the cost of making such
conversions available to you; you shall bear the cost of coverage under such
converted policies or programs.
(E) For the purposes of Section 3 and this Appendix, a dependent will be deemed
"eligible" if, at the time in question, you would, if an employee of Employer,
be entitled to cover such dependent under the plan in question.
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