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:
[ ] 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-12
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)(1) and 0-11.
(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:
------------------------------------------------------------------------
April 8, 2003
TIFFANY & CO.
727 Fifth Avenue
New York, N.Y. 10022
Michael J. Kowalski
Chairman of the Board and Chief Executive Officer
James E. Quinn
President
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Tiffany & Co. on Thursday, May 15, 2003, 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 as soon as possible by completing and
returning the enclosed proxy card, by calling the telephone number listed on the
card, or by accessing the Internet site to vote electronically.
Enclosed are Tiffany & Co.'s 2002 Annual Report and Proxy Statement. We
hope you find it informative reading.
Thank you for your interest in Tiffany & Co.
Sincerely,
/s/ Michael J. Kowalski
Michael J. Kowalski
/s/ James E. Quinn
James E. Quinn
2003 Annual Meeting of Stockholders
Proxy Statement
[graphic]
Tiffany & Co.
PROXY STATEMENT FOR THE
2003 ANNUAL MEETING OF STOCKHOLDERS
TABLE OF CONTENTS
Attendance and Voting Matters............................................................... 1
Introduction....................................................................... 1
Matters To Be Voted On at the 2003 Annual Meeting.................................. 1
How To Vote Your Shares............................................................ 1
The Number of Votes That You Have.................................................. 2
What a Quorum Is................................................................... 3
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...................................... 7
Compliance of Directors, Executive Officers and Greater-Than-Ten-
Percent Stockholders with Section 16(a) Beneficial Ownership
Reporting Requirements.................................................... 8
Fees Paid to the Independent Accountants.................................................... 9
Tiffany & Co.'s Board of Directors and Executive Officers................................... 9
The Board of Directors, In General................................................. 9
Committees of the Board of Directors............................................... 10
Compensation of Directors.......................................................... 13
Compensation of the CEO and Other Executive Officers............................... 15
Compensation Committee Report on Executive Compensation............................ 23
Performance of Tiffany & Co. Stock.......................................................... 26
Discussion of Proposals Presented by the Board.............................................. 27
Item I - Election of the Board of Directors...................................... 27
Item II - Amendment of Employee Incentive Plan.................................... 30
Item III - Appointment of Independent Accountants.................................. 38
Other Matters .............................................................................. 40
Stockholder Proposals, In General.................................................. 40
Stockholder Proposals for Inclusion in the Proxy Statement
for the 2004 Annual Meeting............................................... 40
Reminder to Vote................................................................... 40
Appendix ................................................................................... 41
ATTENDANCE AND VOTING MATTERS
INTRODUCTION
The Annual Meeting of the stockholders of Tiffany & Co. will be held on
Thursday, May 15, 2003, 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 2003 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 25, 2003, 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 2002 Annual Report to
Stockholders. This Report contains financial and other information about our
business during our last fiscal year (February 1, 2002 to January 31, 2003).
MATTERS TO BE VOTED ON AT THE 2003 ANNUAL MEETING
There are three matters scheduled to be voted on at this year's Annual
Meeting:
- the election of the Board of Directors,
- 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 4,000,000, and
- the approval of independent accountants to audit our fiscal 2003
financial statements.
HOW TO VOTE YOUR SHARES
You can vote your shares at the Annual Meeting by proxy or in person.
You can vote by proxy 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 (1-800-435-6710)
and follow the pre-recorded instructions, or
1
- use the Internet to vote by pointing your browser to
http://www.eproxy.com/tif; have your proxy card in hand as you will
be prompted to enter your control number and to create and submit an
electronic vote.
If you do one of the above, you will have designated three officers of
Tiffany & Co. to act as your proxies at the 2003 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, the telephone or the
Internet with respect to each of the proposals presented in this Proxy
Statement.
Alternatively, you can vote your shares in person by attending the Annual
Meeting. You will be given a ballot at the meeting to complete and return.
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 best judgment.
If you decide to vote by proxy (including by mail, telephone or Internet),
you can revoke - that is, change or cancel - your vote at any time before your
proxy casts his 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, call in different instructions, or access the Internet
voting site.
- 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.
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.
2
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.
The number of shares outstanding at the close of business on March 25,
2003, the record date, was 144,832,574. Therefore, 72,416,288 shares must be
present at our 2003 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 vote via telephone or Internet, so indicate by telephone or
3
electronically. A broker non-vote is the same as a withheld vote: neither will
have any effect on the outcome of the election of directors.
To approve the amendment to our 1998 Employee Incentive Plan two things
must happen. First, a majority of shares outstanding as of March 25, 2003, 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 72,416,288 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 4,000,000.
The proposal to ratify the approval of PricewaterhouseCoopers LLP as
independent accountants for fiscal 2003 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, the telephone or by Internet, 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 do not give any specific instructions as to how your shares are to
be voted when you sign a proxy card or vote by telephone or by Internet, 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 1998 Employee Incentive Plan
increasing the number of shares of common stock that may be
delivered to participating employees and their beneficiaries by
4,000,000 and
- FOR approval of the appointment of PricewaterhouseCoopers LLP as
independent accountants to examine our fiscal 2003 financial
statements.
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.
4
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 $7,000 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
25, 2003. 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.
Name and Address Amount and Percent
of Nature of Beneficial of
Beneficial Owner Ownership (1) Class
---------------- ------------- -----
Bank of America Corporation 20,511,157 (2) 14.13
100 North Tryon Street
Charlotte, NC 28255
Prudential Financial, Inc.
751 Broad Street
Newark, NJ 07102-3777 13,998,501 (3) 9.60
-------------------------
(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
(2) Bank of America Corporation, 100 North Tryon Street, Charlotte, NC 28255
("BOA"), reported to the SEC on its form Schedule 13G that it beneficially
owned 20,511,157 shares of the Company's common stock as of December 31,
2002 and that it had sole voting power over zero shares. BOA filed as a
parent holding company or control person with respect to several other
owners of the Company's common stock, including Marsico Capital Management,
LLC, which reported sole voting power with respect to 18,710,214 shares of
the Company's common stock and sole dispositive power over 20,037,489 such
shares.
(3) Prudential Financial, Inc. ("Prudential") reported to the SEC on its form
Schedule 13G that it may be deemed the beneficial holder of securities
beneficially owned by Registered Investment Advisers and Broker Dealers of
which it is the direct or indirect parent company. Prudential stated that
it reported the combined holdings of such entities for administrative
convenience and, as of December 31, 2002, may have direct or indirect
voting and/or investment discretion over 13,979,901 shares of Tiffany & Co.
stock held for its own benefit or for the benefit of its clients by its
separate accounts, externally managed accounts, registered investment
companies, subsidiaries and/or other affiliates. In addition, Prudential
stated that through its beneficial ownership of the Prudential Insurance
Company of America ("PICOA") it may be deemed to hold 18,600 shares of
Tiffany & Co. stock for the benefit of PICOA's general account.
6
OWNERSHIP BY DIRECTORS AND EXECUTIVE OFFICERS
The following table shows the number of shares of Tiffany & Co. common
stock beneficially owned as of March 25, 2003 by those persons who were, as of
the end of the last fiscal year (January 31, 2003), directors, the Chief
Executive Officer (the "CEO"), and the four next most highly compensated
executive officers of Tiffany & Co.
Amount and Percent
Nature of Beneficial of
Name Ownership Class (1)
---- --------- ---------
DIRECTORS:
William R. Chaney (Executive Officer) 1,190,000 (2) *
Rose Marie Bravo 52,466 (3) *
Samuel L. Hayes III 216,213 (4) *
Abby F. Kohnstamm 9,500 (5) *
Michael J. Kowalski (CEO) 1,432,000 (6) 1.0
Charles K. Marquis 212,082 (7) *
James E. Quinn (Executive Officer) 766,131 (8) *
William A. Shutzer 273,812 (9) *
EXECUTIVE OFFICERS:
Beth O. Canavan 179,781 (10) *
James N. Fernandez 442,131 (11) *
ALL EXECUTIVE OFFICERS AND
DIRECTORS AS A GROUP (16 PERSONS): 5,490,360 (12) 3.8
-------------------------
(1) An asterisk (*) is used to indicate less than 1% of the class outstanding.
(2) Includes 240,000 shares issuable upon the exercise of "Vested Stock Options"
which are stock options that either are exercisable as of March 25, 2003 or will
become exercisable within 60 days of that date, and 150,000 shares held by Mr.
Chaney's wife.
(3) Includes 48,466 shares issuable upon the exercise of Vested Stock Options.
(4) Includes 54,000 shares held in trust for the benefit of children of Prof.
Hayes by Barbara L. Hayes, his wife, as trustee, and 2,079 shares held by Prof.
Hayes's wife. Also includes 141,534 shares issuable upon the exercise of Vested
Stock Options.
(5) Includes 7,500 shares issuable upon the exercise of Vested Stock Options.
(6) Includes 1,280,000 shares issuable upon the exercise of Vested Stock
Options.
(7) Includes 130,494 shares issuable upon the exercise of Vested Stock Options.
(8) Includes 720,000 shares issuable upon the exercise of Vested Stock Options;
131 shares credited to Mr. Quinn's account under the Tiffany & Co. Employee
Profit Sharing and Retirement Savings Plan; 33,000 shares held by Mr. Quinn's
wife; and 4,000 shares owned by Mr. Quinn's children under the UGMA.
7
(9) Includes 64,126 shares issuable upon the exercise of Vested Stock Options
and 5,200 shares held by or for Mr. Shutzer's minor children, 400 shares held by
Mr. Shutzer's son and 114,000 shares held by KJC Ltd. of which Mr. Shutzer is
the sole general partner and disclaims beneficial ownership of Tiffany & Co.
stock held by KJC Ltd.
(10) Includes 179,250 shares issuable upon the exercise of Vested Stock Options
and 531 shares credited to Mrs. Canavan's account under the Tiffany & Co.
Employee Profit Sharing and Retirement Savings Plan.
(11) Includes 430,000 shares issuable upon the exercise of Vested Stock Options
and 131 shares credited to Mr. Fernandez's account under the Tiffany & Co.
Employee Profit Sharing and Retirement Savings Plan.
(12) Includes 3,944,620 shares issuable upon the exercise of Vested Stock
Options and 1,607 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, 2002, to January 31, 2003), all filing requirements under Section
16(a) applicable to our directors, executive officers and
greater-than-ten-percent stockholders were satisfied except as follows: NONE.
8
FEES PAID TO THE INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP ("PwC") serves as the Company's independent
accountants.
The following table presents fees for professional audit services
rendered by PwC for the audit of the Company's consolidated financial statements
as of and for the years ended January 31, 2002 and 2003, and for its limited
reviews of the Company's unaudited condensed consolidated interim financial
statements. This table also reflects fees billed for other services rendered by
PwC.
January 31, January 31,
2002 2003
----------- -----------
Audit Fees $ 721,000 $ 883,000
Audit-related Fees (1) 32,000 224,400
---------- ----------
Audit and Audit-related Fees 753,000 1,107,400
Tax Fees (2) 266,000 643,000
All Other Fees (3) 610,000 --
---------- ----------
TOTAL FEES $1,629,000 $1,750,400
(1) Audit-related fees consist principally of fees for audits of financial
statements of certain employee benefit plans and due diligence services.
(2) Tax fees consist of fees for tax consultation and tax compliance services.
(3) All other fees consist of fees for services for non-recurring and certain
benefits related services.
***
In making its recommendation to ratify the appointment of PwC as the
Company's independent accountants for the fiscal year ending January 31, 2004,
the Audit Committee has considered whether PwC's provision of services other
than audit services is compatible with maintaining independence of our outside
accountants.
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 &
9
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.
The Board of Directors met six times during fiscal 2002. With respect to
the eight nominees for director, their attendance rate at Board and committee
meetings averaged 93.69% in fiscal 2002.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has an Audit Committee, a Compensation Committee,
a Stock Option Subcommittee, a Nominating/Corporate Governance Committee and a
Dividend Committee.
Audit Committee
The primary function of the Audit Committee is to assist the Board of
Directors in fulfilling its oversight responsibilities with respect to the
Company's financial matters. The Board of Directors has adopted and approved a
charter for the Audit Committee. The charter was last amended on January 16,
2003. Under its charter, which is attached as Appendix 1, the Audit Committee's
responsibilities include:
- retaining and terminating the Company's independent accountants,
reviewing the quality-control procedures and independence of such
firm and evaluating their proposed audit scope, performance and fee
arrangements,
- approving in advance all audit and non-audit services to be rendered
by the independent accountants,
- reviewing the adequacy of our system of internal financial controls,
- establishing procedures for complaints regarding accounting,
internal accounting controls or auditing matters, and
- 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 principles.
Prof. Hayes, Mr. Marquis and Mr. Shutzer currently serve as members of
the Audit Committee. During fiscal 2002, there were seven 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 303.01 of the
New York Stock Exchange's listing standards as now in effect. The Board of
Directors has not made a determination as to "independence" under new standards
proposed by the New York Stock Exchange for adoption.
10
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, 2003 and 2002, and the related consolidated statements of earnings,
stockholders' equity and comprehensive earnings, and cash flows for each of the
three years in the period ended January 31, 2003. These statements (the "Audited
Financial Statements") are the subject of a report by the Company's independent
accountants, PricewaterhouseCoopers LLP (" PwC"). 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.
The Audit Committee also reviewed and discussed with PwC the matters
required to be discussed by Statement of Auditing Standards No. 61
(Communication with Audit Committees).
The Audit Committee received from PwC the written disclosure and letter
required by Independence Standards Board Standard No. 1 (Independence Discussion
with Audit Committees) and has discussed the independence of PwC with that firm.
The Audit Committee has considered whether the provision by PwC of the tax
consultation, tax compliance and other non-audit-related services disclosed
above under "FEES PAID TO INDEPENDENT ACCOUNTANTS - Tax Fees and All Other Fees"
is compatible with maintaining PwC's independence and has concluded that
providing such services is compatible with that firm's independence from the
Company and its management.
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
which is incorporated by reference in the Company's Annual Report on Form 10-K
for the fiscal year ended January 31, 2003 for filing with the Securities and
Exchange Commission.
Signed:
Samuel L. Hayes III
Charles K. Marquis
William A. Shutzer, Chair
Members of the Audit Committee
Compensation 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.
Prof. Hayes (Chair), Ms. Bravo, Ms. Kohnstamm, Mr. Marquis and Mr.
Shutzer currently serve as members of the Compensation Committee. In fiscal
2002, there were two meetings of this committee.
11
Stock Option Subcommittee
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 (Chair), Ms. Bravo, Ms. Kohnstamm and Mr. Marquis currently
serve as members of the Stock Option Subcommittee. The Stock Option Subcommittee
met seven times in fiscal 2002.
Nominating/Corporate Governance Committee
The role of the Nominating/Corporate Governance 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.
Mr. Marquis (Chair), Ms. Bravo, Prof. Hayes, Ms. Kohnstamm and Mr.
Shutzer currently serve as members of the Nominating/Corporate Governance
Committee. This committee had one meeting in fiscal 2002.
Dividend Committee
The role of the Dividend Committee is to declare regular quarterly
dividends in accordance with the dividend policy established by the full Board
of Directors. Messrs. Chaney, Kowalski and Quinn currently serve as members of
the Dividend Committee. This committee did not meet in fiscal 2002 although it
has acted by unanimous written consent.
12
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 $49,000,
- an additional annual retainer of $3,500 if the director is also a
chairperson of the Compensation, Audit or Nominating/Corporate
Governance 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 7,500 shares of Tiffany & Co. common stock upon their
election or appointment to the Board and in January of each year an option grant
is typically made. In January 2003, each non-employee director was granted an
option to purchase 7,500 shares.
13
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 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 including periods served as an employee director.
However, this particular benefit will not apply to any new director appointed or
elected after January 1, 1999; accordingly, Ms. Kohnstamm does not participate
in this benefit plan.
Messrs. Kowalski and Quinn are employees of Tiffany. They therefore
receive no separate compensation for their service as directors. Mr. Chaney
retired as an employee of the Company effective at the close of business on
January 31, 2003. He will be compensated as a non-employee director as of
February 1, 2003.
14
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 2002,
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
Long Term
Annual Compensation Compensation
------------------------ ---------------------
Name and Securities Underlying All Other
Principal Position (1) Year Salary Bonus(2) Options/SARs Compensation
---------------- ------ ---------- ----------- --------------------- -------------
Michael J. Kowalski 2002 $841,082 $451,000 195,000 shares $11,390 (3)
President and CEO 2001 $814,730 $219,000 150,000 shares $141,076 (4)
2000 $765,247 $1,125,000 100,000 shares $157,336 (5)
William R. Chaney 2002 $498,658 $0 50,000 shares $2,841 (6)
Chairman of the 2001 $498,658 $0 50,000 shares $144,676 (7)
Board 2000 $498,658 $250,000 30,000 shares $169,716 (8)
James E. Quinn 2002 $645,090 $230,000 140,000 shares $11,953 (9)
Vice Chairman 2001 $621,788 $112,000 110,000 shares $105,836 (10)
2000 $581,128 $575,000 75,000 shares $119,486 (11)
Beth Owen Canavan 2002 $405,006 $115,000 85,000 shares $9,761 (12)
Executive Vice President 2001 $392,022 $55,000 75,000 shares $94,756 (13)
2000 $354,814 $280,000 50,000 shares $66,696 (14)
James N. Fernandez 2002 $544,994 $174,000 118,000 shares $12,214 (15)
Executive Vice President 2001 $526,659 $84,000 100,000 shares $93,508 (16)
and Chief Financial Officer 2000 $490,219 $436,500 65,000 shares $65,767 (17)
(1) Titles are as of the end of fiscal year 2002 (January 31, 2003) and do
not reflect changes that became effective as of the close of business on
that date. Those changes were, the resignation of Mr. Chaney as Chairman
of the Board, the appointment of Mr. Kowalski to that position and the
appointment of Mr. Quinn to the position of President.
(2) Bonus amounts are earned in the fiscal year ended January 31, paid in
the following March, and in 2000 and 2002 included cash incentive awards
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.
15
(3) Includes $0 attributable to split-dollar life insurance premiums, $5,890
attributable to premiums for executive long-term disability insurance
and $5,500 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."
(4) Includes $133,600 attributable to split-dollar life insurance premiums,
$2,376 attributable to premiums for executive long-term disability
insurance and $5,100 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) Includes $149,860 attributable to split-dollar life insurance premiums,
$2,376 attributable to premiums for executive long-term disability
insurance and $5,100 for the Company's matching contributions to the
401(k) feature of the Company's Employee Profit Sharing and Retirement
Savings Plan.
(6) Includes $0 attributable to split-dollar life insurance premiums and
$2,841 attributable to premiums for executive long-term disability
insurance. Mr. Chaney's deferred compensation arrangement is discussed
below under "Other Compensation Arrangements."
(7) Includes $142,300 attributable to split-dollar life insurance premiums
and $2,376 attributable to premiums for executive long-term disability
insurance. Mr. Chaney's deferred compensation arrangement is discussed
below under "Other Compensation Arrangements."
(8) Includes $167,340 attributable to split-dollar life insurance premiums
and $2,376 attributable to premiums for executive long-term disability
insurance.
(9) Includes $0 attributable to split-dollar life insurance premiums, $6,453
attributable to premiums for executive long-term disability insurance
and $5,500 for the Company's matching contributions to the 401(k)
feature of the Company's Employee Profit Sharing and Retirement Savings
Plan.
(10) Includes $98,360 attributable to split-dollar life insurance premiums,
$2,376 attributable to premiums for executive long-term disability
insurance and $5,100 for the Company's matching contributions to the
401(k) feature of the Company's Employee Profit Sharing and Retirement
Savings Plan.
(11) Includes $112,010 attributable to split-dollar life insurance premiums,
$2,376 attributable to premiums for executive long-term disability
insurance and $5,100 for the Company's matching contributions to the
401(k) feature of the Company's Employee Profit Sharing and Retirement
Savings Plan.
(12) Includes $0 attributable to split-dollar life insurance premiums, $4,261
attributable to premiums for executive long-term disability insurance
and $5,500 for the Company's matching contributions to the 401(k)
feature of the Company's Employee Profit Sharing and Retirement Savings
Plan.
(13) Includes $87,280 attributable to split-dollar life insurance premiums,
$2,376 attributable to premiums for executive long-term disability
insurance and $5,100 for the Company's matching contributions to the
401(k) feature of the Company's Employee Profit Sharing and Retirement
Savings Plan.
16
(14) Includes $59,220 attributable to split-dollar life insurance premiums,
$2,376 attributable to premiums for executive long-term disability
insurance and $5,100 for the Company's matching contributions to the
401(k) feature of the Company's Employee Profit Sharing and Retirement
Savings Plan.
(15) Includes $0 attributable to split-dollar life insurance premiums, $6,714
attributable to premiums for executive long-term disability insurance
and $5,500 for the Company's matching contributions to the 401(k)
feature of the Company's Employee Profit Sharing and Retirement Savings
Plan.
(16) Includes $86,032 attributable to split-dollar life insurance premiums,
$2,376 attributable to premiums for executive long-term disability
insurance and $5,100 for the Company's matching contributions to the
401(k) feature of the Company's Employee Profit Sharing and Retirement
Savings Plan.
(17) Includes $58,291 attributable to split-dollar life insurance premiums,
$2,376 attributable to premiums for executive long-term disability
insurance and $5,100 for the Company's matching contributions to the
401(k) feature of the Company's Employee Profit Sharing and Retirement
Savings Plan.
OPTION GRANTS IN FISCAL YEAR 2002
Percent of
Total Options
Granted to all
Employees in Per
Fiscal Share
Options Year Exercise Expiration Grant Date
Name Granted (1) 2002 Price (2) Date (3) Present Value (4)
-------- ------------ -------------- --------- ---------- -----------------
Michael J. Kowalski 195,000 shares 8.9 $25.84 1/16/2013 $1,802,931
William R. Chaney 50,000 shares 2.3 $25.84 1/16/2013 $462,290
James E. Quinn 140,000 shares 6.4 $25.84 1/16/2013 $1,294,412
Beth O. Canavan 85,000 shares 3.9 $25.84 1/16/2013 $785,893
James N. Fernandez 118,000 shares 5.4 $25.84 1/16/2013 $1,091,004
-------------------------
(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", death or
disability. The term "change in control" is discussed below.
(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) Options expire no later than the 10th anniversary of the grant date, subject
to earlier expiration in the event of voluntary or involuntary pre-retirement
termination of employment (three months after termination), death, disability or
retirement (two years after the event).
(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
17
volatility rate (37.5%), expected term (5 years), interest rate (2.9%) and
dividend yield (0.6%). 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 $25.84 share exercise price when the options are exercised.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 2002
AND FISCAL YEAR-END OPTION VALUES
Number of Value (2) 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
-------------- ----------- ---------- ------------------------- -------------------------
Michael J. Kowalski 48,000 $1,529,464 1,280,000 / 395,000 $14,339,888/ $0
William R. Chaney 0 0 240,000 / 110,000 $ 2,255,518/ $0
James E. Quinn 60,000 $2,119,037 720,000 / 285,000 $ 6,555,688/ $0
Beth O. Canavan 9,000 $ 239,409 179,250 / 178,750 $ 1,045,233/ $0
James N. Fernandez 0 0 430,000 / 243,000 $ 3,255,000/ $0
(1) Options are deemed "exercisable" in this table if they are exercisable
as of January 31, 2003, or will become exercisable within 60 days of
that date.
(2) The market price per share on which the option value was calculated was
$23.085
EQUITY COMPENSATION PLAN INFORMATION
(as of fiscal year end)
Plan category Number of securities to be Weighted average exercise Number of securities
issued upon exercise of price of outstanding remaining available for
outstanding options, options, warrants and future issuance under
warrants and rights rights equity compensation plans
(excluding securities
reflected in column (a))
(a) (b) (c)
----------------------------- -------------------------- ------------------------- -------------------------
Equity compensation plans 13,205,139 $22.3817 1,333,502 (1)
approved by security holders
Equity compensation plans not 0 0 0
approved by security holders
Total 13,205,139 $22.3817 1,333,502
(1) Shares indicated are the aggregate of those issuable under the Company's
1998 Employee Incentive Plan (the "Employee Plan") and the Company's 1998
Directors Option Plan (the "Directors Plan"). Both plans provide for the
issuance of options and stock awards. To date it has been the Company's practice
to issue only options. However, under the Employee Plan up to 1,000,000 shares
could be issued as stock awards (only 591,002 shares remaining for issuance),
and under the Directors Plan all shares of the 742,500 remaining for issuance
could be issued as stock awards.
18
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As indicated above, the following directors served as members of the
Compensation Committee during the 2002 fiscal year: Ms. Bravo, Professor Hayes,
Ms. Kohnstamm, Mr. Marquis and Mr. Shutzer. 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.
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 and
mandatory vesting.
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. Except in the
event of a change of control (see below), benefits under the Supplemental
Retirement Income Plan do not vest until a participant attains age 60 while
employed by Tiffany and until he or she has provided 15 years of service.
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:
Combined Benefit as a
Percentage of
Years of Service Average Final Compensation
---------------- --------------------------
less than 10 (1)
10-14 20%
15-19 30%
20-24 40%
25-29 50%
30 or more 60%
19
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.
-----------------
(1) A participant retiring with less than 10 years of service would not, except
in certain instances where a change of control has occurred, receive any benefit
under the Supplemental Retirement Income Plan, but would receive a benefit under
the Pension Plan. However, the formula for benefits under the Pension Plan is a
function of years of service and covered compensation (subject to Internal
Revenue Code limitations) and not any specific percentage of the participant's
average final compensation.
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.
Annual Total Benefit for Years of Service
-----------------------------------------------------------------------------------------
Average Final
Compensation 15 20 25 30 35
------------- --------- -------- --------- --------- --------
$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
$1,200,000 $360,000 $480,000 $600,000 $720,000 $720,000
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, 2003), 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:
Name Years of Service Average Final Compensation
--------- ---------------- --------------------------
Michael J. Kowalski 24 $1,252,891
James E. Quinn 16 $854,583
Beth O. Canavan 15 $465,347
James N. Fernandez 24 $688,501
20
OTHER COMPENSATION ARRANGEMENTS
Mr. Chaney's Retirement Benefits. 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.
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 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. Mr. Chaney is also entitled to
participate in the annual retirement benefit for non-employee directors.
Retention Agreements. The Company and Tiffany have entered into
retention agreements with each of the executive officers. These agreements would
provide a covered executive with compensation if he or she 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: three years in the case of Mr. Kowalski and Mr. Quinn and
two years for all other executive officers. If the executive incurs an
involuntary termination during his or her term, compensation, keyed to the
length of his or her 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.
21
Other Benefits on a Change in Control. 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.
Split Dollar Agreements. Tiffany maintains split-dollar life insurance
agreements with its executive officers, including Mr. Kowalski, Mr. Chaney, Mr.
Quinn, Mrs. Canavan and Mr. Fernandez. Under those agreements, Tiffany pays the
premiums for executive life insurance and will be repaid for those premium
payments from the death benefit. In fiscal 2002 no premium payments were made in
respect of the any split-dollar life insurance policy out of concern that such
payments might be prohibited as loans under Section 402(a) of the Sarbanes-Oxley
Act of 2002.
Unless and 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.
Vesting of Options and Retirement Benefits on a Change in Control. 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.
Definition of a Change in Control. 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
22
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.
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 achieve the Company's
strategic and financial goals, retain and attract competent personnel
and link the interests of management with those of the stockholders.
(i) Incentive Awards and other 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 a target bonus for the
coming fiscal year as a percentage of the base salary of each executive
officer. For fiscal 2002 and 2003, 75% was the target for Mr. Kowalski;
the target ranged from 35% to 50% for the other executive officers. Mr.
Chaney was not assigned a target.
Under the terms of the 1998 Employee Incentive Plan, bonuses
that are calculated solely on the basis of an increase or decrease in
the Company's consolidated net earnings in accordance with a formula
are "Incentive Awards." Incentive Awards are "performance-based
compensation" under Section 162(m) of the Internal Revenue Code. See
below. The bonus arrangements for Mrs. Canavan and Messrs. Kowalski,
Quinn and Fernandez for both fiscal 2002 and 2003 were structured as
Incentive Awards. The bonus arrangements for the other executive
officers were not.
The Incentive Award calculation for fiscal 2002 was performed
by the Committee in January of 2003 on the basis of estimated net
earnings. As permitted by the 1998 Employee Incentive Plan, the
Committee applied an
23
adjustment to estimated net earnings to calculate reduced Incentive
Awards; this reduction was deemed necessary to eliminate the positive
effect on earnings arising from the recognition of certain tax benefits
and the negative effect caused by the acquisition of Little Switzerland
Inc. Both these events were not anticipated when the Incentive Award
formula was set. As a consequence of these adjustments, Incentive
Awards were reduced by approximately 29% from target. Bonuses to the
other executive officers were reduced by the same percentage. Actual
bonus payments were recalculated in March on the basis of actual
reported earnings, as so adjusted.
In awarding bonuses to executive officers that were not
Incentive Awards, the Committee was largely influenced by the Incentive
Award calculation.
(ii) Salaries and Benefits
The Committee believes that the Company's compensation and
benefits program for its executives is generally 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 referred to under "PERFORMANCE OF TIFFANY & CO.
STOCK" below (to the extent data was available), a survey of 11
companies in the specialty retail industry with revenues in the $2
billion range, a survey of 51 companies in the retail/wholesale
industry, a general industry sample of 119 companies with revenues in
the $1 billion to $3 billion range and a general industry sample of 657
companies. 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.
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
24
performance. The size of an option grant in any one year is not
necessarily indicative of the size of option grants to be awarded in
future years.
(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. 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 subject to deduction limitations.
Signed:
Rose Marie Bravo
Samuel L. Hayes III
Abby F. Kohnstamm
Charles K. Marquis
William A. Shutzer
Members of the Compensation Committee
25
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 for the same five-year period on (i) the Standard & Poor's 500 Stock
Index, and (ii) a peer group index. 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 1999 and
2000, 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 THE PEER GROUP INDEX
(PERFORMANCE GRAPH)
1/31/1998 1/31/1999 1/31/2000 1/31/2001 1/31/2002 1/31/2003
--------- --------- --------- --------- --------- ---------
Tiffany & Co. $ 100.00 $ 149.93 $ 386.73 $ 390.56 $ 374.18 $ 245.00
Standard & Poors 500 $ 100.00 $ 130.68 $ 142.40 $ 139.50 $ 115.42 $ 87.38
Peer Group $ 100.00 $ 150.68 $ 141.79 $ 141.10 $ 160.63 $ 159.13
ASSUMES AN INVESTMENT OF $100 ON JANUARY 31, 1998 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: Coach, Inc.; Gucci Group N.V.; Movado Group Inc.; Neiman
Marcus Group, Inc.; Nordstrom Inc.; Sotheby Holdings Inc.; Williams Sonoma Inc.;
and Zale Corp. (LVMH, Moet Hennessy Louis Vuitton, which, in previous years was
a part of the Peer Company Group is no longer traded in the United States).
26
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 2003 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:
------------------------------------
Michael J. Kowalski Mr. Kowalski, 51, is Chairman of the Board
of Directors and Chief Executive Officer of
Tiffany & Co. He succeeded Mr. Chaney as
Chairman at the end of fiscal year 2002 and
as Chief Executive Officer in February of
1999. 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. He
became a director of Tiffany & Co. in
January 1995. Mr. Kowalski also serves on
the Board of Directors of Fairmont
Hotels and Resorts and is awaiting
confirmation of his appointment to the Board
of Directors of The Bank of New York. The
Bank of New York is Tiffany's principal
banking relationship, serving as
Administrative Agent and a lender under a
Revolving Credit Facility and as trustee of
Tiffany's Employee Pension Plan.
------------------------------------
Rose Marie Bravo Ms. Bravo, 52, 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.
------------------------------------
27
------------------------------------
William R. Chaney Mr. Chaney, 70, is the former Chairman of
the Board of Directors. He resigned that
office effective January 31, 2003. 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,
the Atlantic Mutual Companies and Provident
Holdings, Inc. The Bank of New York is
Tiffany's principal banking relationship,
serving as Administrative Agent and a lender
under a Revolving Credit Facility and as
trustee of Tiffany's Employee Pension Plan.
------------------------------------
Samuel L. Hayes III Prof. Hayes, 68, was the Jacob H. Schiff
Professor of Investment Banking at the
Harvard Business School from 1975 to 1998,
when he became the Jacob H. Schiff Professor
Emeritus. He was elected a director of
Tiffany & Co. in 1984. He also serves on the
Boards of Directors of the Eaton Vance Group
of Funds and Telect, Inc.
------------------------------------
Abby F. Kohnstamm Ms. Kohnstamm, 49, is the Senior Vice
President, Marketing of IBM Corporation. In
this capacity, she has overall
responsibility for marketing at IBM. Prior
to joining IBM in June 1993, Ms. Kohnstamm
held a number of senior marketing positions
at American Express. Ms. Kohnstamm also
serves on the Board of Trustees of Tufts
University and the Board of Overseers at New
York University's Stern School of Business.
She became a director of Tiffany & Co. in
July 2001, when she was selected by the
Board of Directors to replace a retiring
director. IBM Corporation and its affiliated
companies provide data-processing and
communication hardware, software and
services to Tiffany and purchase business
gifts from Tiffany.
------------------------------------
28
------------------------------------
Charles K. Marquis Mr. Marquis, 60, 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 Boards
of Directors of CSK Auto Corporation,
Jostens, Inc. and Werner Holding Co.
------------------------------------
James E. Quinn Mr. Quinn, 51, is President 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.
------------------------------------
William A. Shutzer Mr. Shutzer, 56, is a Managing Director of
Lehman Brothers. He previously served as a
Partner in Thomas Weisel Partners LLC, a
merchant banking firm, from 1999 through
2000, 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
Jupiter Media Corp. Blount International,
Inc., Practice Works, Inc.,
29
and RSI Holding Corp. Lehman Brothers
provides investment banking services to the
Company.
-----------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF ALL
EIGHT NOMINEES FOR DIRECTOR.
ITEM II - 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. At their 2000 Annual Meeting,
the stockholders approved the first amendment to the Incentive Plan.
On January 16, 2003, the Board of Directors adopted a further amendment to the
Incentive Plan. If that amendment is approved by the stockholders at their 2003
Annual Meeting, the Company will have the authority to issue an additional four
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:
"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)
[Eight Million (8,000,000)] TWELVE MILLION (12,000,000) 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 One Million (1,000,000) 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 Three Million (3,000,000) Shares." (BOLD
indicates new material; [strikethrough] indicates deleted material)
(text of Incentive Plan previously amended to reflect adjustments
required for the two-for-one stock splits that became effective in July
1999 and 2000, respectively).
[ABOVE STRIKETHROUGH TEXT ENCLOSED IN BRACKETS]
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,
30
- 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 splits of the Company's common
stock that became effective in July 1999 and 2000, respectively.
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 11,000,000
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 15,000,000 shares. This
maximum is subject to adjustment. See Maximum Number of Shares and Adjustments
for Corporate Transactions below.
Stock Options Already Granted Under the Plan. To date, only awards of
non-qualified stock options ("NQSOs") and cash have been made.
31
The following table provides information concerning NQSOs that have been granted
through March 25, 2003 to employees of the Company's subsidiaries under the
Incentive Plan:
PERCENT OF WEIGHTED
PERSON OR GROUP AGGREGATE SHARES GRANTED AVERAGE
GRANTED NQSOS SHARES GRANTED TO ALL EMPLOYEES EXERCISE PRICE
------------- -------------- ---------------- --------------
Michael J. Kowalski 995,000 9% $ 25.8212
Chairman and CEO
William R. Chaney 220,000 2% $ 27.8559
(former Chairman)
James E. Quinn 725,000 7% $ 25.5125
President
Beth O. Canavan 308,000 3% $ 29.8526
Executive Vice
President
James N. Fernandez 553,000 5% $ 26.2261
Executive Vice
President and Chief
Financial Officer
All Executive Officers as a Group 3,825,000 36% $ 27.0418
All Employees Who Are Not Executive 6,850,200 64% $ 28.1058
Officers as a Group
TOTAL 10,675,200 100% $ 27.7245
As of March 25, 2003, there were 564,022 shares remaining available for grant
under the Incentive Plan.
Market Value Per Share. As of March 25, 2003, the market value of one share of
the Company's Common Stock, $0.01 par value, was $25.9950 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:
- employees to whom awards are granted,
- the size and type of awards, and
- the terms and conditions of such awards.
32
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),
- 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.
33
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.
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.
34
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 11,000,000. If the proposed amendment
is approved, this maximum will be increased to 15,000,000 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 2000 - 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.
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 -- 1,000,000,
- shares that may be issued as stock awards - 1,000,000,
- shares that may be granted in any one fiscal year to any one
participant pursuant to any and all awards -- 400,000, and
- maximum aggregate cash pay-out in any one fiscal year for cash
awards to a "covered executive" -- $2,000,000.
35
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 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
36
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.
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
37
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.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL.
ITEM III - APPOINTMENT OF INDEPENDENT ACCOUNTANTS
Upon the recommendation of its Audit Committee, the Board of Directors
has appointed PricewaterhouseCoopers LLP ("PwC") as independent accountants to
examine the Company's consolidated financial statements for fiscal year 2003. We
are asking you to ratify our selection.
PwC has served as the Company's independent accountants since 1984.
A representative of PwC 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.
38
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 2003.
39
OTHER MATTERS
STOCKHOLDER PROPOSALS, IN GENERAL
If you would like to submit the name of a candidate for the Nominating/
Corporate Governance Committee to consider as a nominee for director, you may
send your proposal at any time to the Nominating/Corporate Governance 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 2004 Annual Meeting, which is currently
expected to take place on May 20, 2004, you must comply with the following
requirements:
- you must notify the Secretary of Tiffany & Co. in writing no
earlier than January 16, 2004, and no later than February 15,
2004,
- 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 2004 ANNUAL
MEETING
If you wish to submit a proposal to be included in the Proxy Statement
for our 2004 Annual Meeting, we must receive it no later than December 10, 2003.
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 or vote by
Internet as soon as you can so that your vote may be recorded and counted.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Patrick B. Dorsey
Patrick B. Dorsey
Secretary
New York, New York
April 8, 2003
40
Appendix 1
CHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS OF
TIFFANY & CO.
(AS REVISED BY THE BOARD OF DIRECTORS ON JANUARY 16, 2003)
This Charter governs the operations of the Audit Committee.
Composition of the Committee.
The Audit Committee shall be comprised of three or more directors as
determined by the Board of Directors.
Each of the directors serving on the Audit Committee shall be
"independent" under the provisions of 10A of the Securities Act of 1934 as
amended by the Sarbanes-Oxley Act of 2002 and shall have been affirmatively
determined by the Board of Directors to be an "independent director" under the
New York Stock Exchange Corporate Governance Standards.
Each of the directors serving on the Audit Committee shall be "financially
literate" as that qualification is interpreted by the Board of Directors in its
business judgment, or must become financially literate within a reasonable
period of time after his or her appointment to the Audit Committee.
In addition, at least one member of the Audit Committee shall have
accounting or related management "expertise" as that qualification is
interpreted by the Board of Directors in its business judgment.
Finally, at least one member of the Audit Committee shall qualify as a
"financial expert" as that term is interpreted by the SEC pursuant to the
Sarbanes-Oxley Act of 2002.
The members of the Audit Committee shall be elected by the Board of
Directors annually and shall serve until their successors are duly elected and
qualified. Unless a Chair is elected by the full Board of Directors, the members
of the Audit Committee may designate a Chair by majority vote of the full Audit
Committee membership.
Purpose of Committee.
The Purpose of the Audit Committee is to:
(A) assist the Board of Directors in its oversight of (1)
the integrity of the Company's financial statements, (2)
the Company's compliance with legal and regulatory
requirements, (3) the independent auditor's
41
qualifications and independence, and (4) the performance
of the Company's internal audit function and independent
auditors;
(B) prepare the report of the Audit Committee required by
Security and Exchange Commission Rules to be included in
the Company's annual proxy statement.
Duties and Responsibilities.
The duties and responsibilities of the Audit Committee are:
(A) to retain and terminate the Company's independent
auditors and, to that end, the Audit Committee shall be
directly responsible for the appointment, compensation,
and oversight of the work of any registered public
accounting firm employed by the Company (including
resolution of disagreements between Company management
and the auditor regarding financial reporting) for the
purpose of preparing or issuing an audit report or
related work, and each such registered public accounting
firm shall report directly to the Audit Committee;
(B) at least annually, to obtain and review a report by the
independent auditor describing: the independent
auditor's internal quality-control procedures; any
material issues raised by the most recent internal
quality-control review, or peer review, of the firm, or
any inquiry or investigation by governmental or
professional authorities, within the preceding five
years, respecting one or more independent audits carried
out by the firm, and any steps taken to deal with any
such issues; and (to assess the auditor's independence)
all relationships between the independent auditor and
the Company;
(C) discuss the annual audited financial statements and
quarterly financial statements with management and the
independent auditor, including the Company's disclosures
under "Management's Discussion and Analysis of Financial
Condition and Results of Operations";
(D) discuss earnings press releases, as well as financial
information and earnings guidance provided to analysts
and rating agencies;
(E) as appropriate, obtain advice and assistance from
outside legal, accounting or other advisors;
(F) discuss policies with respect to risk assessment and
risk management;
(G) meet separately, periodically, with management, with
internal auditors and with independent auditors;
42
(H) review with the independent auditor any audit problems
or difficulties and management's response;
(I) set clear hiring policies for employees or former
employees of the independent auditors;
(J) report regularly to the Board of Directors;
(K) establish procedures for the receipt, retention and
treatment of complaints received by the Company
regarding accounting, internal accounting controls or
auditing matters and for the confidential, anonymous
submission by employees of the Company of concerns
regarding questionable accounting or auditing matters;
(L) to review the adequacy of the Company's systems of
internal accounting and financial controls;
(M) to approve in advance all audit services, including
comfort letters, as well as non-audit services,
including tax services, to be rendered by the Company's
public accounting firm;
(N) to report its conclusions and concerns to the Board of
Directors; and
(O) to conduct, or have conducted, an annual performance
evaluation of the Audit Committee as required by the New
York Stock Exchange Corporate Governance Standards.
Authority and Funding.
The Audit Committee shall have all authority necessary or implied in order
to carry out its duties and responsibilities. Without limitation to the
generality of the foregoing, the Audit Committee shall have the authority to
engage independent counsel, outside auditors for special audits, reviews and
other procedures, and other advisers, experts and consultants, as it determines
necessary to carry out its duties and responsibilities.
The officers of the Company shall provide and make available to the Audit
Committee, as it may determine, in its capacity as a committee of the Board of
Directors, funds for payment of compensation to the registered public accounting
firm employed by the issuer for the purpose of rendering or issuing an audit
report and to any advisers employed by the Audit Committee pursuant to the
foregoing paragraph.
The Audit Committee may require that the head of the Company's internal
audit department, any other officer or employee of the Company, the Company's
outside
43
counsel or the external auditor attend a meeting of the Audit Committee
or to meet with any members of, or consultants to, the Audit Committee.
Meetings.
The Audit Committee shall meet as often as necessary to fulfill its
functions, but no less than quarterly.
Responsibilities of Others.
In the performance of its duties and responsibilities, it is not the duty
of the Audit Committee to plan or conduct audits, to determine that the
Company's financial statements are complete and accurate and are in accordance
with generally accepted accounting principles or to assure compliance with laws.
These are the responsibilities of management and the internal audit department.
The external auditor is responsible for the audit of the Company's financial
statements in accordance with the standards of the profession.
Processes.
In carrying out its responsibilities, the Audit Committee's policies and
procedures should remain flexible in order to react to changing conditions and
circumstances.
The following shall be the principal recurring processes of the Audit
Committee in carrying out its oversight responsibilities. The processes are set
forth as a guide with understanding that the Audit Committee may alter or
supplement them as appropriate.
1. Annually, the Audit Committee shall appoint and determine the
compensation of the registered public accounting firm to be employed
by the Company for the purpose of preparing or issuing an audit
report or related work and such registered public accounting firm
shall report directly to the Audit Committee.
2. The Audit Committee shall discuss with the internal auditors and the
external auditor the overall scope and plans for their respective
audit work.
3. The Audit Committee shall ensure that the external auditor submits
annually a formal written statement delineating all relationships
between the external auditor and the Company. The Audit Committee is
responsible for engaging in a dialogue with the external auditor
with respect to such disclosed relationships that may affect the
objectivity and independence of the external auditor and taking
appropriate action to satisfy itself or the external auditor's
independence.
44
4. The Audit Committee shall establish policies and procedures for the
engagement of the external auditor to provide such non-audit
services as may be legally performed, and for determining the
compensation to be paid for such services, and consider whether the
external auditor's performance of any non-audit services is
compatible with the external auditor's independence.
5. The Audit Committee shall discuss with management, the internal
auditors and, to the extent appropriate, the external auditor the
adequacy and effectiveness of the Company's accounting and financial
records and system for monitoring and managing business risk and
legal compliance programs. Further, the Audit Committee shall meet
separately with the head of the Company's internal auditor
department and the external auditor, with and without management
present, to discuss the results of their examinations.
6. The Audit Committee shall review and discuss with management and the
external auditor the Company's interim financial results to be
included in the Company's quarterly reports to be filed with the
SEC, and the matters required to be discussed by Statement on
Auditing Standards No. 61 (Communications with Audit Committees), as
it may be modified or supplemented.
7. The Audit Committee shall review with management and the external
auditor the financial statements to be included in the Company's
Annual Report on Form 10-K, as well as the auditor's judgment about
the quality, not just acceptability, of the Company's accounting
principles as applied to its financial reporting. The review shall
also include a discussion of the reasonableness of judgments and
estimates made in the preparation of the financial statements that
may be viewed as critical, as well as the clarity of financial
statement disclosure. In addition, the Audit Committee shall discuss
the results of the annual audit and any other matters required to be
communicated to the Audit Committee by the external auditor under
generally accepted auditing standards, including the matters
required to be discussed by Statement on Auditing Standards No. 61
(Communications with Audit Committees), as it may be modified or
supplemented.
8. Based on its review and discussions of items 3 and 7, the Audit
Committee shall recommend to the Board of Directors whether the
financial statements should be included in the Annual Report on Form
10-K.
9. As a whole, or through the Chair, the Audit Committee shall review
the impact on the financial statements of significant events,
45
transactions, or changes in accounting principles or estimates,
which potentially affect the quality of the financial reporting with
management and the external auditor prior to the filing of the
Company's reports on Form 10-Q or 10-K, or as soon as practicable if
the communications cannot be made prior to its filing.
10. Management and the external auditor shall discuss with the Audit
Committee significant changes to the Company's auditing and
accounting principles, policies, controls, procedures and practices
proposed or contemplated by the external auditor, the internal
auditors or management.
11. The Audit Committee shall review and reassess this Charter annually
and recommend any appropriate changes to the Board of Directors.
12. The Audit Committee shall maintain minutes of its meetings and
regularly report its activities to the Board of Directors.
13. Annually, the Audit Committee shall review the compensation and
performance of the head of the internal audit department. Any change
in the incumbent in such position or in his/her compensation shall
not be made without the approval of the Audit Committee.
As required, the Audit Committee shall inquire into and review any
significant disagreement that is brought to its attention among or between
management and the external auditor or among or between management and the
internal auditor in connection with the preparation of the Company's financial
statements.
As required, the Audit Committee shall review with management and the
external auditor any pending or threatened action by regulators or government
agencies and any employee complaints or published reports that raise material
issues regarding the Company's financial statements or accounting policies.
Reliance on Information Provided.
In adopting this Audit Committee Charter, the Board of Directors
acknowledges that the Audit Committee members are not employees of the Company
and are not providing any expert or special assurance as to the Company's
financial statements or any professional certification as to the external
auditor's work or auditing standards. Each member of the Audit Committee shall
be entitled to rely on the integrity of those persons and organizations within
and outside the Company that provide information to the Audit Committee and the
accuracy and completeness of the financial and other information provided to the
Audit Committee by such persons or organizations absent actual knowledge to the
contrary.
46
Please Mark Here [ ]
for Address
Change or
Comments
SEE REVERSE SIDE
FOR ALL WITHHELD FOR NOMINEES
Item 1: Election of the following nominees as directors: NOMINEES NAMED BELOW
01 Michael J. Kowalski, 05 Abby F. Kohnstamm [ ] [ ]
02 Rose Marie Bravo, 06 Charles K. Marquis
03 William R. Chaney, 07 James E. Quinn
04 Samuel L. Hayes III 08 William A. Shutzer
Withheld for (write in each nominee's name in the space provided below):
--------------------------------------------------------------------------------
Item 2: Approval of an amendment to the Company's 1998 Employee Incentive Plan FOR AGAINST ABSTAIN
to increase the maximum number of shares of common stock, $.01 par [ ] [ ] [ ]
value, that may be delivered to participating employees under the plan from
8,000,000 to 12,000,000.
Item 3: Approval of the appointment of PricewaterhouseCoopers LLP as independent FOR AGAINST ABSTAIN
accountants of the Company's fiscal 2003 financial statements. [ ] [ ] [ ]
I PLAN TO ATTEND THE ANNUAL MEETING [ ]
THIS PROXY IS CONTINUED ON THE REVERSE SIDE.
THE BOARD OF DIRECTORS RECOMMENDS: A VOTE FOR ALL NOMINEES FOR DIRECTOR IN ITEM
1, FOR APPROVAL OF THE AMENDMENT TO THE 1998 EMPLOYEE INCENTIVE PLAN IN ITEM 2
AND FOR APPROVAL OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT
ACCOUNTANTS IN ITEM 3. SHARES REPRESENTED BY THIS PROXY WILL BE SO VOTED UNLESS
OTHERWISE INDICATED, IN WHICH CASE THEY WILL BE VOTED AS MARKED.
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.
FOLD AND DETACH HERE
VOTE BY INTERNET OR TELEPHONE OR MAIL
24 HOURS A DAY, 7 DAYS A WEEK
INTERNET AND TELEPHONE VOTING IS AVAILABLE THROUGH 11PM EASTERN TIME THE DAY
PRIOR TO ANNUAL MEETING DAY.
YOUR INTERNET OR TELEPHONE VOTE AUTHORIZES THE NAMED PROXIES TO VOTE YOUR
SHARES IN THE SAME MANNER AS IF YOU MARKED, SIGNED AND RETURNED YOUR PROXY CARD.
INTERNET TELEPHONE MAIL
HTTP://WWW.EPROXY.COM/TIF 1-800-435-6710
Use the Internet to vote your proxy. Use any touch-tone telephone to Mark, sign and date
Have your proxy card in hand when vote your proxy. Have your proxy your proxy card
you access the Web site. You will be OR card in hand when you call. You will and return it in the
prompted to enter your control be prompted to enter your control enclosed postage-paid
number, located in the box below, to number, located in the box below, envelope.
create and submit an electronic ballot. and then follow the directions
given.
IF YOU VOTE YOUR PROXY BY INTERNET OR BY
TELEPHONE, YOU DO NOT NEED TO MAIL BACK YOUR PROXY CARD.
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 15, 2003, 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 AMENDMENT
TO THE 1998 EMPLOYEE INCENTIVE PLAN INCREASING THE MAXIMUM NUMBER OF SHARES OF
COMMON STOCK THAT MAY BE DELIVERED UNDER THE PLAN IN ITEM 2, AND "FOR" APPROVAL
OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT ACCOUNTANTS IN
ITEM 3.
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 AND 3. 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 M.J. KOWALSKI, 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 2003 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
ADDRESS CHANGE/COMMENTS (MARK THE CORRESPONDING BOX ON THE REVERSE SIDE)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
FOLD AND DETACH HERE
TIFFANY & CO.
727 Fifth Avenue
New York, N.Y. 10022
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD THURSDAY, MAY 15, 2003
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 Thursday, May 15, 2003, 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 1998 Employee Incentive Plan to
increase the maximum number of shares of common stock, $.01 par value,
that may be delivered to participating employees under the plan from
8,000,000 to 12,000,000; and
3. Approval of the appointment of PricewaterhouseCoopers LLP as independent
accountants of the Company's fiscal 2003 financial statements.
All stockholders are cordially invited to attend, although only those
stockholders of record as of the close of business on March 25, 2003 will be
entitled to notice of and to vote at the meeting or 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, 600 Madison Avenue, 8th
Floor, New York commencing on April 25, 2003 during ordinary business hours.
BY ORDER OF THE BOARD OF DIRECTORS
Patrick B. Dorsey
Secretary
New York, New York
April 8, 2003
YOUR VOTE IS IMPORTANT. EVEN IF IT IS YOUR DESIRE TO ATTEND THE ANNUAL MEETING,
PLEASE SIGN AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING POSTAGE PAID
ENVELOPE, VOTE BY INTERNET OR CALL IN YOUR VOTE.