PREM14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Rule 14a-101)

Filed by the Registrant  ☒ 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))
  Definitive Proxy Statement
  Definitive Additional Materials
  Soliciting Material Pursuant to §240.14a-12

 

LOGO

(Name of Registrant as Specified in its Charter)

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

Payment of Filing Fee (Check the appropriate box):

  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:

Common stock, par value $0.01 per share, of Tiffany & Co.

  (2)  

Aggregate number of securities to which transaction applies:

As of October 31, 2020, 123,627,964 shares of common stock, which is the sum of (A) 121,411,166 shares of common stock issued and outstanding, plus (B) 476,840 shares of common stock subject to outstanding performance share units (including, for the avoidance of doubt, any dividend equivalent units credited in respect of such performance share units), plus (C) 592,827 shares of common stock subject to outstanding restricted stock units (including, for the avoidance of doubt, any dividend equivalent units credited in respect of such restricted stock units), plus (D) 1,147,131 shares of common stock underlying options with an exercise price below the per share merger consideration of $131.50.

  (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):

Solely for the purpose of calculating the filing fee, the underlying value of the transaction was calculated as the sum of: (A) 121,411,166 shares of common stock issued and outstanding, plus 476,840 shares of common stock subject to outstanding performance share units, plus 592,827 shares of common stock subject to outstanding restricted stock units, multiplied by $131.50 and (B) 1,147,131 shares of common stock issuable upon the exercise of options with an exercise price less than $131.50, multiplied by $38.56 (which is the difference between $131.50 and the weighted average exercise price of $92.94 of such options).

  (4)  

Proposed maximum aggregate value of transaction:

$16,150,462,910.86

  (5)  

Total fee paid:

$1,762,015.50, determined, in accordance with Section 14(g) of the Securities Exchange Act of 1934, as amended, by multiplying 0.0001091 by the proposed maximum aggregate value of the transaction of $16,150,462,910.86.

  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:

 

     

 

 

 


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LOGO

 

[]

Dear Tiffany & Co. Stockholders:

On behalf of the board of directors (the “Board”) of Tiffany & Co. (the “Company”), we cordially invite you to attend a special meeting of stockholders of the Company, which will be held on [●], at [●], Eastern Time (the “special meeting”). Due to public health concerns surrounding the novel coronavirus (COVID-19) and to prioritize the health and well-being of our employees, stockholders and other community members, the Company will hold the special meeting in a virtual meeting format only on http://www.virtualshareholdermeeting.com/TIF2021SM (the “virtual meeting website”). You will not be able to attend the special meeting physically in person. For purposes of attendance at the special meeting, all references in this proxy statement to “present in person” or “in person” shall mean virtually present at the special meeting.

On November 24, 2019, the Company entered into a merger agreement (the “original merger agreement”) with LVMH Moët Hennessy-Louis Vuitton SE, a societas Europaea (European company) organized under the laws of France (“Parent”), Breakfast Holdings Acquisition Corp., a Delaware corporation and an indirect wholly owned subsidiary of Parent (“Holding”), and Breakfast Acquisition Corp., a Delaware corporation and a direct wholly owned subsidiary of Holding (“Merger Sub”). On October 28, 2020, the Company entered into an amended and restated merger agreement (the “merger agreement”) with Parent, Holding and Merger Sub, which amended and restated the original merger agreement in its entirety and provides for, among other things, the acquisition by Parent of the Company through the merger of Merger Sub with and into the Company (the “merger”), with the Company continuing as the surviving corporation in the merger and an indirect wholly owned subsidiary of Parent.

If the merger is completed, you will be entitled to receive $131.50 in cash, without interest, less any required withholding taxes, for each share of the common stock, par value $0.01 per share, of the Company (our “common stock”) owned by you immediately prior to completion of the merger (unless you have properly exercised, and not lost, your appraisal rights with respect to such shares of our common stock), which represents a premium of approximately 33.4% to the Company’s closing price on October 25, 2019, the last trading day prior to the first media accounts regarding a possible acquisition of the Company by Parent, and a premium of approximately 43.4% to the Company’s thirty (30)-day volume-weighted average stock price on that same date.

The Board has determined that the merger and the other transactions contemplated by the merger agreement are advisable to, and in the best interests of, the Company and its stockholders and approved and declared advisable the merger agreement, the merger and the other transactions contemplated by the merger agreement. The Board made its determination after consultation with its legal and financial advisors and consideration of a number of factors.

Approval of the proposal to adopt the merger agreement requires the affirmative vote of the holders of a majority of the shares of our common stock issued and outstanding as of the close of business on the record date. The Board recommends that you vote “FOR” approval of the proposal to adopt the merger agreement. The proposal to approve, by non-binding, advisory vote, certain compensation arrangements for the Company’s named executive officers in connection with the merger requires the affirmative vote of the holders of a majority of the shares of our common stock present in person or represented by proxy at the special meeting and entitled to vote on such proposal. The Board recommends that you vote “FOR” the proposal to approve, by non-binding, advisory vote, certain compensation arrangements for the Company’s named executive officers in connection with the merger. The proposal to approve an adjournment or postponement of the special meeting, if necessary or appropriate, to solicit additional proxies if there are not sufficient votes to approve the proposal to adopt the merger agreement requires the affirmative vote of the holders of a majority of the shares of our common stock present in person or represented by proxy at the special meeting and entitled to vote on such


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proposal. The Board recommends that you vote “FOR” the proposal to approve adjournment or postponement of the special meeting, if necessary or appropriate, to solicit additional proxies if there are not sufficient votes to approve the proposal to adopt the merger agreement.

In accordance with the General Corporation Law of the State of Delaware (as amended, and all rules and regulations promulgated thereunder, the “DGCL”), the amendment and restatement of the original merger agreement necessitates that the merger agreement be adopted by the affirmative vote of the holders of a majority of the shares of our common stock issued and outstanding as of the close of business on the record date. As a result, you are now being asked to vote on the proposal to adopt the merger agreement, which amended and restated the original merger agreement in its entirety, despite the fact that you may have voted on the proposal to adopt the original merger agreement in connection with the February 4, 2020 special meeting of the Company’s stockholders.

Your vote is very important. The merger cannot be completed unless the merger agreement is adopted by the affirmative vote of the holders of a majority of the shares of our common stock issued and outstanding as of the close of business on the record date. Whether or not you plan to attend the special meeting virtually, please complete, date, sign and return, as promptly as possible, the enclosed proxy card in the accompanying postage-prepaid reply envelope, or submit your proxy by telephone or via the Internet. If your shares of our common stock are held in “street name” by your bank, broker or other nominee, your bank, broker or other nominee will be unable to vote your shares of our common stock without instructions from you. You should instruct your bank, broker or other nominee to vote your shares of our common stock in accordance with the procedures provided by your bank, broker or other nominee. If you fail to return your proxy card, submit your proxy by telephone or via the Internet or vote in person, or if your shares are held in “street name” by your bank, broker or other nominee, and you fail to instruct your bank, broker or other nominee to vote your shares of our common stock, your shares of our common stock will not be counted for purposes of determining whether a quorum is present at the special meeting and will have the same effect as a vote “AGAINST” approval of the proposal to adopt the merger agreement.

Stockholders who do not vote in favor of the proposal to adopt the merger agreement, and who demand appraisal in writing to the Company prior to the special meeting and comply with all of the applicable requirements of Delaware law, which are summarized in the section entitled “Appraisal Rights” in the accompanying proxy statement and reproduced in its entirety as Annex D to the accompanying proxy statement, will be entitled to rights of appraisal to obtain the fair value of their shares of our common stock.

You have the right to revoke a proxy at any time prior to the taking of the vote at the special meeting. You may revoke your proxy prior to the taking of the vote at the special meeting, by submitting a new proxy to vote your shares over the Internet or by telephone (only your latest Internet or telephone proxy is counted), by signing a later-dated new proxy and mailing it, in each case, in accordance with the instructions on the enclosed proxy card or by sending a written revocation of your proxy to the Company prior to the special meeting. In addition, you may revoke your proxy by attending the special meeting virtually and voting in person; however, attending the special meeting virtually will not revoke your written, Internet or telephone proxy, as the case may be, unless you specifically request revocation or vote in person at the special meeting. The accompanying proxy statement provides you with detailed information about the special meeting, the merger agreement, the changes to the original merger agreement, and the merger. A copy of the merger agreement is attached as Annex A to the accompanying proxy statement. We encourage you to read the entire proxy statement, and its annexes, including the merger agreement, carefully. You may also obtain additional information about the Company from documents we have filed with the Securities and Exchange Commission (the “SEC”).


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If you have any questions or need assistance voting your shares of our common stock, please contact Innisfree M&A Incorporated, our proxy solicitor (“Innisfree”), by calling toll-free at (877) 687-1874. We look forward to seeing you at the special meeting.

Sincerely,

 

 

LOGO    LOGO

Roger N. Farah

Chairman of the Board of Directors

  

Alessandro Bogliolo

Chief Executive Officer

The proxy statement is dated [●], and is first being mailed on or about [●] to our stockholders of record who owned shares of our common stock as of the close of business on [●].

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THE MERGER, PASSED UPON THE MERITS OR FAIRNESS OF THE MERGER AGREEMENT OR THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE PROPOSED MERGER, OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE INFORMATION CONTAINED IN THE ACCOMPANYING PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.


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LOGO

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

To Be Held []

[●]

To the Stockholders of the Company:

NOTICE IS HEREBY GIVEN that a special meeting of stockholders of Tiffany & Co. (the “Company”) will be held on [●], at [●], Eastern Time (the “special meeting”). Due to public health concerns surrounding the novel coronavirus (COVID-19) and to prioritize the health and well-being of the Company’s employees, stockholders and other community members, the Company will hold the special meeting in a virtual meeting format only on http://www.virtualshareholdermeeting.com/TIF2021SM (the “virtual meeting website”). You will not be able to attend the special meeting physically in person. For purposes of attendance at the special meeting, all references in this proxy statement to “present in person” or “in person” shall mean virtually present at the special meeting.

The special meeting will be held for the following purpose:

 

  1.

to consider and vote on a proposal to adopt the Amended and Restated Agreement and Plan of Merger, dated as of October 28, 2020, as it may be amended from time to time (the “merger agreement”), by and among the Company, LVMH Moët Hennessy-Louis Vuitton SE, a societas Europaea (European company) organized under the laws of France (“Parent”), Breakfast Holdings Acquisition Corp., a Delaware corporation and an indirect wholly owned subsidiary of Parent (“Holding”), and Breakfast Acquisition Corp., a Delaware corporation and a direct wholly owned subsidiary of Holding (“Merger Sub”), a copy of which is attached as Annex A to the accompanying proxy statement, which amended and restated the Agreement and Plan of Merger, dated as of November 24, 2019 (the “original merger agreement”), by and among the Company, Parent, Holding and Merger Sub, and pursuant to which, among other things, upon the terms and subject to the conditions set forth therein, Merger Sub will be merged with and into the Company (the “merger”), with the Company continuing as the surviving corporation in the merger and an indirect wholly owned subsidiary of Parent;

 

  2.

to consider and vote on a proposal to approve, by non-binding, advisory vote, certain compensation arrangements for the Company’s named executive officers in connection with the merger; and

 

  3.

to consider and vote on a proposal to adjourn or postpone the special meeting, if necessary or appropriate, to solicit additional proxies if there are not sufficient votes to approve the proposal to adopt the merger agreement.

The merger agreement, the changes to the original merger agreement, the merger and the other transactions that would be effected in connection with the merger are described more fully in the attached proxy statement, and we urge you to read it carefully and in its entirety.

The Company’s board of directors (the “Board”) has determined that the merger and the other transactions contemplated by the merger agreement are advisable to, and in the best interests of, the Company and its stockholders and approved and declared advisable the merger agreement, the merger and the other transactions contemplated by the merger agreement. The Board made its determination after consultation with its legal and financial advisors and consideration of a number of factors.

Approval of the proposal to adopt the merger agreement requires the affirmative vote of the holders of a majority of the shares of the common stock, par value $0.01 per share, of the Company (our “common stock”)


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issued and outstanding as of the close of business on the record date. The proposal to approve, by non-binding, advisory vote, certain compensation arrangements for the Company’s named executive officers in connection with the merger requires the affirmative vote of the holders of a majority of the shares of our common stock present in person or represented by proxy at the special meeting and entitled to vote on such proposal. The proposal to approve adjournment or postponement of the special meeting, if necessary or appropriate, to solicit additional proxies if there are not sufficient votes to approve the proposal to adopt the merger agreement requires the affirmative vote of the holders of a majority of the shares of our common stock present in person or represented by proxy at the special meeting and entitled to vote on such proposal.

The Board recommends that you vote “FOR” approval of the proposal to adopt the merger agreement, “FOR” the proposal to approve, by non-binding, advisory vote, certain compensation arrangements for the Company’s named executive officers in connection with the merger and “FOR” the proposal to approve adjournment or postponement of the special meeting, if necessary or appropriate, to solicit additional proxies if there are not sufficient votes to approve the proposal to adopt the merger agreement.

In accordance with the General Corporation Law of the State of Delaware (as amended, and all rules and regulations promulgated thereunder, the “DGCL”), the amendment and restatement of the original merger agreement necessitates that the merger agreement be adopted by the affirmative vote of the holders of a majority of the shares of our common stock issued and outstanding as of the close of business on the record date. As a result, you are now being asked to vote on the proposal to adopt the merger agreement, which amended and restated the original merger agreement in its entirety, despite the fact that you may have voted on the proposal to adopt the original merger agreement in connection with the February 4, 2020 special meeting of the Company’s stockholders.

Your vote is very important, regardless of the number of shares of our common stock that you own. Because stockholders cannot take any action at the special meeting unless a majority of the shares of our common stock issued and outstanding and entitled to vote thereat is represented, it is important that you attend the special meeting virtually or are represented by proxy at the special meeting. The merger cannot be completed unless the merger agreement is adopted by the affirmative vote of the holders of a majority of the shares of our common stock issued and outstanding as of the close of business on the record date. Whether or not you plan to attend the special meeting virtually, please complete, date, sign and return, as promptly as possible, the enclosed proxy card in the accompanying postage-prepaid reply envelope, or submit your proxy by telephone or the Internet. If your shares of our common stock are held in “street name” by your bank, broker or other nominee, your bank, broker or other nominee will be unable to vote your shares of our common stock without instructions from you. You should instruct your bank, broker or other nominee to vote your shares of our common stock in accordance with the procedures provided by your bank, broker or other nominee. If you fail to return your proxy card, submit your proxy by telephone or via the Internet or vote in person, or if your shares are held in “street name” by your bank, broker or other nominee, and you fail to instruct your bank, broker or other nominee to vote your shares of our common stock, your shares of our common stock will not be counted for purposes of determining whether a quorum is present at the special meeting and will have the same effect as a vote “AGAINST” approval of the proposal to adopt the merger agreement.

Stockholders who do not vote in favor of the proposal to adopt the merger agreement, and who demand appraisal in writing to the Company prior to the special meeting and comply with all of the applicable requirements of Delaware law, which are summarized in the section entitled “Appraisal Rights” in the accompanying proxy statement and reproduced in its entirety as Annex D to the accompanying proxy statement, will be entitled to rights of appraisal to obtain the fair value of their shares of common stock of the Company.

You have the right to revoke a proxy at any time prior to the taking of the vote at the special meeting. You may revoke your proxy prior to the taking of the vote at the special meeting, by submitting a new proxy to vote


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your shares over the Internet or by telephone (only your latest Internet or telephone proxy is counted), by signing a later-dated new proxy and mailing it, in each case, in accordance with the instructions on the enclosed proxy card or by sending a written revocation of your proxy to the Company prior to the special meeting. In addition, you may revoke your proxy by attending the special meeting virtually and voting in person; however, attending the special meeting virtually will not revoke your written, Internet or telephone proxy, as the case may be, unless you specifically request revocation or vote in person at the special meeting.

The Board has fixed the close of business on [●] as the record date for determination of stockholders entitled to receive notice of, and to vote at, the special meeting and any adjournments or postponements thereof. Only stockholders of record as of the close of business on the record date are entitled to receive notice of, and to vote at (in person or by proxy), the special meeting and at any adjournment or postponement thereof. These individuals and entities will be entitled to cast one (1) vote on each matter properly brought before the special meeting for each share of our common stock held of record as of the close of business on the record date. The stockholders of record as of the close of business on the record date for the special meeting, their duly appointed proxy holders, and the “street name” stockholders who beneficially owned shares of our common stock on the record date are entitled to participate in the virtual meeting and will need their assigned 16-digit control number to vote shares in person at the special meeting. The control number can be found on the proxy card, voting instruction form, or other applicable proxy notices. If your shares are held in the name of a bank, broker or other nominee and you do not have the assigned 16-digit control number, please follow the instructions on the voting instruction form, or other applicable proxy notices, furnished by your bank, broker or other nominee to vote your shares accordingly. Please note that if you are a beneficial owner of shares of our common stock held in the Tiffany and Company Employee Profit Sharing and Retirement Savings Plan, you will not be able to vote those shares in person at the special meeting.

Attendance at the special meeting will be limited to stockholders of record at the record date, their duly appointed proxy holders, and stockholders who beneficially owned shares of our common stock on the record date and our invited guests. Technical assistance will be available for attendees who experience an issue accessing the special meeting. Contact information for technical support will appear on the virtual meeting website prior to the start of the special meeting. Please note that recording of the special meeting will not be permitted.

A list of the stockholders entitled to vote at the special meeting will be available during ordinary business hours ten (10) business days before the special meeting at the Company’s principal place of business located at 200 Fifth Avenue, New York, New York 10010. Please contact the Company’s Investor Relations Department by sending an email to jason.wong@tiffany.com if you wish to inspect the list prior to the special meeting. To access the list during the special meeting, please use the virtual meeting website link set forth above.

WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING VIRTUALLY, PLEASE COMPLETE, DATE, SIGN AND RETURN, AS PROMPTLY AS POSSIBLE, THE ENCLOSED PROXY CARD IN THE ACCOMPANYING POSTAGE-PREPAID REPLY ENVELOPE, OR SUBMIT YOUR PROXY BY TELEPHONE OR THE INTERNET. IF YOU ATTEND THE SPECIAL MEETING VIRTUALLY AND VOTE IN PERSON, YOUR IN PERSON VOTE WILL REVOKE ANY PROXY PREVIOUSLY SUBMITTED BY YOU.

 

BY ORDER OF THE BOARD OF DIRECTORS
LOGO
Leigh M. Harlan
Secretary


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TABLE OF CONTENTS

 

     Page  

SUMMARY

     1  

QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER

     17  

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

     28  

PARTIES TO THE MERGER

     30  

The Company

     30  

Parent

     30  

Holding

     30  

Merger Sub

     31  

THE SPECIAL MEETING

     32  

Date, Time and Place of the Special Meeting

     32  

Purpose of the Special Meeting

     32  

Record Date and Quorum

     33  

Attendance

     33  

Vote Required

     34  

Voting

     35  

Voting by the Company’s Directors and Executive Officers

     37  

Proxies and Revocation

     37  

Anticipated Date of Completion of the Merger

     38  

Rights of Stockholders Who Seek Appraisal

     38  

Adjournments

     39  

Technical Difficulties or Trouble Accessing the Virtual Meeting Website

     39  

Solicitation of Proxies; Payment of Solicitation Expenses

     39  

Questions and Additional Information

     40  

THE MERGER

     41  

Per Share Merger Consideration

     41  

Changes to the Original Merger Agreement Pursuant to the Merger Agreement

     41  

Background of the Merger

     42  

Reasons for the Merger; Recommendation of the Company’s Board of Directors

     57  

Opinions of the Company’s Financial Advisors

     65  

Opinion of Centerview Partners

     65  

Opinion of Goldman Sachs

     72  

Certain Company Forecasts

     81  

Financing of the Merger

     86  

Financing

     86  

Financing Cooperation

     86  

Closing and Effective Time

     88  

Payment of the Per Share Merger Consideration and Surrender of Shares

     89  

Interests of Certain Persons in the Merger

     90  

Material U.S. Federal Income Tax Consequences of the Merger

     95  

Information Reporting and Backup Withholding

     97  

Regulatory Approvals

     97  

THE MERGER AGREEMENT

     99  

Explanatory Note Regarding the Merger Agreement

     99  

Effects of the Merger; Directors and Officers; Certificate of Incorporation; By-laws

     99  

Closing and Effective Time

     100  

Treatment of Common Stock and Equity Awards

     100  

Surrender and Payment Procedures

     101  

Representations and Warranties

     103  

Representations and Warranties of the Company

     103  

 

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     Page  

Material Adverse Effect

     104  

Representations and Warranties of Parent

     106  

Conduct of Our Business Pending the Merger

     107  

Committee Structure: Conferring Matters; Approval Matters

     111  

Cure Rights of the Company

     112  

No Solicitation of Acquisition Proposals; Board Recommendation Changes

     112  

No Solicitation

     112  

Non-Solicitation Exceptions

     113  

Notification to Parent

     114  

Change of Recommendation or Termination of the Merger Agreement

     114  

The Special Meeting

     116  

Filings; Other Actions; Notification

     117  

Financing of the Merger

     119  

Financing

     119  

Financing Cooperation

     119  

Employee Benefits Matters

     121  

Conditions to the Merger

     122  

Termination

     123  

Termination Fee

     124  

Fees and Expenses

     125  

Remedies

     125  

Indemnification; Directors’ and Officers’ Insurance

     125  

Modification or Amendment

     127  

Governing Law; Jurisdiction

     127  

NON-BINDING, ADVISORY VOTE ON MERGER-RELATED COMPENSATION FOR THE COMPANY’S NAMED EXECUTIVE OFFICERS

     128  

Golden Parachute Compensation

     128  

The Compensation Proposal

     130  

MARKET PRICE OF COMMON STOCK

     131  

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     132  

OWNERSHIP BY DIRECTORS AND EXECUTIVE OFFICERS

     133  

APPRAISAL RIGHTS

     134  

DELISTING AND DEREGISTRATION OF OUR COMMON STOCK

     139  

OTHER MATTERS

     139  

HOUSEHOLDING

     139  

SUBMISSION OF STOCKHOLDER PROPOSALS

     140  

WHERE YOU CAN FIND MORE INFORMATION

     141  

ANNEX A MERGER AGREEMENT

     A-1  

ANNEX B OPINION OF CENTERVIEW PARTNERS

     B-1  

ANNEX C OPINION OF GOLDMAN SACHS & CO. LLC

     C-1  

ANNEX D SECTION 262 OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE

     D-1  

 

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LOGO

 

200 Fifth Avenue

New York, New York 10010

PROXY STATEMENT

Special Meeting of Stockholders

Introduction

This proxy statement is dated [●], and is first being mailed on or about [●] to the stockholders of record of Tiffany & Co., a Delaware corporation (the “Company”), as of the close of business on [●] in connection with the solicitation of proxies by our board of directors (the “Board”), for use at a special meeting of stockholders of the Company to be held on [●], at [●], Eastern Time, or at any adjournment or postponements thereof (the “special meeting”). Due to public health concerns surrounding the novel coronavirus (COVID-19) and to prioritize the health and well-being of the Company’s employees, stockholders and other community members, the Company will hold the special meeting in a virtual meeting format only on http://www.virtualshareholdermeeting.com/TIF2021SM (the “virtual meeting website”). You will not be able to attend the special meeting physically in person. For purposes of attendance at the special meeting, all references in this proxy statement to “present in person” or “in person” shall mean virtually present at the special meeting.

Stockholders will be asked:

 

   

to consider and vote on a proposal to adopt the Amended and Restated Agreement and Plan of Merger, dated as of October 28, 2020, as it may be amended from time to time (the “merger agreement”), by and among the Company, LVMH Moët Hennessy-Louis Vuitton SE, a societas Europaea (European company) organized under the laws of France (“Parent”), Breakfast Holdings Acquisition Corp., a Delaware corporation and an indirect wholly owned subsidiary of Parent (“Holding”), and Breakfast Acquisition Corp., a Delaware corporation and a direct wholly owned subsidiary of Holding (“Merger Sub”), which amended and restated the Agreement and Plan of Merger, dated as of November 24, 2019 (the “original merger agreement”), by and among the Company, Parent, Holding and Merger Sub (the “merger proposal”);

 

   

to consider and vote on a proposal to approve, by non-binding, advisory vote, certain compensation arrangements for the Company’s named executive officers in connection with the merger (the “compensation proposal”); and

 

   

to consider and vote on a proposal to adjourn or postpone the special meeting, if necessary or appropriate, to solicit additional proxies if there are not sufficient votes to approve the merger proposal (the “adjournment proposal”).

A copy of the merger agreement is attached as Annex A to the proxy statement. Upon the terms and subject to the conditions set forth in the merger agreement, Merger Sub will be merged with and into the Company (the “merger”), with the Company continuing as the surviving corporation in the merger and an indirect wholly owned subsidiary of Parent.

 

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SUMMARY

This summary highlights selected information contained elsewhere in this proxy statement. This summary does not contain all of the information you should consider. You should read the entire proxy statement, its annexes and the documents referred to in this proxy statement carefully before voting. Each item in this summary includes a page reference directing you to a more complete description of that topic. You may obtain the information incorporated by reference in this proxy statement without charge by following the instructions under the section entitled “Where You Can Find More Information” beginning on page 141 of this proxy statement.

Parties to the Merger (Page 30)

Tiffany & Co.

Tiffany & Co., a Delaware corporation (as previously defined, the “Company”), with headquarters in New York, New York, is a holding company that operates through Tiffany and Company (“Tiffany”) and the Company’s other subsidiary companies. Charles Lewis Tiffany founded Tiffany’s business in 1837. Today, with more than 14,000 employees, Tiffany and the Company’s other subsidiaries design, manufacture and market jewelry, watches and luxury accessories. The Company operates more than 300 retail stores worldwide as part of its omni-channel approach. The Company is listed on the New York Stock Exchange (the “NYSE”) under the symbol “TIF.” A detailed description of the Company’s business is located in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2020, filed with the Securities and Exchange Commission (the “SEC”) on March 20, 2020, which is incorporated by reference into this proxy statement. See the section entitled “Where You Can Find More Information” beginning on page 141.

LVMH Moët Hennessy-Louis Vuitton SE

LVMH Moët Hennessy-Louis Vuitton SE, a societas Europaea (European company) organized under the laws of France (as previously defined, “Parent”), is a holding company that operates through a portfolio of wine and spirits brands that includes Moët & Chandon, Dom Pérignon, Veuve Clicquot Ponsardin, Krug, Ruinart, Mercier, Château d’Yquem, Domaine du Clos des Lambrays, Château Cheval Blanc, Château du Galoupet, Château d’Esclans, Colgin Cellars, Hennessy, Glenmorangie, Ardbeg, Belvedere, Woodinville, Volcán de Mi Tierra, Chandon, Cloudy Bay, Terrazas de los Andes, Cheval des Andes, Cape Mentelle, Newton, Bodega Numanthia and Ao Yun and a portfolio of fashion and leather goods brands that includes Louis Vuitton, Christian Dior Couture, Celine, Loewe, Kenzo, Givenchy, Pink Shirtmaker, Fendi, Emilio Pucci, Marc Jacobs, Berluti, Nicholas Kirkwood, Loro Piana, RIMOWA, Patou and Fenty. Parent is present in the Perfumes and Cosmetics sector with Parfums Christian Dior, Guerlain, Parfums Givenchy, Kenzo Parfums, Perfumes Loewe, Benefit Cosmetics, Make Up For Ever, Acqua di Parma, Fresh, Fenty Beauty by Rihanna and Maison Francis Kurkdjian. Parent has a portfolio of watches and jewelry brands that includes Bvlgari, TAG Heuer, Chaumet, Repossi, Dior Watches, Zenith, Fred and Hublot. Parent is also active in selective retailing as well as in other activities through DFS, Sephora, Le Bon Marché, La Samaritaine, Groupe Les Echos, Cova, Le Jardin d’Acclimatation, Royal Van Lent, Belmond and Cheval Blanc hotels. Additional information about Parent and its subsidiaries is included on its website: www.lvmh.com. The information provided or accessible through Parent’s website is not part of, or incorporated by reference in, this proxy statement.

Holding

Breakfast Holdings Acquisition Corp., a Delaware corporation and an indirect wholly owned subsidiary of Parent (as previously defined, “Holding”), was incorporated for the purpose of entering into the merger agreement and consummating the transactions contemplated by the merger agreement. Holding, as the sole stockholder of Merger Sub, approved and adopted the terms and provisions of the merger agreement, including the consummation of the transactions contemplated thereby.

 

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Merger Sub

Breakfast Acquisition Corp., a Delaware corporation and a direct wholly owned subsidiary of Holding (as previously defined, “Merger Sub”), was incorporated for the purpose of entering into the merger agreement and consummating the transactions contemplated by the merger agreement. Prior to the effective time (as defined in the section entitled “Summary—The Merger” beginning on page 4) of the merger, Merger Sub will have conducted no other business activities and will have no assets, liabilities or obligations other than those incident to its formation and pursuant to the merger agreement and the transactions contemplated by the merger agreement. Upon completion of the merger, Merger Sub will merge with and into the Company and will thereafter cease to exist.

The Special Meeting (Page 32)

Date, Time, Place and Purpose of the Special Meeting (Page 32)

This proxy statement is being furnished to our stockholders as part of the solicitation of proxies by the Board for use at the special meeting to be held on [●], at [●], Eastern Time. Due to public health concerns surrounding the novel coronavirus (COVID-19) and to prioritize the health and well-being of the Company’s employees, stockholders and other community members, the Company will hold the special meeting in a virtual meeting format only on http://www.virtualshareholdermeeting.com/TIF2021SM. You will not be able to attend the special meeting physically in person.

At the special meeting, holders of our common stock, par value $0.01 per share (our “common stock,” and the holders thereof, our “stockholders”), will be asked to approve the merger proposal, the compensation proposal and the adjournment proposal.

Record Date and Quorum (Page 33)

The Board has fixed the close of business on [●] as the record date for the determination of stockholders entitled to receive notice of, and to vote at, the special meeting, and any adjournments or postponements thereof. Only holders of record of our common stock as of the close of business on the record date are entitled to receive notice of, and to vote at (in person or by proxy), the special meeting and at any adjournment or postponement thereof.

As of [●], there were [●] shares of our common stock issued and outstanding. We expect that a similar figure will be outstanding and entitled to vote at the special meeting as of the close of business on the record date. Each holder of our common stock issued and outstanding as of the close of business on the record date is entitled to cast one (1) vote on each matter properly brought before the special meeting for each share of such common stock.

The presence at the special meeting, in person or represented by proxy, of the holders of a majority of the shares of our common stock issued and outstanding and entitled to vote thereat as of the close of business on the record date constitutes a quorum. Abstentions (as described in the section entitled “The Special Meeting—Vote Required” starting on page 34) are counted as present for the purpose of determining whether a quorum is present. Because brokers do not have discretionary authority to vote on any of the proposals at the special meeting, if you do not instruct your bank, broker or other nominee to vote your shares of our common stock, your shares of our common stock will not be voted (“broker non-votes”) and are not counted for the purpose of determining the presence of a quorum.

Vote Required (Page 34)

Approval of the merger proposal requires the affirmative vote of the holders of a majority of the shares of our common stock issued and outstanding as of the close of business on the record date. Abstentions and broker non-votes will have the same effect as a vote “AGAINST” approval of the merger proposal.

 

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Approval of the compensation proposal requires the affirmative vote of the holders of a majority of the shares of our common stock present in person or represented by proxy at the special meeting and entitled to vote on such proposal. Abstentions will have the same effect as a vote “AGAINST” approval of the compensation proposal. Broker non-votes will have no effect on the approval of the compensation proposal, assuming a quorum is present.

Approval of the adjournment proposal requires the affirmative vote of the holders of a majority of the shares of our common stock present in person or represented by proxy at the special meeting and entitled to vote on such proposal. Abstentions will have the same effect as a vote “AGAINST” approval of the adjournment proposal. Broker non-votes will have no effect on the approval of the adjournment proposal, assuming a quorum is present.

In accordance with the General Corporation Law of the State of Delaware (as amended, and all rules and regulations promulgated thereunder, the “DGCL”), the amendment and restatement of the original merger agreement necessitates that the merger agreement be adopted by the affirmative vote of the holders of a majority of the shares of our common stock issued and outstanding as of the close of business on the record date. As a result, you are now being asked to vote on the proposal to adopt the merger agreement, which amended and restated the original merger agreement in its entirety, despite the fact that you may have voted on the proposal to adopt the original merger agreement in connection with the February 4, 2020 special meeting of the Company’s stockholders.

As of [●], the current directors and executive officers of the Company beneficially owned, in the aggregate, [●] shares of our common stock (not including any shares of our common stock deliverable upon exercise of or underlying any Company options, Company PSUs or Company RSUs (each as defined in the section entitled “Summary—Interests of Certain Persons in the Merger” beginning on page 8 and collectively, the “Company equity awards”)), representing less than 1% of the outstanding voting power of our common stock as of [●]. We expect that our directors and executive officers will beneficially own and be entitled to vote a similar figure at the close of business on the record date. The directors and officers have informed the Company that they currently intend to vote all such shares of our common stock “FOR” approval of the merger proposal, “FOR” approval of the compensation proposal and “FOR” approval of the adjournment proposal.

Proxies and Revocation (Page 37)

Any stockholder of record entitled to vote at the special meeting may vote in person at the special meeting, or by submitting a proxy to vote via the Internet, by telephone or by mail using the enclosed postage-prepaid envelope. If you are a beneficial owner of shares of our common stock and your shares are held in “street name,” you should instruct your bank, broker or other nominee on how to vote your shares of our common stock using the instructions provided by your bank, broker or other nominee. If you fail to submit a proxy or to vote in person at the special meeting, or you do not provide your bank, broker or other nominee with instructions, as applicable, your shares of our common stock will not be voted on the merger proposal, which will have the same effect as a vote “AGAINST” approval of the merger proposal.

If you fail to vote in person at the special meeting or fail to return your proxy card or fail to submit your proxy to vote via the Internet or by telephone, or if your shares of our common stock are held in “street name” by your bank, broker or other nominee, and you fail to instruct your bank, broker or other nominee to vote, your shares of our common stock will not be voted and will not have an effect on the approval of the compensation proposal or the adjournment proposal, assuming a quorum is present.

Shares of our common stock held in the Tiffany and Company Employee Profit Sharing and Retirement Savings Plan (the “Tiffany 401(k) Plan”) are voted by the Tiffany 401(k) Plan’s trustee in accordance with specific instructions given by Tiffany 401(k) Plan participants to whose accounts such shares have been

 

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allocated. Any shares of our common stock held in the Tiffany 401(k) Plan for which no instructions are received will be voted in the same proportion as those shares for which instructions are received. Please note that if you are a beneficial owner of shares of our common stock held through the Tiffany 401(k) Plan, you will not be able to vote those shares in person at the special meeting.

You have the right to revoke a proxy at any time prior to the taking of the vote at the special meeting. You may revoke your proxy prior to the taking of the vote at the special meeting, by submitting a new proxy to vote your shares over the Internet or by telephone (only your latest Internet or telephone proxy is counted), by signing a later-dated new proxy and mailing it, in each case, in accordance with the instructions on the enclosed proxy card or by sending a written revocation of your proxy to the Company prior to the special meeting. In addition, you may revoke your proxy by attending the special meeting virtually and voting in person; however, attending the special meeting virtually will not revoke your written, Internet or telephone proxy, as the case may be, unless you specifically request revocation or vote in person at the special meeting.

If you are a beneficial owner of shares of our common stock held in “street name”, you may change your instruction to your bank, broker or other nominee, as applicable, by submitting a subsequent instruction to such bank, broker or other nominee, or you may change your vote by attending the special meeting virtually and voting your shares

If you are a beneficial owner of shares of our common stock held through the Tiffany 401(k) Plan, you may change your instruction to the Tiffany 401(k) Plan trustee by submitting a subsequent instruction to such trustee by 11:59 p.m., Eastern Time, on [●]. You will not be able to vote those shares in person at the special meeting.

The Merger (Page 41)

The Company entered into an Agreement and Plan of Merger, dated as of November 24, 2019, with Parent, Holding and Merger Sub, which we refer to as the “original merger agreement.” On October 28, 2020, the Company, Parent, Holding and Merger Sub entered into an Amended and Restated Agreement and Plan of Merger (the “merger agreement”), which amended and restated the original merger agreement in its entirety.

Upon the terms and subject to the conditions set forth in the merger agreement, and in accordance with the applicable provisions of the DGCL, at the effective time (as defined herein), Merger Sub will merge with and into the Company, whereupon the separate corporate existence of Merger Sub will cease and the Company will continue as the surviving corporation in the merger and an indirect wholly owned subsidiary of Parent. We refer to the time when the merger becomes effective as the “effective time,” which will occur upon a certificate of merger with respect to the merger executed in accordance with, and containing such information as is required by, the relevant provisions of the DGCL (the “certificate of merger”) having been duly filed with and accepted by the Secretary of State of the State of Delaware (or at such later time as the Company and Parent may agree in writing and specify in the certificate of merger in accordance with the relevant provisions of the DGCL). Following the merger, the Company will cease to be a publicly traded company. You will not own any shares of the capital stock of the surviving corporation. Unless the merger agreement is terminated, the closing of the merger (the “closing”) will take place on the day no later than the fifth (5th) business day after the conditions set forth in the merger agreement have been satisfied or waived (to the extent permitted by applicable law) by the party entitled to the benefit of such conditions, or on such other date and time as the Company and Parent may agree in writing (such date on which the closing occurs, the “closing date”).

Changes to the Original Merger Agreement Pursuant to the Merger Agreement (page 41)

The original merger agreement was amended and restated pursuant to the merger agreement to, among other things, (i) reduce the per share merger consideration to $131.50 in cash from $135.00 in cash, in each case, without interest, less any required withholding taxes, (ii) expressly permit the Company to declare and pay regular quarterly dividends of up to $0.58 per share in the Company’s sole discretion, (iii) eliminate certain

 

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conditions to the closing such as (A) the absence of a material adverse effect on the Company, and (B) the absence of (1) any legal prohibition by a governmental entity that is in effect and enjoins, prevents or otherwise prohibits, materially restrains or materially impairs or makes unlawful consummation of the transactions contemplated by the merger agreement and (2) any proceeding instituted by a governmental entity that seeks to temporarily or permanently impose a legal restraint, (iv) narrow the condition to the closing with respect to the accuracy of the Company’s representations and warranties to only select fundamental representations and warranties (relating to the Company’s organization, good standing and qualification, capital structure (except for de minimis inaccuracies), corporate authority and approval, actions taken to render inapplicable takeover statutes, absence of rights plans, absence of undisclosed broker’s or finder’s fees and receipt of financial advisor opinions), (v) expand the meaning of ordinary course of business (as defined in the section entitled “The Merger Agreement—Conduct of Our Business Pending the Merger” beginning on page 107) to include the manner in which the Company and its subsidiaries have been operating since the date of the original merger agreement through the date of the merger agreement, and to include any COVID-19 measures (as defined in the section entitled “The Merger Agreement—Representations and Warranties—COVID-19 Measures” beginning on page 106) taken after the signing of the merger agreement, and (vi) provide that if the merger has not been consummated within six (6) business days after the date on which the requisite company vote (as defined in the section entitled “Summary—The Merger Agreement—Termination” beginning on page 14) has been obtained as a result of the material breach of the merger agreement by Parent or Merger Sub (it being understood that the closing cannot take place prior to January 7, 2021), the Company will have no further obligation to comply with certain obligations in respect of the conduct of its business pending the merger. Parent further agreed that, in the event that any proceeding is brought by the Company to enforce the terms of the merger agreement or for money damages, the “per share merger consideration” will be deemed, for all purposes in that proceeding, including any award of specific performance or damages, to be $135.00 in cash, without interest and less any required withholding taxes.

As described in the section entitled “The Merger—Background of the Merger” beginning on page 42, on September 9, 2020, the Company filed a lawsuit against Parent, Holding and Merger Sub, and, on September 29, 2020, Parent, Holding and Merger Sub filed counterclaims against the Company (the “merger litigation”) in the Court of Chancery of the State of Delaware (the “Delaware Court of Chancery”) related to the merger under the original merger agreement. Concurrently with the execution of the merger agreement, the Company, Parent, Holding and Merger Sub also entered into a settlement agreement (the “settlement agreement”) pursuant to which, among other things, each party agreed to dismiss with prejudice all claims that it brought in the merger litigation and filed a stipulation and order of dismissal dismissing with prejudice all claims asserted by the parties in the merger litigation.

For additional information, see the section entitled “The Merger—Changes to the Original Merger Agreement Pursuant to the Merger Agreement” beginning on page 41.

The Merger Consideration (Page 41)

At the effective time, upon the terms and subject to the conditions set forth in the merger agreement, each share of our common stock issued and outstanding immediately prior to the effective time (other than excluded shares, the “eligible shares”) will be automatically canceled and will cease to exist, and will be converted into the right to receive an amount of cash equal to $131.50 (the “per share merger consideration”), without interest, less any required withholding taxes, other than: (i) shares of our common stock that are owned or held in treasury immediately prior to the effective time by the Company or any wholly owned subsidiary of the Company or owned immediately prior to the effective time by Parent or any wholly owned subsidiary of Parent, including Holding and Merger Sub (collectively, the “cancelled shares”), which will be automatically canceled without payment of any consideration therefor and will cease to exist; and (ii) shares of our common stock, other than the cancelled shares, that are held by a stockholder of record who did not vote in favor of the merger proposal with respect to such shares and is entitled to demand and validly demands appraisal of such shares of our common stock pursuant to, and complies in all respects with, Section 262 of the DGCL (such shares, the “dissenting shares,” and together with the cancelled shares, the “excluded shares”).

 

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Pursuant to the merger agreement, in the event that any proceeding is brought by the Company to enforce the terms of the merger agreement or for money damages, the “per share merger consideration” will be deemed, for all purposes in that proceeding, including any award of specific performance or damages, to be $135.00 in cash, without interest and less any required withholding taxes.

Reasons for the Merger; Recommendation of the Board (Page 57)

After careful consideration of various factors as described in the section entitled “The Merger—Reasons for the Merger; Recommendation of the Company’s Board of Directors” beginning on page 57, the Board determined that the merger agreement, the merger and the other transactions contemplated by the merger agreement are advisable to, and in the best interests of, the Company and the Company’s stockholders, and approved and declared advisable the merger agreement and the execution, delivery and performance of the merger agreement by the Company and the consummation of the merger and the other transactions contemplated by the merger agreement. The Board also directed that the merger agreement be submitted to the stockholders for adoption at the special meeting and recommended that the stockholders vote to adopt the merger agreement and to approve and/or adopt such other matters that are submitted for their approval and/or adoption in connection with the merger agreement at the special meeting. In the course of reaching its determination and recommendation, the Board consulted with and received the advice and assistance of its outside legal and financial advisors and senior management at various times.

In considering the recommendation of the Board with respect to the merger proposal, you should be aware that certain of our directors and executive officers may have interests in the merger that are different from, or in addition to, yours. Members of the Board were aware of and considered these interests, among other matters, in evaluating and negotiating the merger agreement and the merger, and in recommending to the stockholders of the Company that the merger agreement be adopted. For additional information, see the section entitled “The Merger—Interests of Certain Persons in the Merger” beginning on page 90.

The Board recommends that you vote “FOR” approval of the merger proposal, “FOR” approval of the compensation proposal and “FOR” approval of the adjournment proposal.

Opinions of Financial Advisors (Page 65)

Opinion of Centerview Partners (Page 65)

The Company retained Centerview Partners LLC (“Centerview”) as financial advisor to the Company in connection with the proposed merger and the other transactions contemplated by the merger agreement, which are collectively referred to as the “transaction” throughout this section and the summary of Centerview’s opinion in the section entitled “The Merger—Opinions of the Company’s Financial Advisors—Opinion of Centerview Partners” beginning on page 65. In connection with this engagement, the Board requested that Centerview evaluate the fairness, from a financial point of view, to the holders of shares of common stock (other than excluded shares) of the merger consideration proposed to be paid to such holders pursuant to the merger agreement. On October 28, 2020, Centerview rendered to the Board its oral opinion, which was subsequently confirmed by delivery of a written opinion dated October 28, 2020 that, as of such date and based upon and subject to the assumptions made, procedures followed, matters considered, and qualifications and limitations upon the review undertaken by Centerview in preparing its opinion, the merger consideration proposed to be paid to the holders of shares of common stock (other than excluded shares) pursuant to the merger agreement was fair, from a financial point of view, to such holders.

The full text of the written opinion of Centerview, dated October 28, 2020, which describes the assumptions made, procedures followed, matters considered, and qualifications and limitations upon the review undertaken by Centerview in preparing its opinion, is attached as Annex B and is incorporated by reference. Centerview’s financial advisory services and opinion were provided for the information and

 

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assistance of the Board (in their capacity as directors and not in any other capacity) in connection with and for purposes of its consideration of the transaction and Centerview’s opinion addressed only the fairness, from a financial point of view, as of the date thereof, to the holders of shares of common stock (other than excluded shares) of the merger consideration to be paid to such holders pursuant to the merger agreement. Centerview’s opinion did not address any other term or aspect of the merger agreement or the transaction and does not constitute a recommendation to any stockholder of the Company or any other person as to how such stockholder or other person should vote with respect to the merger or otherwise act with respect to the transaction or any other matter.

The full text of Centerview’s written opinion should be read carefully in its entirety for a description of the assumptions made, procedures followed, matters considered, and qualifications and limitations upon the review undertaken by Centerview in preparing its opinion.

In connection with Centerview’s services as a financial advisor to the Board and pursuant to an engagement letter, as amended, between the Company and Centerview, the Company agreed to pay Centerview an aggregate fee of $45 million, $3 million of which was paid upon the rendering of Centerview’s opinion in connection with the original merger agreement, $3 million of which was paid upon the rendering of Centerview’s opinion in connection with the merger agreement and $39 million of which is payable contingent upon consummation of the merger.

For additional information, see the section entitled “The Merger—Opinions of the Company’s Financial Advisors—Opinion of Centerview Partners” beginning on page 65 and Annex B to this proxy statement.

Opinion of Goldman Sachs (Page 72)

At a meeting of the Board held on October 28, 2020, Goldman Sachs & Co. LLC (“Goldman Sachs”) rendered to the Board its oral opinion, subsequently confirmed in its written opinion dated October 28, 2020, to the effect that, as of the date of Goldman Sachs’ written opinion, and based upon and subject to the factors and assumptions set forth in Goldman Sachs’ written opinion, the per share merger consideration of $131.50 to be paid to the holders (other than Parent and its affiliates) of shares of common stock pursuant to the merger agreement was fair from a financial point of view to such holders.

The full text of the written opinion of Goldman Sachs, dated October 28, 2020, which sets forth the assumptions made, procedures followed, matters considered, qualifications and limitations on the review undertaken in connection with Goldman Sachs’ opinion, is attached to this proxy statement as Annex C. The summary of Goldman Sachs’ opinion contained in this proxy statement is qualified in its entirety by reference to the full text of Goldman Sachs’ written opinion. Goldman Sachs’ advisory services and opinion were provided for the information and assistance of the Board in connection with its consideration of the merger and the opinion does not constitute a recommendation as to how any holder of shares of common stock should vote with respect to the merger or any other matter.

Pursuant to an engagement letter between the Company and Goldman Sachs, the Company agreed to pay Goldman Sachs for its services in connection with the merger an aggregate fee that is estimated, based on the information available as of the date of announcement, at approximately $32 million plus an additional discretionary fee of up to approximately $16 million, all of which is contingent upon completion of the merger.

For additional information, see the section entitled “The Merger—Opinions of the Company’s Financial Advisors—Opinion of Goldman Sachs” beginning on page 72 and Annex C to this proxy statement.

Financing of the Merger (Page 86)

The merger is not subject to a financing condition.

 

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Parent, Holding and Merger Sub have represented in the merger agreement that Parent and its controlled affiliates will have sufficient cash, available lines of credit or other sources of funds at the effective time necessary to consummate the transactions contemplated by the merger agreement. Parent, Holding and Merger Sub have further represented in the merger agreement that Parent and its controlled affiliates have the financial resources and capabilities to fully perform all of Parent’s, Holding’s and Merger Sub’s obligations under the merger agreement.

Parent has agreed to notify the Company if Parent or any of its subsidiaries has entered into any commitment letter or other agreement pursuant to which any person (or persons) has committed to provide debt financing for the purposes of financing the transactions contemplated by the merger agreement, and to identify to the Company the applicable person (or persons) that has committed to provide such debt financing. On November 25, 2019, Parent notified the Company that Parent has entered into a facilities agreement, dated as of November 25, 2019 (the “facilities agreement”), with, among others, Citigroup Global Markets Limited, as coordinator, and Citibank Group plc, UK Branch, as agent, which provides for a $8,500,000,000 bridge loan facility, a $5,750,000,000 364-day revolving credit facility and a €2,500,000,000 revolving credit facility. On February 11, 2020 and April 7, 2020, Parent completed eight bond issuances totaling €10,700,000,000 (the “bonds”), following which the $8,500,000,000 bridge loan facility was terminated. Amongst other sources, proceeds of the 364-day revolving credit facility, the revolving credit facility and the bonds may be used for the payment of the merger consideration and fees and expenses in connection therewith.

Prior to the closing date, the Company has agreed to, and has agreed to cause its subsidiaries to, use commercially reasonable efforts to cause its and the subsidiaries’ respective affiliates and representatives to use commercially reasonable efforts to provide all customary cooperation that is reasonably requested by Parent in connection with any debt financing obtained by Parent or any of its subsidiaries for the purpose of financing the transactions contemplated by the merger agreement. For additional information with respect to the financing of the merger, see the section entitled “The Merger—Financing of the Merger” beginning on page 86.

Interests of Certain Persons in the Merger (Page 90)

In considering the recommendation of the Board that you vote to adopt the merger agreement, you should be aware that aside from their interests as Company stockholders, the Company’s directors and executive officers have interests in the merger that are different from, or in addition to, those of Company stockholders generally. These interests include, among others:

 

   

Under the merger agreement, in connection with the closing, (i) each award of options to purchase shares (“Company options”) that is outstanding immediately prior to the effective time, whether vested or unvested, will be canceled and converted into the right to receive an amount in cash, without interest, equal to the product of (A) the excess, if any, of (1) $131.50 over (2) the per share exercise price for such Company option, multiplied by (B) the total number of shares underlying such Company option, less any required withholding taxes, (ii) each performance stock unit that vests on the basis of time and the achievement of performance metrics (“Company PSU”) that is outstanding immediately prior to the effective time will be canceled and converted into the right to receive an amount in cash, without interest, equal to the sum of (A) any accrued but unpaid cash in respect of dividend equivalent rights representing fractional shares with respect to such Company PSU, plus (B) the product of (1) the total number of shares subject to such Company PSU (including, for the avoidance of doubt, any dividend equivalent units credited in respect of Company PSUs) immediately prior to the effective time, multiplied by (2) $131.50, less any required withholding taxes and (iii) each restricted stock unit that vests solely on the basis of time (“Company RSU”) that is outstanding immediately prior to the effective time will be canceled and converted into the right to receive an amount in cash, without interest, equal to the sum of (A) any accrued but unpaid cash in respect of dividend equivalent rights representing fractional shares with respect to such Company RSU, plus (B) the product of (1) the total number of shares underlying such Company RSU (including, for the avoidance of doubt, any dividend

 

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equivalent units credited in respect of Company RSUs), multiplied by (2) $131.50, less any required withholding taxes; provided that if the consummation of the merger occurs on or following February 1, 2021 and prior to May 1, 2021, 25% of the Company equity awards granted in respect of the Company’s fiscal year 2021 will receive the foregoing treatment and the remainder of such awards will be forfeited.

 

   

Each of the Company’s executive officers is party to a retention agreement with the Company that provides for “double-trigger” severance benefits in the event of qualifying terminations of employment within the two (2) year period following the merger. Parent and the Company have agreed that the Company’s Chief Executive Officer, Chief Financial Officer and General Counsel will have “good reason” to resign under their respective retention agreements at the closing, subject to their continued employment though closing.

 

   

Following the merger, the 1994 Tiffany and Company Supplemental Retirement Income Plan (the “Supplemental Plan”) provides for “double-trigger” vesting upon a qualifying termination, or “single-trigger” vesting at the time of the merger if the participant has either attained age 65, or age 55 with ten (10) years of service. Certain of the Company’s executive officers participate, but are not yet vested, in the Supplemental Plan.

 

   

In accordance with the merger agreement, with respect to compensation of the Company’s non-employee directors, annual equity awards in respect of fiscal year 2020 were granted in the ordinary course of business consistent with past practice solely in the form of Company RSUs, and cash fees in respect of fiscal year 2020 will be paid in full prior to the closing, and if the closing does not occur prior to May 1, 2021, annual equity awards in respect of fiscal year 2021 may be granted in the ordinary course of business consistent with past practice solely in the form of Company RSUs, and cash fees in respect of fiscal year 2021 will be paid in full prior to the closing.

 

   

The Company may continue to implement strategies to mitigate the impact of Sections 280G and 4999 of the Code (as defined in the section entitled “The Merger—Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 95) with respect to payments and other benefits that may be payable to employees (including executive officers) in connection with the transaction (including, without limitation, by entering into restrictive covenant agreements); provided that any action taken to accelerate any payments to such employees (other than actions substantially similar to mitigation actions taken prior to the date of the merger agreement) is subject to the prior consultation of Parent and in no event will the Company be permitted to provide or enter into tax gross-ups. In accordance with the foregoing, on December 13, 2019, the Board and/or the compensation committee of the Board (“Compensation Committee”), as applicable, approved the following actions to mitigate the potential impact of Sections 280G and 4999 of the Code on the Company and its executive officers (including certain of the named executive officers): (i) payment in December 2019 of a portion of the 2019 annual cash incentive awards that would otherwise have been payable in the first quarter of fiscal year 2020; (ii) acceleration of the vesting of certain Company RSUs and Company options scheduled to vest before January 31, 2021 (so that such Company RSUs and Company options vested as of December 17, 2019 and were settled or eligible for exercise, respectively, thereafter); (iii) acceleration of the vesting of a portion of the Company PSUs awarded in January 2017 (so that such Company PSUs, which were projected to vest and be earned in March 2020, vested as of December 17, 2019 and were settled thereafter); and (iv) payment in cash to certain of the executive officers who are not named executive officers in December 2019 of a portion of the annual equity awards that would have otherwise been granted in the ordinary course in January 2020, subject to clawback and repayment if the executive officer resigns without good reason or is terminated for cause prior to the closing, or if the merger agreement is terminated without the closing of the merger. In exchange for the treatment described above, each named executive officer entered into new restrictive covenant agreements that include non-competition and non-solicitation restrictions for a period of one (1) year post-employment (eighteen (18) months for the CEO).

 

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The parties have agreed that the Company may grant cash retention bonuses to Company employees on terms determined by the Company acting in good faith following consultation with Parent; provided that any such award to certain persons, including all executive officers, is subject to the prior consent of Parent. On December 13, 2019, the Board approved the payment of retention awards to certain named executive officers (and three (3) other executive officers who are not named executive officers), subject to the execution of the restrictive covenant agreement described above and a special bonus agreement, which provides for clawback and repayment if the executive officer resigns without good reason (or pursuant to a claim of good reason where the claim is based solely upon the occurrence or anticipated occurrence of the merger) or is terminated for cause prior to January 31, 2021. The retention awards paid to named executive officers are as follows: Messrs. Bogliolo ($2,700,000) and Galtie ($800,000) and Mses. Harlan ($2,530,000) and Vitale ($900,000). The Company determined to pay these retention awards to the executive officers and certain other recipients who are not executive officers in December 2019 subject to the clawback provisions in order to mitigate the potential impact of Sections 280G and 4999 of the Code with respect to such awards.

 

   

The Company’s directors and officers will be entitled to certain ongoing indemnification and coverage under directors’ and officers’ liability insurance policies pursuant to the merger agreement (as described in the section entitled “The Merger Agreement—Indemnification; Directors’ and Officers’ Insurance” beginning on page 125).

Members of the Board were aware of and considered these interests, among other matters, in evaluating and negotiating the merger agreement and the merger, and in recommending to the Company’s stockholders that the merger agreement be adopted. For additional information, see the sections entitled “The Merger—Background of the Merger” beginning on page 42 and “The Merger—Reasons for the Merger; Recommendation of the Company’s Board of Directors” beginning on page 57. These interests are described in more detail below in the section entitled “The Merger—Interests of Certain Persons in the Merger” beginning on page 90, and certain of them are quantified in the section entitled “Non-Binding, Advisory Vote on Merger-Related Compensation for the Company’s Named Executive Officers” beginning on page 128.

Material U.S. Federal Income Tax Consequences of the Merger (Page 95)

If you are a U.S. holder (as defined in the section entitled “The Merger—Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 95), the receipt of cash in exchange for shares of common stock pursuant to the merger will generally be a taxable transaction for U.S. federal income tax purposes. You should consult your own tax advisor regarding the particular tax consequences to you of the exchange of shares of common stock for cash pursuant to the merger in light of your particular circumstances (including the application and effect of any state, local or foreign income and other tax laws). You should read the section entitled “The Merger—Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 95 for a more detailed discussion of the U.S. federal income tax consequences of the merger. You should also consult your tax advisor for a complete analysis of the effect of the merger on your federal, state and local and/or foreign taxes.

Regulatory Approvals (Page 97)

All regulatory authorizations, consents, orders, approvals or waivers required for the merger under the merger agreement have been obtained. Pursuant to the original merger agreement, on January 3, 2020, Parent and the Company filed notification of the merger with the Federal Trade Commission (the “FTC”) and the Department of Justice (the “DOJ”) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (as amended, and all rules and regulations promulgated thereunder, collectively, the “HSR Act”), and on February 3, 2020, the waiting period under the HSR Act in connection with the merger expired (the “original HSR clearance”). Further, on March 26, 2020, the Committee on Foreign Investment in the United States (“CFIUS”) informed the parties that it had concluded its review of the merger and determined that there are no unresolved national security concerns with respect to the transaction. Since then, the Company obtained the existing

 

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competition clearances (as defined in the section entitled “The Merger—Regulatory Approvals”) from certain non-U.S. governmental authorities with jurisdiction over antitrust and competition matters.

The original HSR clearance will expire as of February 2, 2021. Pursuant to the merger agreement, if the SEC does not confirm orally or in writing that it has no further comments on this proxy statement or that it does not intend to review this proxy statement prior to December 15, 2020, Parent, Holding, Merger Sub and the Company will, by no later than December 18, 2020, file a notification of the merger with the FTC and DOJ under the HSR Act, and will request early termination of the waiting period under the HSR Act. With such filing by December 18, 2020, the waiting period under the HSR Act is expected to expire by the middle of January 2021, such that the merger would have the antitrust clearance under the HSR Act, even after the original HSR clearance expires.

With respect to the existing competition clearances, if at any time it becomes reasonably apparent to the Company that, as a result of the timing of the potential closing date, it will not be reasonably likely that the closing date will occur prior to the expiration date of any such existing competition clearance, each of the Company and Parent, as applicable, are required to prepare and file, with respect to the transactions contemplated by the merger agreement, any notifications required or advisable under applicable antitrust laws, such complete filings to be made by no later than the business day after the applicable existing competition clearance expires. The merger agreement does not provide for any further action with respect to CFIUS.

Upon the terms and subject to the conditions set forth in the merger agreement, the Company and Parent have agreed to cooperate with each other and use (and cause their respective controlled affiliates to use) their respective reasonable best efforts to take or cause to be taken all actions, and do or cause to be done all things, necessary or advisable on their respective parts under the merger agreement and applicable laws to consummate and make effective the merger and the other transactions contemplated by the merger agreement as promptly as practicable, including (i) maintaining in effect the existing competition clearances (including not taking any action that could reasonably be expected to cause any existing competition clearance to be withdrawn, rescinded or rendered invalid), (ii) preparing and filing, in consultation with the other, as promptly as practicable, with any governmental entity documentation to effect all necessary notices, reports, consents, registrations, approvals, permits, authorizations, expirations of waiting periods and other filings, (iii) obtaining as promptly as practicable all consents, registrations, approvals, permits and authorizations necessary or advisable to be obtained from any governmental entity in order to consummate the merger and the other transactions contemplated by the merger agreement and (iv) not taking any action that could, or could reasonably be expected to, cause any governmental entity to prevent, delay or impair consummation of the merger.

Further, if Parent or any of its affiliates (or any person acting on behalf of Parent or at Parent’s direction) receives any request for information from any governmental entity relating to the merger or the Company or is notified by the Company or any governmental entity of any request or requirement of any governmental entity for Parent to provide any information, document or filing to such governmental entity relating to the merger or the Company, Parent will provide, and will cause its affiliates to provide, a complete response to such request as promptly as reasonably practicable and in any event within five (5) business days of receiving such request for information. Parent must (i) notify the Company within twenty-four (24) hours of receipt of any communication or request for information from a governmental entity relating to the merger or the Company and (ii) consult with the Company with respect to all aspects of its response thereto prior to providing any substantive response to any governmental entity with respect thereto.

You should read the section entitled “The Merger—Regulatory Approvals” beginning on page 97 for a more detailed discussion of the parties’ obligations with respect to maintaining or obtaining regulatory approvals or waivers in connection with the merger.

 

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The Merger Agreement (Page 99)

Treatment of Common Stock and Equity Awards (Page 100)

 

   

Common Stock. At the effective time, each eligible share will be automatically canceled and will cease to exist, and will be converted into the right to receive, upon the terms and subject to the conditions set forth in the merger agreement, $131.50 in cash, without interest, less any required withholding taxes.

 

   

Company Options. At the effective time, each Company option that is outstanding immediately prior to the effective time, whether vested or unvested, will be canceled and converted into the right to receive an amount in cash, without interest, equal to the product of (i) the excess, if any, of (A) $131.50 over (B) the per share exercise price for such Company option, multiplied by (ii) the total number of shares underlying such Company option, less any required withholding taxes.

 

   

Company PSUs. At the effective time, each Company PSU that is outstanding immediately prior to the effective time will be canceled and converted into the right to receive an amount in cash, without interest, equal to the sum of (A) any accrued but unpaid cash in respect of dividend equivalent rights representing fractional shares with respect to such Company PSU, plus (B) the product of (i) the total number of shares subject to such Company PSU (including, for the avoidance of doubt, any dividend equivalent units credited in respect of Company PSUs) immediately prior to the effective time, multiplied by (ii) $131.50, less any required withholding taxes; provided that if the consummation of the merger occurs on or following February 1, 2021 and prior to May 1, 2021, 25% of the Company PSUs granted in respect of the Company’s fiscal year 2021 will receive the foregoing treatment and the remainder of such awards will be forfeited.

 

   

Company RSUs. At the effective time, each Company RSU that is outstanding immediately prior to the effective time will be canceled and converted into the right to receive an amount in cash, without interest, equal to the sum of (A) any accrued but unpaid cash in respect of dividend equivalent rights representing fractional shares with respect to such Company RSU, plus (B) the product of (i) the total number of shares underlying such Company RSU (including, for the avoidance of doubt, any dividend equivalent units credited in respect of Company RSUs), multiplied by (ii) $131.50, less any required withholding taxes; provided that if the consummation of the merger occurs on or following February 1, 2021 and prior to May 1, 2021, 25% of the Company RSUs granted in respect of the Company’s fiscal year 2021 equity awards will receive the foregoing treatment and the remainder of such awards will be forfeited.

No Solicitation of Acquisition Proposals; Board Recommendation Changes (Page 112)

Until the effective time or earlier termination of the merger agreement in accordance with its terms, subject to certain exceptions, we are not permitted to (i) initiate, solicit, cause, propose or knowingly encourage, assist or facilitate any inquiry, proposal or offer with respect to, or the making, submission or announcement of any acquisition proposal (as defined in the section entitled “The Merger Agreement—No Solicitation of Acquisition Proposals; Board Recommendation Changes” beginning on page 112) or any inquiry, proposal or request for information that would reasonably be expected to lead to, or result in, an acquisition proposal or (ii) engage in, conduct, continue, respond to or otherwise participate in any discussions or negotiations regarding, or disclose or furnish to any person any non-public information or data concerning the Company or its subsidiaries with respect to, or cooperate in any way that would otherwise reasonably be expected to lead to, any acquisition proposal or any inquiry, proposal, offer or request for information that would reasonably be expected to lead to, or result in, an acquisition proposal.

Notwithstanding these restrictions, under certain circumstances, we may, prior to the time the requisite company vote (as defined in the section entitled “Summary—The Merger Agreement—Termination” beginning on page 14) is obtained, in response to an unsolicited, bona fide written acquisition proposal, acting upon the recommendation of the Board and subject to certain obligations to provide Parent with advance notice and to

 

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keep Parent informed: (i) provide information and data concerning the Company and its subsidiaries and access to the Company and its subsidiaries’ properties, books and records, provided that the Company must make available to Parent such information or data not previously made available to Parent, and that the Company must receive from the person making such acquisition proposal an executed confidentiality agreement with terms at least as restrictive on the person as the terms in the confidentiality agreement between the Company and Parent are on Parent; and (ii) engage or otherwise participate in any discussions or negotiations with such person regarding such acquisition proposal if the Board determines prior to taking such action that such acquisition proposal constitutes, or could reasonably be expected to result in, a superior proposal (as defined in the section entitled “The Merger Agreement—No Solicitation of Acquisition Proposals; Board Recommendation Changes—Non-Solicitation Exceptions” beginning on page 113) and that the failure to take such action would be inconsistent with the Board’s fiduciary duties.

The merger agreement also provides, among other restrictions, that the Board cannot fail to include the recommendation that the holders of our common stock adopt the merger agreement in the proxy statement; withhold, withdraw, qualify, amend or modify the Board’s recommendation to stockholders to adopt the merger agreement; or approve or recommend any acquisition proposal. Notwithstanding the foregoing, as provided in the merger agreement, we may, prior to the time the requisite company vote is obtained, and subject to certain obligations to provide Parent with advance written notice, (x) make a change of recommendation (as defined in the section entitled “The Merger Agreement—No Solicitation of Acquisition Proposals; Board Recommendation Changes—Change of Recommendation or Termination of the Merger Agreement” beginning on page 114) (A)(1) in response to an acquisition proposal that the Board determines to be a superior proposal that is made and not withdrawn or (2) if an intervening event (as defined in the section entitled “The Merger Agreement—No Solicitation of Acquisition Proposals; Board Recommendation Changes—Change of Recommendation or Termination of the Merger Agreement” beginning on page 114) has occurred and (B) the Board determines in good faith (after consultation with its outside legal counsel and financial advisor) that failure to take such action in response to such superior proposal or intervening event, as applicable, would violate the directors’ fiduciary duties under applicable law, or (y) subject to certain obligations to take into account any changes to the terms of the merger agreement proposed by Parent in good faith prior to termination and the payment of the termination fee (as defined in the section entitled “The Merger Agreement—Termination Fee” beginning on page 124) payable by the Company, authorize the Company to terminate the merger agreement in order to enter into a definitive written agreement with respect to such superior proposal if the Board determines in good faith (after consultation with its outside legal counsel and financial advisors) that, in light of such superior proposal, the failure to terminate the merger agreement and enter into an agreement with respect to such superior proposal would violate the directors’ fiduciary duties under applicable law.

Conditions to the Merger (Page 122)

The respective obligations of the Company, Parent, Holding and Merger Sub to consummate the merger are subject to the satisfaction or waiver (to the extent permitted by applicable law) of certain customary conditions, including the adoption of the merger agreement by our stockholders, the maintenance or receipt of certain regulatory approvals or waivers (it being understood that the existing competition clearances are deemed to satisfy this condition to the extent still in effect), material compliance by the parties with their respective obligations under the merger agreement and the accuracy of certain of the parties’ representations and warranties (in the case of the Company’s representations and warranties, with such representations and warranties being limited to only select fundamental representations and warranties (relating to the Company’s organization, good standing and qualification, capital structure (except for de minimis inaccuracies), corporate authority and approval, actions taken to render inapplicable takeover statutes, absence of rights plans, absence of undisclosed broker’s or finder’s fees and receipt of financial advisor opinions)). For additional information, see the section entitled “The Merger Agreement—Conditions to the Merger” beginning on page 122.

 

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Termination (Page 123)

We and Parent may, by mutual written consent, terminate the merger agreement and abandon the merger at any time prior to the effective time. The merger agreement may also be terminated and the merger abandoned at any time prior to the effective time as follows.

By either Parent or the Company if:

 

   

the merger is not consummated on or before June 30, 2021 (as may be automatically extended to December 31, 2021, the “outside date,” as described in the section entitled “The Merger Agreement—Termination” on page 123) (the “termination date trigger”); or

 

   

the adoption of the merger agreement by the holders of a majority of our issued and outstanding shares of common stock entitled to vote on such matter at the special meeting (the “requisite company vote”) has not been obtained at the special meeting (the “requisite vote trigger”).

by the Company if:

 

   

there has been a breach of any representation, warranty, covenant or agreement made by Parent, Holding or Merger Sub set forth in the merger agreement, or if any representation or warranty of Parent, Holding or Merger Sub has become untrue following the date of the merger agreement, in either case, that would cause the conditions to the closing that relate to the accuracy of Parent’s, Holding’s or Merger Sub’s representations and warranties and the performance, in all material aspects, of the obligations of Parent, Holding and Merger Sub under the merger agreement to not be satisfied, subject to the conditions described in the section entitled “The Merger Agreement—Termination” on page 123; or

 

   

prior to the time the requisite company vote is obtained, to enter into an alternative acquisition agreement in compliance with the terms of the merger agreement; provided that the Company pays the termination fee (as defined in the section entitled “The Merger Agreement—Termination Fee” beginning on page 124) to Parent (the “superior proposal trigger”).

by Parent if:

 

   

prior to the time the requisite company vote is obtained, there has been a change of recommendation (the “change of recommendation trigger”) or if the Company or any of its representatives has materially breached any of its obligations related to not soliciting acquisition proposals or a change of recommendation (the “no shop trigger”).

Subject to the payment, under certain circumstances, of the termination fee (as described in the section entitled “The Merger Agreement—Termination Fee”), in the event of termination of the merger agreement by Parent or the Company in accordance with its terms, the merger agreement will be terminated and become void and have no effect, without any liability or obligation on the part of the Company, Parent, Holding or Merger Sub (or any of their respective affiliates or representatives); provided that no such termination will relieve the Company, Parent, Holding or Merger Sub from any liability or damages for willful breach of the merger agreement prior to such termination or the requirement, under certain circumstances, to pay the termination fee and the miscellaneous and general provisions in the merger agreement and the provisions of the merger agreement with respect to the effect of termination will each survive the termination of the merger agreement. For additional information with respect to the termination of the merger, see the section entitled “The Merger Agreement—Termination” beginning on page 123.

 

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Termination Fee (Page 124)

A termination fee equal to $575,000,000 would be payable by us in the event that the merger agreement is terminated in accordance with its terms:

 

   

by either the Company or Parent, pursuant to the termination date trigger or requisite vote trigger and, in each case:

 

   

any person has made an acquisition proposal to the Company or its stockholders (whether or not conditional or not withdrawn) or publicly announced an intention (whether or not conditional and whether or not withdrawn) to make an acquisition proposal with respect to the Company or any of its subsidiaries; and

 

   

within twelve (12) months after such termination, the Company enters into any alternative acquisition agreement with respect to any acquisition proposal (with 50% being substituted in lieu of 15% in each instance thereof in the definition of “acquisition proposal”), then immediately prior to or concurrently with the occurrence of such entry into an alternative acquisition agreement;

 

   

by Parent, pursuant to the change of recommendation trigger or no shop trigger, then promptly, but in no event later than two (2) business days after the date of such termination; or

 

   

by the Company, pursuant to the superior proposal trigger, then simultaneously with, and as a condition to, the effectiveness of any such termination.

In no event will the Company be required to pay the termination fee on more than one (1) occasion.

Remedies (Page 125)

Other than in the case of actual or intentional fraud or willful breach of any provision of the merger agreement by the Company, the right to receive the termination fee will be the sole and exclusive monetary remedy of Parent, Holding and Merger Sub, with respect to the merger agreement and the transactions contemplated by the merger agreement, against the Company and its subsidiaries and any of their respective directors, officers, employees, stockholders and affiliates for all losses and damages suffered as a result of the failure of the merger or other transactions contemplated by the merger agreement to be consummated or for a breach for failure to perform obligations under the merger agreement.

No termination of the merger agreement will relieve or release any party to the merger agreement from any liabilities or damages arising out of its actual or intentional fraud or willful breach of any provision of the merger agreement.

Subject to the foregoing paragraph, the parties are entitled to injunctions to restrain any breaches or violations of the merger agreement and to seek to enforce specifically the terms and provisions of the merger agreement in addition to any other remedies to which they are entitled in equity or at law.

Further, pursuant to the merger agreement, in the event that any proceeding is brought by the Company to enforce the terms of the merger agreement or for money damages, the “per share merger consideration” will be deemed, for all purposes in that proceeding, including any award of specific performance or damages, to be $135.00 in cash, without interest and less any required withholding taxes.

Market Price of Common Stock (Page 131)

The closing price of our common stock on the NYSE on October 25, 2019, the last trading day prior to the first media accounts regarding a possible acquisition of the Company by Parent, was $98.55 per share of our common stock. If the merger is completed, you will be entitled to receive $131.50 in cash, without interest, less

 

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any required withholding taxes, for each eligible share owned by you, which represents a premium of approximately 33.4% to the Company’s closing price on October 25, 2019, the last trading day prior to the first media accounts regarding a possible acquisition of the Company by Parent, and a premium of approximately 43.4% to the Company’s thirty (30)-day volume-weighted average share price of $91.70 per share of our common stock on that same date.

On [●], the last full trading day before the filing of this proxy statement, the closing price for our common stock on the NYSE was $[●] per share of common stock. You are encouraged to obtain current market quotations for our common stock in connection with voting your shares of our common stock.

Appraisal Rights (Page 134)

If the merger is completed, the Company’s stockholders who do not vote in favor of the merger proposal are entitled to appraisal rights under Section 262 of the DGCL, but only if they fully comply with all of the applicable legal requirements of Section 262 of the DGCL, which are summarized in this proxy statement in the section entitled “Appraisal Rights” beginning on page 134 and set forth in their entirety in Section 262 of the DGCL (attached to this proxy statement as Annex D). This means that you may be entitled to have the fair value of your shares of our common stock determined by the Delaware Court of Chancery and to receive payment based on that valuation in lieu of the per share merger consideration, without interest, less any required withholding taxes, pursuant to the merger agreement, if you follow exactly the procedures set forth in Section 262 of the DGCL. The ultimate amount you may receive in an appraisal proceeding may be less than, equal to or more than the amount you would have otherwise received under the merger agreement.

To exercise your appraisal rights with respect to your shares of our common stock, you must, among other things, submit a written demand for appraisal to the Company before the vote is taken on the merger proposal and you must not vote (either in person or by proxy) in favor of the merger proposal with respect to such shares. If you fail to follow exactly the procedures set forth in Section 262 of the DGCL, you will lose your appraisal rights. The requirements for exercising appraisal rights are further described in the section entitled “Appraisal Rights” beginning on page 134 and the text of the DGCL appraisal rights statute is reproduced in its entirety as Annex D to this proxy statement. We encourage you to read these provisions carefully and in their entirety. If you hold your shares of our common stock through a bank, broker or other nominee and you wish to exercise your appraisal rights, you should consult with your bank, broker or other nominee to determine the appropriate procedures for the making of a demand for appraisal by your bank, broker or other nominee. In view of the complexity of the DGCL relating to appraisal rights, stockholders who may wish to pursue appraisal rights should consult their legal and financial advisors promptly. The discussion of appraisal rights in this proxy statement is not a full summary of the law pertaining to appraisal rights under the DGCL, and is qualified in its entirety by the full text of Section 262 of the DGCL, a copy of which is attached to this proxy statement as Annex D.

Delisting and Deregistration of Common Stock (Page 139)

If the merger is completed, our common stock will be delisted from the NYSE and deregistered under the Securities Exchange Act of 1934 (as amended, and all rules and regulations promulgated thereunder, collectively, the “Exchange Act”), and we will no longer file periodic reports with the SEC on account of our common stock.

 

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QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER

The following questions and answers are intended to briefly address some commonly asked questions regarding the merger, the merger agreement and the special meeting. These questions and answers may not address all questions that may be important to you as a Company stockholder. Please refer to the “Summary” beginning on page 1 and the more detailed information contained elsewhere in this proxy statement, the annexes to this proxy statement and the documents referred to in this proxy statement, which you should read carefully and in their entirety. You may obtain the information incorporated by reference into this proxy statement without charge by following the instructions under the section entitled “Where You Can Find More Information.”

 

Q.

What is the proposed merger and what effects will it have on the Company?

 

A.

The proposed merger is an indirect acquisition of the Company by Parent, through Holding and Merger Sub, pursuant to the terms and subject to the conditions of the merger agreement. If the merger proposal is approved by our stockholders and the other closing conditions under the merger agreement have been satisfied or waived (to the extent permitted by applicable law), Merger Sub will merge with and into the Company, with the Company continuing as the surviving corporation and an indirect wholly owned subsidiary of Parent. As a result of the merger, the Company will no longer be a publicly held corporation, and you, as a holder of our common stock, will no longer have any interest in our future earnings or growth. In addition, following the merger, our common stock will be delisted from the NYSE and deregistered under the Exchange Act, and we will no longer file periodic reports with the SEC on account of our common stock.

 

Q.

What will I receive if the merger is completed?

 

A.

At the effective time of the merger, each share of our common stock issued and outstanding immediately prior to the effective time (other than excluded shares) will be automatically canceled and will cease to exist, and will be converted into the right to receive, upon the terms and subject to the conditions set forth in the merger agreement, $131.50 in cash, without interest, less any required withholding taxes.

 

Q.

How does the per share merger consideration compare to the market price of our common stock prior to the announcement of the merger under the original merger agreement?

 

A.

The per share merger consideration of $131.50 per share of common stock represents a premium of approximately 33.4% to the closing price of our common stock as of October 25, 2019, the last trading day prior to the first media accounts regarding a possible acquisition of the Company by Parent, and a premium of approximately 43.4% to the thirty (30)-day volume-weighted average share price on that same date.

 

Q.

Why is there a second special meeting relating to the merger?

 

A.

The Company, Parent, Holding and Merger Sub agreed to reduce the per share merger consideration from $135.00 as set forth in the original merger agreement to $131.50 as set forth in the merger agreement and make other changes to the original merger agreement in connection with the settlement of the merger litigation. The Board believes, for the reasons described in this proxy statement, that it is in the best interests of the Company and its stockholders to agree to the reduced per share merger consideration and other amended terms, rather than proceed with such litigation. For a discussion of the changes made to the original merger agreement pursuant to the merger agreement, please see the section of this proxy statement entitled “The Merger—Changes to the Original Merger Agreement Pursuant to the Merger Agreement” beginning on page 41.

 

    

In accordance with the DGCL, the amendment and restatement of the original merger agreement necessitates that the merger agreement be adopted by the affirmative vote of the holders of a majority of the shares of our common stock issued and outstanding as of the close of business on the record date. As a

 

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  result, you are now being asked to vote on the proposal to adopt the merger agreement, which amended and restated the original merger agreement in its entirety, despite the fact that you may have voted on the proposal to adopt the original merger agreement in connection with the February 4, 2020 special meeting of the Company’s stockholders.

 

Q.

What changes were made to the original merger agreement pursuant to the merger agreement?

 

A.

The original merger agreement was amended and restated pursuant to the merger agreement to, among other things, (i) reduce the per share merger consideration to $131.50 from $135.00 in cash, in each case, without interest, less any required withholding taxes, (ii) expressly permit the Company to declare and pay regular quarterly dividends of up to $0.58 per share in the Company’s sole discretion, (iii) eliminate certain conditions to the closing such as (A) the absence of a material adverse effect on the Company, and (B) the absence of (1) any legal prohibition by a governmental entity that is in effect and enjoins, prevents or otherwise prohibits, materially restrains or materially impairs or makes unlawful consummation of the transactions contemplated by the merger agreement and (2) any proceeding instituted by a governmental entity that seeks to temporarily or permanently impose a legal restraint, (iv) narrow the condition to the closing with respect to the accuracy of the Company’s representations and warranties to only select fundamental representations and warranties (relating to the Company’s organization, good standing and qualification, capital structure (except for de minimis inaccuracies), corporate authority and approval, actions taken to render inapplicable takeover statutes, absence of rights plans, absence of undisclosed broker’s or finder’s fees and receipt of financial advisor opinions), (v) expand the meaning of ordinary course of business to include the manner in which the Company and its subsidiaries have been operating since the date of the original merger agreement through the date of the merger agreement, and any COVID-19 measures taken after the signing of the merger agreement, and (vi) provide that if the merger has not been consummated within six (6) business days after the date on which the requisite company vote has been obtained as a result of the material breach of the merger agreement by Parent or Merger Sub (it being understood that the closing cannot take place prior to January 7, 2021), the Company will have no further obligation to comply with certain obligations in respect of the conduct of its business pending the merger. Parent further agreed that, in the event that any proceeding is brought by the Company to enforce the terms of the merger agreement or for money damages, the “per share merger consideration” will be deemed, for all purposes in that proceeding, including any award of specific performance or damages, to be $135.00 in cash, without interest and less any required withholding taxes.

 

Q.

Why was the original merger agreement amended and restated to, among other things, reduce the per share merger consideration?

 

A.

As described in the section entitled “The Merger—Background of the Merger” beginning on page 42, the Company filed a lawsuit against Parent, Holding and Merger Sub, and Parent, Holding and Merger Sub filed counterclaims against the Company in the Delaware Court of Chancery related to the merger under the original merger agreement. After careful consideration of various factors as described in the section entitled “The Merger—Reasons for the Merger; Recommendation of the Company’s Board of Directors” beginning on page 57, including the attractive value of the per share merger consideration and reduction of uncertainty posed by the merger litigation, the Board determined that the merger agreement, the merger and the other transactions contemplated by the merger agreement are advisable to, and in the best interests of, the Company and the Company’s stockholders, and approved and declared advisable the merger agreement and the execution, delivery and performance of the merger agreement by the Company and the consummation of the merger and the other transactions contemplated by the merger agreement. In the course of reaching its determination and recommendation, the Board consulted with and received the advice and assistance of its outside legal and financial advisors and senior management at various times.

 

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Q.

Is it possible for stockholders to reject the merger agreement and return to the terms of the original merger agreement?

 

A.

No, the adoption of the merger agreement (which amended and restated the original merger agreement in its entirety) by our stockholders is a condition to closing the merger. If the merger agreement (which amended and restated the original merger agreement in its entirety) is not adopted by the holders of our common stock or if the merger is not completed for any other reason, holders of our common stock will not receive any payment from Parent for their shares of our common stock. Instead, the Company will remain an independent public company and our common stock will continue to be listed and traded on the NYSE.

 

Q.

How does the Board recommend that I vote?

 

A.

The Board recommends that you vote “FOR” approval of the merger proposal, “FOR approval of the compensation proposal and “FOR” approval of the adjournment proposal.

 

Q.

When do you expect the merger to be completed?

 

A.

We are working towards completing the merger as soon as possible. All regulatory authorizations, consents, orders, approvals or waivers required for the merger under the merger agreement have been obtained. Assuming the maintenance or, in the event any existing approval or waiver expires and the Company files for such approval or waiver again, receipt of such regulatory approvals or waivers, and the satisfaction or waiver (to the extent permitted by applicable law) of other closing conditions, including obtaining of the requisite company vote, we anticipate that the merger will be completed early in the calendar year 2021.

 

Q.

What happens if the merger is not completed?

 

A.

If the merger proposal is not approved by the stockholders of the Company in accordance with the requisite company vote, or if the merger is not completed for any other reason, the stockholders of the Company will not receive any payment for their shares of our common stock in connection with the merger. Instead, the Company will remain an independent public company and our common stock will continue to be listed and traded on the NYSE.

 

    

In the event that the merger agreement is terminated, depending on the circumstances surrounding the termination, it is possible that the Company will be required to pay Parent a termination fee of $575,000,000. You should read the section entitled “The Merger Agreement—Termination Fee” beginning on page 124 for a more detailed discussion of the termination fee.

 

Q.

What conditions must be satisfied to complete the merger?

 

A.

There are several conditions which must be satisfied or waived (to the extent permitted by applicable law) to complete the merger, including obtaining stockholder approval of the merger proposal in accordance with the requisite company vote, obtaining or maintaining certain regulatory approvals or waivers (it being understood that the existing competition clearances are deemed to satisfy this condition to the extent still in effect), and the accuracy of certain representations and warranties and material compliance with covenants contained in the merger agreement.

 

    

You should read the section entitled “The Merger Agreement—Conditions to the Merger” beginning on page 122 for a more detailed discussion of the conditions to completion of the merger.

 

Q.

Is the merger expected to be taxable to me?

 

A.

Yes. The exchange of shares of our common stock for the per share merger consideration pursuant to the merger will generally be a taxable transaction to U.S. holders (as defined under the section entitled “The

 

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  Merger—Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 95) for U.S. federal income tax purposes.

 

    

If you are a U.S. holder and you exchange your shares of our common stock in the merger for cash, you will generally recognize gain or loss in an amount equal to the difference, if any, between the amount of cash received with respect to such shares and your adjusted tax basis in such shares. We encourage you to read the section entitled “The Merger—Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 95 for a more detailed discussion of the U.S. federal income tax consequences of the merger.

 

    

You should also consult your tax advisor regarding the particular tax consequences to you of the exchange of shares of common stock for cash pursuant to the merger in light of your particular circumstances (including the application and effect of any state, local or foreign income and other tax laws).

 

Q.

Why am I receiving this proxy statement and proxy card or voting instruction form?

 

A.

You are receiving this proxy statement enclosed with the proxy notice and the enclosed proxy card or voting instruction form in connection with the solicitation of proxies by the Board for use at the special meeting. This proxy statement describes matters on which we urge you to vote and is intended to assist you in deciding how to vote your shares of our common stock with respect to such matters.

 

    

In accordance with the DGCL, the amendment and restatement of the original merger agreement necessitates that the merger agreement be adopted by the affirmative vote of the holders of a majority of the shares of our common stock issued and outstanding as of the close of business on the record date. As a result, you are now being asked to vote on the proposal to adopt the merger agreement, which amended and restated the original merger agreement in its entirety, despite the fact that you may have voted on the proposal to adopt the original merger agreement in connection with the February 4, 2020 special meeting of the Company’s stockholders.

 

Q.

When and where is the special meeting?

 

A.

The special meeting of the stockholders of the Company will be held on [●], at [●], Eastern Time. Due to public health concerns surrounding the novel coronavirus (COVID-19) and to prioritize the health and well-being of the Company’s employees, stockholders and other community members, the Company will hold the special meeting in a virtual meeting format only on http://www.virtualshareholdermeeting.com/TIF2021SM. You will not be able to attend the special meeting physically in person.

 

Q.

What am I being asked to vote on at the special meeting?

 

A.

You are being asked to consider and vote on the following:

 

   

a proposal to adopt the merger agreement that provides for, among other things, the acquisition of the Company by Parent;

 

   

a proposal to approve, by non-binding, advisory vote, certain compensation arrangements for the Company’s named executive officers in connection with the merger proposal; and

 

   

a proposal to approve adjournment or postponement of the special meeting, if necessary or appropriate, including to solicit additional proxies if there are not sufficient votes to approve the merger proposal.

 

Q.

Why am I being asked to consider and vote on a proposal to approve, by non-binding, advisory vote, certain compensation arrangements for the Company’s named executive officers in connection with the merger?

 

A.

Under SEC rules, we are required to seek a non-binding, advisory vote with respect to the compensation that may be paid or become payable to our named executive officers that is based on or otherwise relates to the merger, commonly referred to as “golden parachute” compensation.

 

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Q.

What will happen if the Company’s stockholders do not approve the compensation proposal?

 

A.

Approval of the compensation that may be paid or become payable to the Company’s named executive officers that is based on or otherwise relates to the merger is not a condition to completion of the merger. The vote is an advisory vote and will not be binding on the Company, Parent, Holding or Merger Sub. Because the merger-related compensation to be paid to the Company’s named executive officers in connection with the merger is based on contractual arrangements with the named executive officers, such compensation may be payable, regardless of the outcome of this advisory vote, if the merger agreement is adopted (subject only to the contractual obligations applicable thereto).

 

Q.

What vote is required for the Company’s stockholders to approve the merger proposal?

 

A.

Approval of the merger proposal requires the affirmative vote of the holders of a majority of the shares of our common stock issued and outstanding as of the close of business on the record date. That means that the merger proposal will be approved if more than half of the shares of our common stock issued and outstanding as of the close of business on the record date vote “FOR” the proposal. Therefore, your abstentions from voting and broker non-votes will have the same effect as a vote “AGAINST” approval of the merger proposal.

 

Q.

What vote of our stockholders is required to approve the compensation proposal?

 

A.

Approval of the compensation proposal requires the affirmative vote of the holders of a majority of the shares of our common stock present in person or represented by proxy at the special meeting and entitled to vote on the matter. That means that the compensation proposal will be approved if more than half of those shares of our common stock present in person or represented by proxy at the special meeting and entitled to vote on the matter vote “FOR” the proposal. Therefore, your abstentions from voting will have the same effect as a vote “AGAINST” approval of the compensation proposal. Broker non-votes will have no effect on the approval of the compensation proposal, assuming a quorum is present.

 

Q.

What vote of our stockholders is required to approve the adjournment proposal?

 

A.

Approval of the adjournment proposal requires the affirmative vote of the holders of a majority of the shares of our common stock present in person or represented by proxy at the special meeting and entitled to vote on the matter. That means that the adjournment proposal will be approved if more than half of those shares of our common stock present in person or represented by proxy at the special meeting and entitled to vote on the matter vote “FOR” the proposal. Therefore, your abstentions from voting will have the same effect as a vote “AGAINST” approval of the adjournment proposal. Broker non-votes will have no effect on the approval of the adjournment proposal, assuming a quorum is present.

 

Q.

Do any of the Company’s directors or executive officers have interests in the merger that may differ from, or be in addition to, my interests as a stockholder?

 

A.

In considering the recommendation of the Board with respect to the merger proposal, you should be aware that our directors and executive officers may have certain interests in the merger that may be different from, or in addition to, the interests of our stockholders generally. The Board was aware of and considered these interests, among other matters, in evaluating and negotiating the merger agreement and the merger, and in recommending that the merger agreement be adopted by our stockholders. See the sections entitled “The Merger—Interests of Certain Persons in the Merger” beginning on page 90 and “Non-Binding, Advisory Vote on Merger-Related Compensation for the Company’s Named Executive Officers” beginning on page 128.

 

Q.

What is the difference between holding shares as a stockholder of record and as a beneficial owner?

 

A.

If your shares of our common stock are registered directly in your name with our transfer agent, Computershare, you are considered the stockholder of record with respect to those shares of our common

 

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  stock. As the stockholder of record, you have the right to vote by proxy, which involves granting your voting rights directly to the Company or to a third party, or to vote in person at the special meeting.

 

    

If your shares of our common stock are held by a bank, broker or nominee, or if your shares are held in the Tiffany 401(k) Plan, then you are considered the beneficial owner of shares of our common stock, and the organization holding, or trustee of, your account is considered the stockholder of record with respect to those shares of our common stock. The organization holding, or trustee of, your account should send you, as the beneficial owner, a package describing the procedure for voting your shares of our common stock. You should follow the instructions provided by them to vote your shares of our common stock. You will need your assigned 16-digit control number to vote shares in person at the special meeting. The control number can be found on the proxy card, voting instruction form, or other applicable proxy notices. If your shares are held in the name of a bank, broker or other nominee and you do not have the assigned 16-digit control number, please follow the instructions on the voting instruction form, or other applicable proxy notices, furnished by your bank, broker or other nominee to vote your shares accordingly. Please note that if you are a beneficial owner of shares of our common stock held through the Tiffany 401(k) Plan, you will not be able to vote those shares in person at the special meeting.

 

    

As compared to holding shares as a stockholder of record, holding only beneficial ownership of shares of our common stock may affect the steps you are required to take in order to exercise your appraisal rights with respect to such shares, as described in Annex D of this proxy statement.

 

Q.

If my shares of common stock are held in “street name” by my bank, broker or other nominee, or through the Tiffany 401(k) Plan, will my bank, broker, Tiffany 401(k) Plan trustee or other nominee vote my shares of common stock for me?

 

A.

Your bank, broker or other nominee will only be permitted to vote your shares of our common stock if you instruct your bank, broker or other nominee how to vote. You should follow the procedures provided by your bank, broker or other nominee regarding the voting of your shares of our common stock. Banks, brokers or other nominees who hold shares in street name for customers have the authority to vote only on “routine” proposals when they have not otherwise received instructions from the applicable beneficial owners. This means that banks, brokers and other nominees are precluded from exercising their voting discretion with respect to the approval of non-routine matters, such as the merger proposal, the compensation proposal and the adjournment proposal, and, as a result, absent specific instructions from the applicable beneficial owner of such shares of our common stock, banks, brokers or other nominees are not empowered to vote those shares of our common stock on any of the proposals under consideration at this special meeting. If you do not instruct your bank, broker or other nominee to vote your shares of our common stock or if you do not vote in person at the special meeting, your shares of our common stock will not be voted, and the effect will be the same as a vote “AGAINST” approval of the merger proposal, and your shares of our common stock will not be voted and will not have an effect on the approval of the compensation proposal or the adjournment proposal, assuming a quorum is present.

 

    

Shares of our common stock held in the Tiffany 401(k) Plan are voted by the Tiffany 401(k) Plan’s trustee in accordance with specific instructions given by Tiffany 401(k) Plan participants to whose accounts such shares of our common stock have been allocated. Any shares held in the Tiffany 401(k) Plan for which no instructions are received will be voted in the same proportion as those shares for which instructions are received. Please note that if you are a beneficial owner of shares of our common stock held through the Tiffany 401(k) Plan, you will not be able to vote those shares in person at the special meeting.

 

Q.

Who can vote at the special meeting?

 

A.

All of the holders of record of our common stock as of the close of business on [●], the record date for the special meeting, are entitled to receive notice of, and to vote at, the special meeting.

 

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Q.

How many votes do I have?

 

A.

You are entitled to cast one (1) vote on each matter properly brought before the special meeting for each share of our common stock held of record by you as of the close of business on [●], the record date for the special meeting.

 

Q.

What is a quorum?

 

A.

A “quorum” is the minimum number of shares that must be present at the special meeting for a valid vote. For the special meeting, a majority of the shares of our common stock issued and outstanding as of the close of business on the record date must be present in person or represented by proxy (including, for any beneficial owner of shares held in street name, by the organization holding such stockholder’s account).

 

    

As of [●], the number of shares of our common stock issued and outstanding was [●]. We expect that a similar figure will be outstanding and entitled to vote at the special meeting as of the close of business on the record date.

 

    

Once a quorum is present at the special meeting, it will not be broken by the subsequent withdrawal of a stockholder. As such, if a stockholder is represented by proxy at the special meeting, his or her shares are deemed present for purposes of a quorum, even if the stockholder withholds his or her vote or elects to “abstain” for one (1) or more proposals, or if the stockholder fails to instruct his or her bank, broker or other nominee to vote on one of the proposals.

 

Q.

How do I vote?

 

A.

You can vote your shares of our common stock at the special meeting either by submitting your proxy or instruction prior to the special meeting, or by attending the special meeting virtually and voting in person. Voting instructions, whether voting is in person or by proxy, vary depending on whether you are a stockholder of record (also known as a “registered stockholder”) or a beneficial owner of shares held in street name.

 

    

Stockholder of Record. If you are a stockholder of record, you may vote your shares of our common stock on matters presented at the special meeting in any of the following ways:

 

   

In Person. You may attend the special meeting in a virtual format on http://www.virtualshareholdermeeting.com/TIF2021SM and cast your vote there. You will need your assigned 16-digit control number to vote shares electronically at the special meeting. The control number can be found on the proxy card, voting instruction form, or other applicable proxy notices.

 

   

By Telephone or via the Internet. You can submit a proxy to vote your shares by telephone or via the Internet by following the instructions on the enclosed proxy card. Proxies submitted by telephone or via the Internet must be received by 11:59 p.m., Eastern Time, on [●]. Have your proxy card in hand as you will be prompted to enter your control number.

 

   

By Mail. You can submit a proxy to vote your shares by mail if you received a printed proxy card by completing, signing, dating and promptly returning your proxy card in the postage-prepaid envelope provided with the materials. Proxies submitted by mail must be received by the close of business on [●] in order to ensure that your vote is counted.

 

    

Beneficial Owner. If you are the beneficial owner of shares of our common stock, please refer to the instructions provided by the organization holding, or trustee of, your account to see which of the above choices are available to you. Those instructions will identify which of the above choices are available to you in order to have your shares of our common stock voted. You may instruct your bank, broker, Tiffany 401(k) Plan trustee or other nominee, as applicable, how to vote on your behalf. Please note that if you are a beneficial owner of shares of our common stock held through the Tiffany 401(k) Plan, your proxies submitted by telephone or via the Internet must be received by 11:59 p.m., Eastern Time, on [●], and your

 

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  proxies submitted by mail must be received by the close of business on [●] in order to ensure that your vote is counted. Please note that if you are a beneficial owner of shares of our common stock held through the Tiffany 401(k) Plan, you will not be able to vote those shares in person at the special meeting.

 

    

To attend the special meeting virtually and vote your shares at that meeting, you will need your assigned 16-digit control number. The control number can be found on the proxy card, voting instruction form, or other applicable proxy notices. If your shares are held in the name of a bank, broker or other nominee and you do not have the assigned 16-digit control number, please follow the instructions on the voting instruction form, or other applicable proxy notices, furnished by your bank, broker or other nominee to vote your shares accordingly. Please note that if you are a beneficial owner of shares of our common stock held through the Tiffany 401(k) Plan, you will not be able to vote those shares in person at the special meeting.

 

    

For additional information, see the instructions under the section entitled “The Special Meeting—Attendance” beginning on page 33 of this proxy statement.

 

    

IT IS IMPORTANT THAT YOU PROMPTLY SUBMIT A PROXY TO VOTE YOUR SHARES OF OUR COMMON STOCK. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING VIRTUALLY, PLEASE COMPLETE, DATE, SIGN AND RETURN, AS PROMPTLY AS POSSIBLE, THE ENCLOSED PROXY CARD IN THE ACCOMPANYING PREPAID REPLY ENVELOPE, OR SUBMIT YOUR PROXY BY TELEPHONE OR THE INTERNET. STOCKHOLDERS WHO ATTEND THE SPECIAL MEETING VIRTUALLY MAY REVOKE THEIR PROXIES BY VOTING IN PERSON OR PRIOR TO THE SPECIAL MEETING AS DESCRIBED HEREIN.

 

Q.

How can I change or revoke my vote?

 

A.

If you are a stockholder of record, you may revoke any prior proxy or voting instructions at any time prior to the taking of the vote at the special meeting, regardless of how your proxy or voting instructions were originally submitted, by:

 

   

sending an executed, later-dated proxy card to the Corporate Secretary of the Company, calling in different instructions or providing different instructions through the Internet voting site;

 

   

notifying the Corporate Secretary of the Company in writing that you wish to revoke your proxy, provided that such notice must be received by us before the special meeting; or

 

   

attending the special meeting virtually and voting your shares in person.

 

    

If you are a beneficial owner of shares of our common stock held in “street name”, you may change your instruction to your bank, broker or other nominee, as applicable, by submitting a subsequent instruction to such bank, broker or other nominee, or you may change your vote by attending the special meeting virtually and voting your shares.

 

    

If you are a beneficial owner of shares of our common stock held through the Tiffany 401(k) Plan, you may change your instruction to the Tiffany 401(k) Plan trustee by submitting a subsequent instruction to such trustee by 11:59 p.m., Eastern Time, on [●]. You will not be able to vote those shares in person at the special meeting.

 

Q.

What is a proxy?

 

A.

A proxy is your legal designation of another person, such person referred to as a “proxy,” to vote your shares of our common stock. The written document describing the matters to be considered and voted on at

 

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  the special meeting is called a “proxy statement.” The document used to designate a proxy to vote your shares of our common stock is called a “proxy card.”

 

    

Proxies will extend to, and be voted at, any adjournment or postponement of the special meeting.

 

Q.

If a stockholder gives a proxy, how are the shares of our common stock voted?

 

A.

If you vote by proxy, you will have designated three officers of the Company to act as your proxies at the special meeting. One of them will then vote your shares at the special meeting in accordance with the instructions you have given them on the proxy card or by telephone or via the Internet with respect to each of the proposals presented in this proxy statement.

 

    

When completing the Internet or telephone processes on the enclosed proxy card, you may specify whether your shares of our common stock should be voted for or against or to abstain from voting on all, some or none of the specific items of business to come before the special meeting.

 

    

If you are a stockholder of record and return a signed proxy card or grant a proxy via the Internet or by telephone, but do not indicate how you wish your shares to be voted, the shares represented by your properly signed proxy will be voted in accordance with the following recommendations of the Board: “FOR” approval of the merger proposal, “FOR” approval of the compensation proposal and “FOR” approval of the adjournment proposal.

 

    

Shares of our common stock held in the Tiffany 401(k) Plan are voted by the Tiffany 401(k) Plan’s trustee in accordance with specific instructions given by Tiffany 401(k) Plan participants to whose accounts such shares of our common stock have been allocated. Any shares of our common stock held in the Tiffany 401(k) Plan for which no instructions are received will be voted in the same proportion as those shares of our common stock for which instructions are received.

 

Q.

How are votes counted?

 

A.

For the merger proposal, the compensation proposal and the adjournment proposal, you may vote “FOR,” “AGAINST” or “ABSTAIN.” Abstentions will have the same effect as votes “AGAINST” approval of the merger proposal, the compensation proposal and the adjournment proposal. Broker non-votes will have the same effect as votes “AGAINST” approval of the merger proposal and will have no effect on the approval of the compensation proposal or the adjournment proposal, assuming a quorum is present.

 

    

All votes will be tabulated by American Election Services, LLC, the inspector of elections appointed for the special meeting.

 

Q.

What do I do if I receive more than one proxy card or set of voting instructions?

 

A.

If you received more than one proxy card, your shares of our common stock are likely registered in different names or with different addresses or are in more than one (1) account. You must separately vote the shares of our common stock shown on each proxy card that you receive in order for all of your shares of our common stock to be voted at the special meeting.

 

Q.

How do I ask questions at the special meeting?

 

A.

The stockholders of record, along with “street name” stockholders who beneficially owned shares of our common stock on the record date, and their duly appointed proxy holders, will need their assigned 16-digit control number to submit questions related to the matters to be voted on at the special meeting during the live webcast of the meeting. Such questions may be submitted by using the instructions on the virtual

 

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  meeting website at http://www.virtualshareholdermeeting.com/TIF2021SM. The control number can be found on the proxy card, voting instruction form, or other previously received notices. Please note that if you are a beneficial owner of shares of our common stock held through the Tiffany 401(k) Plan, you will be able to submit questions but will not be able to vote those shares in person at the special meeting.

 

Q.

What if during the check-in time or during the special meeting I have technical difficulties or trouble accessing the virtual meeting website?

 

A.

If the Company experiences technical difficulties during the special meeting (e.g., a temporary or prolonged power outage), it will determine whether the special meeting can be promptly reconvened (if the technical difficulty is temporary) or whether the special meeting will need to be reconvened on a later day (if the technical difficulty is more prolonged). In any such situation, the Company will promptly notify stockholders of the decision via http://www.virtualshareholdermeeting.com/TIF2021SM.

 

    

Broadridge Financial Solutions will have technicians ready to assist you with any individual technical difficulties you may have accessing the virtual meeting website. Contact information for technical support will appear on the virtual meeting website prior to the start of the special meeting.

 

Q.

What happens if I sell my shares of common stock before the special meeting?

 

A.

The record date for stockholders entitled to vote at the special meeting is earlier than both the date of the special meeting and the consummation of the merger. If you transfer your shares of our common stock after the record date but before the special meeting, unless special arrangements (such as provision of a proxy) are made between you and the person to whom you transfer your shares and each of you notifies the Company in writing of such special arrangements, you will retain your right to vote such shares of our common stock at the special meeting but will transfer the right to receive the per share merger consideration to the person to whom you transfer your shares of our common stock.

 

Q.

What happens if I sell my shares of common stock after the special meeting but before the effective time?

 

A.

If you transfer your shares of our common stock after the special meeting but before the effective time, you will have transferred the right to receive the per share merger consideration to the person to whom you transfer your shares of our common stock. In order to receive the per share merger consideration, you must hold your shares of our common stock through the completion of the merger.

 

Q.

Who will solicit and pay the cost of soliciting proxies?

 

A.

The Company has engaged Innisfree M&A Incorporated (“Innisfree”) to assist in the solicitation of proxies for the special meeting. The Company estimates that it will pay Innisfree a fee of $25,000 plus additional potential fees to be determined at the conclusion of the solicitation. The Company has agreed to reimburse Innisfree for certain out-of-pocket fees, telephone charges and expenses and will also indemnify Innisfree, its subsidiaries and their respective directors, officers, employees and agents against certain claims, liabilities, losses, damages and expenses related to the proxy solicitation. The Company may advance monies to Innisfree to pay on the Company’s behalf charges rendered by banks, brokers, the Tiffany 401(k) Plan trustees or their agents for their respective expenses in forwarding proxy materials to beneficial owners of shares of our common stock. Our directors, officers and employees may also solicit proxies by telephone, by facsimile, by mail, on the Internet or in person. They will not be paid any additional amounts for soliciting proxies.

 

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Q.

What do I need to do now?

 

A.

Even if you plan to attend the special meeting virtually, after carefully reading and considering the information contained in this proxy statement, please submit a proxy to vote promptly to ensure that your shares of our common stock are represented at the special meeting. If you hold your shares of our common stock in your own name as the stockholder of record, you may submit a proxy to have your shares of our common stock voted at the special meeting in one of three ways: (i) using the Internet in accordance with the instructions set forth on the enclosed proxy card; (ii) calling the toll-free number specified on your proxy card; or (iii) completing, signing, dating and returning the enclosed proxy card in the accompanying prepaid reply envelope. If you decide to attend the special meeting virtually and vote in person, your in person vote will revoke any proxy previously submitted by you. If you are a beneficial owner of shares of our common stock, please refer to the instructions provided by your bank, broker, Tiffany 401(k) Plan trustee or other nominee to see which of the above choices are available to you. You may instruct your broker or Tiffany 401(k) Plan’s trustee, as applicable, how to vote on your behalf.

 

Q.

Should I send in my stock certificates now?

 

A.

No. If the merger proposal is approved, you will be sent a letter of transmittal promptly after the completion of the merger, and in any event within five (5) business days of the closing date, describing how you may exchange your shares of our common stock for the per share merger consideration in accordance with the terms of the merger agreement. If your shares of our common stock are held in “street name” by a bank, broker or other nominee, or through the Tiffany 401(k) Plan, you should contact your bank, broker, Tiffany 401(k) Plan trustee or other nominee for instructions as to how to effect the surrender of your shares of our common stock in exchange for the per share merger consideration in accordance with the terms of the merger agreement. Please do NOT return your stock certificate(s) with your proxy.

 

Q.

Am I entitled to exercise appraisal rights under the DGCL instead of receiving the per share merger consideration for my shares of the Company’s common stock?

 

A.

Stockholders who do not vote in favor of the adoption of the merger agreement are entitled to exercise appraisal rights under Section 262 of the DGCL in connection with the merger if they take certain actions and meet certain conditions. For additional information, see the section entitled “Appraisal Rights” beginning on page 134. For the full text of Section 262 of the DGCL, please see Annex D of this proxy statement. Because of the complexity of the DGCL relating to appraisal rights, if you wish to exercise your appraisal rights, we encourage you to seek the advice of financial and legal counsel.

 

Q.

Who can help answer any other questions I might have?

 

A.

If you have additional questions about the merger, merger agreement or special meeting, need assistance in submitting your proxy or voting your shares of our common stock, or need additional copies of the proxy statement or the enclosed proxy card, please contact Innisfree, our proxy solicitor, by calling toll-free at (877) 687-1874. Banks, brokers and other nominees should call at (212) 750-5833.

 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This proxy statement and the other documents referenced herein, including, without limitation, statements relating to the merger and conditions to closing of the merger, may constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995, each as amended. Forward-looking statements by their nature address matters that are, to different degrees, uncertain, such as statements about the consummation of the merger (and the anticipated benefits thereof) and about the future plans, assumptions and expectations for the Company’s business and its results. Forward-looking statements provide current expectations of future events and include any statement that does not directly relate to any historical or current fact. Words such as “anticipates,” “believes,” “expects,” “intends,” “plans,” “projects,” “may,” “will,” or other similar expressions may identify such forward-looking statements.

These and other forward-looking statements are not guarantees of future results and are subject to risks, uncertainties and assumptions that could cause actual results to differ materially from those discussed in forward-looking statements, including, as a result of factors, risks and uncertainties over which we have no control. The inclusion of such statements should not be regarded as a representation that any plans, estimates or expectations will be achieved. You should not place undue reliance on such statements. Important factors, risks and uncertainties that could cause actual results to differ materially from such plans, estimates or expectations include, but are not limited to, the following: (i) conditions to the completion of the merger, including stockholder approval of the merger proposal, may not be satisfied or the regulatory approvals or waivers required for the merger may not be obtained or maintained, in each case, on the terms expected or on the anticipated schedule; (ii) the occurrence of any event, change or other circumstance that could give rise to the termination of the merger agreement between the parties to the merger or affect the ability of the parties to recognize the benefits of the merger; (iii) the effect of the announcement or pendency of the merger on the Company’s business relationships, operating results and business generally; (iv) risks that the merger disrupts the Company’s current plans and operations and potential difficulties in the Company’s employee retention; (v) risks that the merger may divert management’s attention from the Company’s ongoing business operations; (vi) potential litigation that may be instituted against the Company or its directors or officers related to the merger or the merger agreement between the parties to the merger and any adverse outcome of any such potential litigation; (vii) the amount and timing of the costs, fees, expenses and other charges related to the merger, including in the event of any unexpected delays; (viii) other risks to consummation of the merger, including the risk that the merger will not be consummated within the expected time period, or at all, which may affect the Company’s business and the price of the common stock of the Company; (ix) any adverse effects on the Company by other general industry, economic, business and/or competitive factors; (x) the COVID-19 pandemic, including the duration and scope thereof, the availability of a vaccine or cure that mitigates the effect of the virus, the potential for additional waves of outbreaks and changes in financial, business, travel and tourism, consumer discretionary spending and other general consumer behaviors, political, public health and other conditions, circumstances, requirements and practices resulting therefrom; (xi) protest activity in the U.S.; and (xii) such other factors as are set forth in the Company’s periodic public filings with the SEC, including, but not limited to, those described under the headings “Risk Factors” and “Forward Looking Statements” in the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended July 31, 2020, in the Company’s Form 10-K for the fiscal year ended January 31, 2020, and in its other filings made with the SEC from time to time, which are available via the SEC’s website at www.sec.gov. The consequences of material differences in results as compared with those anticipated in the forward-looking statements could include, among other things, business disruption, operational problems, financial loss, legal liability to third parties and similar risks, any of which could have a material adverse effect on the Company’s financial condition, results of operations, credit rating or liquidity or stock price. In addition, there can be no assurance that merger will be completed, or if it is completed, that it will close within the anticipated time period, or that the expected benefits of the merger will be realized.

 

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Forward-looking statements reflect the views and assumptions of management as of the date of this communication with respect to future events. The Company does not undertake, and hereby disclaims, any obligation, unless required to do so by applicable securities laws, to update any forward-looking statements as a result of new information, future events or other factors. The inclusion of any statement in this communication does not constitute an admission by the Company or any other person that the events or circumstances described in such statement are material.

 

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PARTIES TO THE MERGER

The Company

Tiffany & Co.

200 Fifth Avenue

New York, New York 10010

Telephone: (212) 755-8000

Tiffany & Co., a Delaware corporation (as previously defined, the “Company”), with headquarters in New York, New York, is a holding company that operates through Tiffany and Company (as previously defined, “Tiffany”) and the Company’s other subsidiary companies. Charles Lewis Tiffany founded Tiffany’s business in 1837. Today, with more than 14,000 employees, Tiffany and the Company’s other subsidiaries design, manufacture and market jewelry, watches and luxury accessories. The Company operates more than 300 retail stores worldwide as part of its omni-channel approach. The Company is listed on the NYSE under the symbol “TIF.” A detailed description of the Company’s business is located in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2020, filed with SEC on March 20, 2020, which is incorporated by reference into this proxy statement. See the section entitled “Where You Can Find More Information” beginning on page 141.

Parent

LVMH Moët Hennessy-Louis Vuitton SE

22 avenue Montaigne

75008 Paris, France

Telephone: +33 1 44 13 22 22

LVMH Moët Hennessy-Louis Vuitton SE, a societas Europaea (European company) organized under the laws of France (as previously defined, “Parent”), is a holding company that operates through a portfolio of wine and spirits brands that includes Moët & Chandon, Dom Pérignon, Veuve Clicquot Ponsardin, Krug, Ruinart, Mercier, Château d’Yquem, Domaine du Clos des Lambrays, Château Cheval Blanc, Château du Galoupet, Château d’Esclans, Colgin Cellars, Hennessy, Glenmorangie, Ardbeg, Belvedere, Woodinville, Volcán de Mi Tierra, Chandon, Cloudy Bay, Terrazas de los Andes, Cheval des Andes, Cape Mentelle, Newton, Bodega Numanthia and Ao Yun and a portfolio of fashion and leather goods brands that includes Louis Vuitton, Christian Dior Couture, Celine, Loewe, Kenzo, Givenchy, Pink Shirtmaker, Fendi, Emilio Pucci, Marc Jacobs, Berluti, Nicholas Kirkwood, Loro Piana, RIMOWA, Patou and Fenty. Parent is present in the Perfumes and Cosmetics sector with Parfums Christian Dior, Guerlain, Parfums Givenchy, Kenzo Parfums, Perfumes Loewe, Benefit Cosmetics, Make Up For Ever, Acqua di Parma, Fresh, Fenty Beauty by Rihanna and Maison Francis Kurkdjian. Parent has a portfolio of watches and jewelry brands that includes Bvlgari, TAG Heuer, Chaumet, Repossi, Dior Watches, Zenith, Fred and Hublot. Parent is also active in selective retailing as well as in other activities through DFS, Sephora, Le Bon Marché, La Samaritaine, Groupe Les Echos, Cova, Le Jardin d’Acclimatation, Royal Van Lent, Belmond and Cheval Blanc hotels. Additional information about Parent and its subsidiaries is included on its website: www.lvmh.com. The information provided or accessible through Parent’s website is not part of, or incorporated by reference in, this proxy statement.

Holding

c/o LVMH Inc.

19 East 57th Street

New York, New York 10022

Telephone: (212) 931-2727

Breakfast Holdings Acquisition Corp., a Delaware corporation and an indirect wholly owned subsidiary of Parent (as previously defined, “Holding”), was incorporated for the purpose of entering into the merger agreement and

 

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consummating the transactions contemplated by the merger agreement. Holding, as the sole stockholder of Merger Sub, approved and adopted the terms and provisions of the merger agreement, including the consummation of the transactions contemplated thereby.

Merger Sub

c/o LVMH Inc.

19 East 57th Street

New York, New York 10022

Telephone: (212) 931-2727

Breakfast Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of Holding (as previously defined, “Merger Sub”), was incorporated for the purpose of entering into the merger agreement and consummating the transactions contemplated by the merger agreement. Prior to the effective time of the merger, Merger Sub will have conducted no other business activities and will have no assets, liabilities or obligations other than those incident to its formation and pursuant to the merger agreement and the transactions contemplated by the merger agreement. Upon completion of the merger, Merger Sub will merge with and into the Company and will cease to exist.

 

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THE SPECIAL MEETING

Date, Time and Place of the Special Meeting

This proxy statement is being furnished to our stockholders as part of the solicitation of proxies by the Board for use at the special meeting to be held on [●], at [●], Eastern Time, or at any adjournment or postponement thereof. Due to public health concerns surrounding the novel coronavirus (COVID-19) and to prioritize the health and well-being of the Company’s employees, stockholders and other community members, the Company will hold the special meeting in a virtual meeting format only on http://www.virtualshareholdermeeting.com/TIF2021SM. You will not be able to attend the special meeting physically in person.

Purpose of the Special Meeting

At the special meeting, holders of our common stock will be asked to consider and vote on the following:

 

   

the merger proposal;

 

   

the compensation proposal; and

 

   

the adjournment proposal.

THE BOARD RECOMMENDS THAT YOU VOTE “FOR” EACH OF THE ABOVE PROPOSALS.

The Company’s stockholders must approve the merger proposal in order for the merger to occur. If the Company’s stockholders fail to approve the merger proposal in accordance with the requisite company vote, the merger will not occur. A copy of the merger agreement is attached as Annex A to this proxy statement, which we encourage you to read carefully and in its entirety.

In accordance with the DGCL, the amendment and restatement of the original merger agreement necessitates that the merger agreement be adopted by the affirmative vote of the holders of a majority of the shares of our common stock issued and outstanding as of the close of business on the record date. As a result, you are now being asked to vote on the proposal to adopt the merger agreement, which amended and restated the original merger agreement in its entirety, despite the fact that you may have voted on the proposal to adopt the original merger agreement in connection with the February 4, 2020 special meeting of the Company’s stockholders.

The vote on the compensation proposal is a vote separate and apart from the vote on the merger proposal. Accordingly, a stockholder may vote to approve the merger proposal and vote not to approve the compensation proposal, and vice versa. Because the vote on the compensation proposal is advisory in nature only, it will not be binding on the Company, Parent Holding or Merger Sub. Accordingly, if the merger agreement is adopted by the Company’s stockholders in accordance with the requisite company vote and the merger is completed, the merger-related compensation may be paid to the Company’s named executive officers to the extent payable in accordance with the terms of their respective compensation agreements and arrangements even if the stockholders do not approve the compensation proposal.

The vote on the adjournment proposal relates to the merger proposal and, if adopted, will allow the Company to, if necessary or appropriate, solicit additional proxies, including if there are not sufficient votes to approve the merger proposal in accordance with the requisite company vote. Nonetheless, even if a quorum is not present at the special meeting, the chair of the special meeting or the holders of a majority of the voting power of the outstanding shares of capital stock entitled to be voted at the special meeting that are present, in person or by proxy, may adjourn or postpone the special meeting to another place, date or time, in accordance with the Company’s by-laws.

 

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Record Date and Quorum

The Board has fixed the close of business on [●] as the record date for the determination of stockholders entitled to receive notice of, and to vote at, the special meeting, and any adjournments or postponements thereof. Only holders of record of our common stock as of the close of business on the record date are entitled to receive notice of, and to vote at (in person or by proxy), the special meeting and at any adjournment or postponement thereof.

As of [●], there were [●] shares of our common stock issued and outstanding. We expect that a similar figure will be outstanding and entitled to vote at the special meeting as of the close of business on the record date. Each holder of our common stock issued and outstanding as of the close of business on the record date is entitled to cast one (1) vote on each matter properly brought before the special meeting for each share of such common stock.

The presence at the special meeting, in person or represented by proxy, of the holders of a majority of the shares of our common stock issued and outstanding and entitled to vote at the special meeting constitutes a quorum for the transaction of business at the special meeting. Once a quorum is present at the special meeting, it will not be broken by the subsequent withdrawal of a stockholder. As such, once a share of our common stock is represented at the special meeting, it will be counted for the purpose of determining a quorum at the special meeting. Shares of our common stock represented at the special meeting but not voted, including shares of our common stock for which proxies have been received but for which stockholders have abstained, will be treated as present at the special meeting for purposes of determining the presence or absence of a quorum for the transaction of all business. Because brokers do not have discretionary authority to vote on any of the proposals at the special meeting, broker non-votes are not counted for the purpose of determining the presence of a quorum. Your vote is very important, regardless of the number of shares of our common stock that you own. Because stockholders cannot take any action at the special meeting unless a majority of the shares of our common stock issued and outstanding and entitled to vote thereat is represented, it is important that you attend the special meeting virtually or are represented by proxy at the special meeting.

In the event that a quorum is not present at the special meeting, we expect to adjourn, postpone or recess the special meeting, including to solicit enough proxies to obtain a quorum by no more than ten (10) days in connection with any one (1) adjournment, postponement or recess and no more than a total of twenty (20) days from the original date of the special meeting. The Company may also adjourn, postpone or recess the special meeting if the Board has determined in good faith (after consultation with outside legal counsel) that such adjournment, postponement or recess is necessary under applicable law to comply with the requirements made by the SEC or other applicable law with respect to the proxy statement or that failure to take such adjournment, postponement or recess action would be inconsistent with the directors’ fiduciary duties under applicable law by no more than ten (10) business days or such other amount of time reasonably agreed by the Company and Parent to be necessary to comply with applicable law. If the Company experiences technical difficulties during the special meeting (e.g., a temporary or prolonged power outage), it will determine whether the special meeting can be promptly reconvened (if the technical difficulty is temporary) or whether the special meeting will need to be reconvened on a later day (if the technical difficulty is more prolonged). In any such situation, the Company will promptly notify stockholders of the decision via http://www.virtualshareholdermeeting.com/TIF2021SM.

Attendance

Only stockholders of record as of the close of business on the record date are entitled to receive notice of, and to vote at (in person or by proxy), the special meeting and at any adjournment or postponement thereof. These individuals and entities will be entitled to cast one (1) vote on each matter properly brought before the special meeting for each share of our common stock held of record as of the close of business on the record date. The stockholders of record as of the close of business on the record date for the special meeting, their duly appointed proxy holders, along with “street name” stockholders who beneficially owned shares of our common

 

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stock on the record date, are entitled to participate in the virtual special meeting and will need their assigned 16-digit control number to vote shares in person at the special meeting. The control number can be found on the proxy card, voting instruction form, or other applicable proxy notices. If your shares are held in the name of a bank, broker or other nominee and you do not have the assigned 16-digit control number, please follow the instructions on the voting instruction form, or other applicable proxy notices, furnished by your bank, broker or other nominee to vote your shares accordingly. Please note that if you are a beneficial owner of shares of our common stock held through the Tiffany 401(k) Plan, you will not be able to vote those shares in person at the special meeting.

Attendance at the special meeting will be limited to stockholders of record at the record date, their duly appointed proxy holders, and stockholders who beneficially owned shares of our common stock on the record date and our invited guests. Technical assistance will be available for attendees who experience an issue accessing the special meeting. Contact information for technical support will appear on the virtual meeting website prior to the start of the special meeting virtually. Please note that recording of the special meeting will not be permitted.

Vote Required

For the merger proposal, you may vote “FOR,” “AGAINST” or “ABSTAIN.” Approval of the merger proposal requires the affirmative vote of the holders of a majority of the shares of our common stock issued and outstanding as of the close of business on the record date. That means that the merger proposal will be approved if more than half of the issued and outstanding shares of our common stock entitled to vote on the matter vote “FOR” the proposal. Therefore, abstentions from voting will have the same effect as a vote “AGAINST” approval of the merger proposal, but will count for the purpose of determining whether a quorum is present.

Your vote is very important, regardless of the number of shares of our common stock that you own. Because stockholders cannot take any action at the special meeting unless a majority of the shares of our common stock issued and outstanding and entitled to vote thereat is represented in person or by proxy, it is important that you attend the special meeting virtually or are represented by proxy at the special meeting. If you fail to return your proxy card, submit your proxy by telephone or via the Internet or vote in person, or if your shares of our common stock are held in “street name” by your bank, broker or other nominee and you fail to instruct your bank, broker or other nominee to vote your shares of our common stock, it will have the same effect as a vote “AGAINST” approval of the merger proposal.

If your shares of our common stock are registered directly in your name with our transfer agent, Computershare, you are considered, with respect to those shares of our common stock, the stockholder of record. This proxy statement and proxy card have been sent directly to you by the Company. As the stockholder of record, you have the right to vote in person at the special meeting or to grant your voting rights directly to the Company or to a third party by a proxy duly executed or transmitted in a manner in accordance with applicable law.

If your shares of our common stock are held in “street name” by a bank, broker or other nominee, or through the Tiffany 401(k) Plan, you are considered the “beneficial owner” of those shares of our common stock. In that case, this proxy statement has been forwarded to you by your bank, broker, Tiffany 401(k) Plan trustee or other nominee who is considered, with respect to those shares of our common stock, the stockholder of record. As the beneficial owner of those shares, you have the right to direct your bank, broker, Tiffany 401(k) Plan trustee or other nominee how to vote your shares of our common stock by following their instructions for voting. Your bank, broker, Tiffany 401(k) Plan trustee or other nominee should send you, as the beneficial owner, a package describing the procedure for voting your shares.

Banks, brokers or other nominees who hold shares in “street name” for customers generally have the authority to vote only on “routine” proposals when they have not otherwise received instructions from the applicable beneficial owners. This means that banks, brokers and other nominees are precluded from exercising their voting discretion with respect to the approval of non-routine matters, such as the merger proposal, the compensation proposal and the adjournment proposal, and, as a result, absent specific instructions from the

 

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applicable beneficial owner of such shares of our common stock, banks, brokers or other nominees are not empowered to vote those shares of our common stock on any of the proposals under consideration at this special meeting.

For the purposes of the merger proposal, if you attend the special meeting virtually and abstain from voting on this proposal, or if you have given a proxy and have abstained from voting on this proposal, this will have the same effect as if you voted “AGAINST” approval of the merger proposal. If you fail to return your proxy card, submit your proxy by telephone or via the Internet or vote in person, or if your shares are held in “street name” by your bank, broker or other nominee, and you do not instruct your bank, broker or other nominee to vote your shares of our common stock, your shares of our common stock will not be voted, and the effect will be the same as a vote “AGAINST” approval of the merger proposal.

For the compensation proposal, you may vote “FOR,” “AGAINST” or “ABSTAIN.” Approval of the compensation proposal requires the affirmative vote of the holders of a majority of the shares of our common stock that are present in person or by proxy at the special meeting and entitled to vote on such proposal. That means that the compensation proposal will be approved if more than half of those shares present in person or represented by proxy at the special meeting and entitled to vote on the matter vote “FOR” the proposal. For purposes of the compensation proposal, if you attend the special meeting virtually and abstain from voting on the compensation proposal, or if you have given a proxy and abstained from voting on the compensation proposal, your shares will not be voted “FOR” or “AGAINST” such proposal, but will have the same effect as a vote “AGAINST” such proposal. If you fail to submit a proxy or vote in person at the special meeting or if your shares of our common stock are held in “street name” by a bank, broker or other nominee and you do not instruct your bank, broker or other nominee to vote your shares of our common stock, your shares of our common stock will not be voted and will not have an effect on the approval of the compensation proposal, assuming a quorum is present.

For the adjournment proposal, you may vote “FOR,” “AGAINST” or “ABSTAIN.” Approval of the adjournment proposal requires the affirmative vote of the holders of a majority of the shares of our common stock that are present in person or by proxy at the special meeting and entitled to vote on such proposal. That means that the adjournment proposal will be approved if more than half of those shares present in person or represented by proxy at the special meeting and entitled to vote on the matter vote “FOR” the proposal. For purposes of the adjournment proposal, if you attend the special meeting virtually and abstain from voting on the adjournment proposal, or if you have given a proxy and abstained from voting on the adjournment proposal, your shares will not be voted “FOR” or “AGAINST” such proposal, but will have the same effect as a vote “AGAINST” such proposal. If you fail to submit a proxy or vote in person at the special meeting or if your shares of our common stock are held in “street name” by a bank, broker or other nominee and you do not instruct your bank, broker or other nominee to vote your shares of our common stock, your shares of our common stock will not be voted and will not have an effect on the approval of the adjournment proposal, assuming a quorum is present.

Shares of our common stock held in the Tiffany 401(k) Plan are voted by the Tiffany 401(k) Plan’s trustee in accordance with specific instructions given by Tiffany 401(k) Plan participants to whose accounts such shares have been allocated. Any shares of our common stock held in the Tiffany 401(k) Plan for which no instructions are received will be voted in the same proportion as those shares for which instructions are received.

Voting

Stockholder of Record. If you are a stockholder of record, you may vote your shares of our common stock on matters presented at the special meeting in any of the following ways:

 

   

In Person. You may attend the special meeting in a virtual format on http://www.virtualshareholdermeeting.com/TIF2021SM and cast your vote there. You will need your assigned 16-digit control number to vote shares electronically at the special meeting. The control number can be found on the proxy card, voting instruction form, or other applicable proxy notices.

 

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By Telephone or via the Internet. You can submit a proxy to vote your shares by telephone or via the Internet by following the instructions on the enclosed proxy card. Proxies submitted by telephone or via the Internet must be received by 11:59 p.m., Eastern Time, on [●]. Have your proxy card in hand as you will be prompted to enter your control number.

 

   

By Mail. You can submit a proxy to vote your shares by mail if you received a printed proxy card by completing, signing, dating and promptly returning your proxy card in the postage-prepaid envelope provided with the materials. Proxies submitted by mail must be received by the close of business on [●] in order to ensure that your vote is counted.

Beneficial Owner. If you are the beneficial owner of shares of our common stock, please refer to the instructions provided by the organization holding, or trustee of, your account to see which of the above choices are available to you. Those instructions will identify which of the above choices are available to you in order to have your shares of our common stock voted. You may instruct your bank, broker, Tiffany 401(k) Plan trustee or other nominee, as applicable, how to vote on your behalf. Please note that if you are a beneficial owner of shares of our common stock held through the Tiffany 401(k) Plan, your proxies submitted by telephone or via the Internet must be received by 11:59 p.m., Eastern Time, on [●], and your proxies submitted by mail must be received by the close of business on [●] in order to ensure that your vote is counted.

To attend the special meeting virtually and vote your shares at that meeting, you will need your assigned 16-digit control number. The control number can be found on the proxy card, voting instruction form, or other applicable proxy notices. If your shares are held in the name of a bank, broker or other nominee and you do not have the assigned 16-digit control number, please follow the instructions on the voting instruction form, or other applicable proxy notices, furnished by your bank, broker or other nominee to vote your shares accordingly. Please note that if you are a beneficial owner of shares of our common stock held through the Tiffany 401(k) Plan, you will not be able to vote those shares in person at the special meeting.

If you vote by proxy, regardless of the method you choose to vote, the individuals named on the enclosed proxy card, and each of them, with full power of substitution, will vote your shares of our common stock in the way that you indicate. When completing the Internet or telephone processes or the proxy card, you may specify whether your shares of our common stock should be voted “FOR” or “AGAINST” or to “ABSTAIN” from voting on all, some or none of the specific items of business to come before the special meeting.

If you are a stockholder of record and you properly sign your proxy card but do not mark the boxes showing how your shares of our common stock should be voted on a matter, the shares of our common stock represented by your properly signed proxy will be voted “FOR” approval of the merger proposal, “FOR” approval of the compensation proposal and “FOR” approval of the adjournment proposal.

If you have any questions or need assistance voting your shares, please contact Innisfree, our proxy solicitor, by calling toll-free at (877) 687-1874. Banks, brokers and other nominees should call at (212) 750-5833.

YOUR VOTE IS VERY IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES OF OUR COMMON STOCK THAT YOU OWN. BECAUSE STOCKHOLDERS CANNOT TAKE ANY ACTION AT THE SPECIAL MEETING UNLESS A MAJORITY OF THE SHARES OF OUR COMMON STOCK ISSUED AND OUTSTANDING AND ENTITLED TO VOTE THEREAT IS REPRESENTED, IT IS IMPORTANT THAT YOU ATTEND THE SPECIAL MEETING VIRTUALLY OR ARE REPRESENTED BY PROXY AT THE SPECIAL MEETING. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING VIRTUALLY, PLEASE COMPLETE, DATE, SIGN AND RETURN, AS PROMPTLY AS POSSIBLE, THE ENCLOSED PROXY CARD IN THE ACCOMPANYING POSTAGE-PREPAID REPLY ENVELOPE, OR SUBMIT YOUR PROXY BY

 

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TELEPHONE OR THE INTERNET. IF YOU WILL ATTEND THE SPECIAL MEETING VIRTUALLY AND VOTE IN PERSON, YOUR IN PERSON VOTE WILL REVOKE ANY PROXY PREVIOUSLY SUBMITTED BY YOU.

Voting by the Company’s Directors and Executive Officers

As of [●], the current directors and executive officers of the Company beneficially owned, in the aggregate, [●] shares of our common stock (not including any shares of our common stock deliverable upon exercise of or underlying any Company equity awards), representing less than 1% of the outstanding voting power of our common stock as of [●]. We expect that our directors and executive officers will beneficially own and be entitled to vote a similar figure as of the close of business on the record date.

Proxies and Revocation

Any stockholder of record entitled to vote at the special meeting may submit a proxy via the Internet, by telephone or by returning the enclosed proxy card in the accompanying postage-prepaid reply envelope, or may vote in person by attending the special meeting virtually. If your shares of our common stock are held in “street name” by a bank, broker or other nominee, or through the Tiffany 401(k) Plan, you should instruct your bank, broker, Tiffany 401(k) Plan trustee or other nominee on how to vote your shares of our common stock using the instructions provided by your bank, broker, Tiffany 401(k) Plan trustee or other nominee. If you fail to vote in person at the special meeting or fail to return your proxy card or fail to submit your proxy via the Internet or by telephone, or if your shares are held in “street name” by your bank, broker or other nominee, and you fail to instruct your bank, broker or other nominee to vote, your shares of our common stock will not be counted for purposes of determining whether a quorum is present at the special meeting and will have the same effect as a vote “AGAINST” approval of the merger proposal.

If you fail to vote in person at the special meeting or fail to return your proxy card or fail to submit your proxy via the Internet or by telephone, or if your shares are held in “street name” by your bank, broker or other nominee, and you fail to instruct your bank, broker or other nominee to vote, your shares of our common stock will not be voted and will not have an effect on the approval of the compensation proposal, assuming a quorum is present.

If you fail to vote in person at the special meeting or fail to return your proxy card or fail to submit your proxy via the Internet or by telephone, or if your shares are held in “street name” by your bank, broker or other nominee, and you fail to instruct your bank, broker or other nominee to vote, your shares of our common stock will not be voted and will not have an effect on the approval of the on the adjournment proposal, assuming a quorum is present.

Shares of our common stock held in the Tiffany 401(k) Plan are voted by the Tiffany 401(k) Plan’s trustee in accordance with specific instructions given by Tiffany 401(k) Plan participants to whose accounts such shares have been allocated. Any shares of our common stock held in the Tiffany 401(k) Plan for which no instructions are received will be voted in the same proportion as those shares for which instructions are received.

You have the right to revoke a proxy at any time prior to the taking of the vote at the special meeting. If you are a stockholder of record, you may revoke any prior proxy or voting instructions prior to the taking of the vote at the special meeting, regardless of how your proxy or voting instructions were originally submitted, by:

 

   

sending an executed, later-dated proxy card to the Corporate Secretary of the Company, calling in different instructions or providing different instructions through the Internet voting site;

 

   

notifying the Corporate Secretary of the Company in writing that you wish to revoke your proxy, provided that such notice must be received by us before the special meeting; or

 

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attending the special meeting virtually and voting your shares. You will need your assigned 16-digit control number to vote shares in person at the meeting. The control number can be found on the proxy card, voting instruction form, or other applicable proxy notices.

If you are a beneficial owner of shares of our common stock held in “street name”, you may change your instruction to your bank, broker or other nominee, as applicable, by submitting a subsequent instruction to such bank, broker or other nominee, or you may change your vote by attending the special meeting virtually and voting your shares. You will need your assigned 16-digit control number to vote shares in person at the special meeting. The control number can be found on the proxy card, voting instruction form, or other applicable proxy notices. If your shares are held in the name of a bank, broker or other nominee and you do not have the assigned 16-digit control number, please follow the instructions on the voting instruction form, or other applicable proxy notices, furnished by your bank, broker or other nominee to vote your shares accordingly.

If you are a beneficial owner of shares of our common stock held through the Tiffany 401(k) Plan, you may change your instruction to the Tiffany 401(k) Plan trustee by submitting a subsequent instruction to such trustee by 11:59 p.m., Eastern Time, on [●]. You will not be able to vote those shares in person at the special meeting.

Anticipated Date of Completion of the Merger

We are working towards completing the merger as soon as possible. All regulatory authorizations, consents, orders, approvals or waivers required for the merger under the merger agreement have been obtained. Assuming the maintenance or, in the event any existing approval or waiver expires and the Company files for such approval or waiver again, receipt of such regulatory approvals or waivers, and the satisfaction or waiver (to the extent permitted by applicable law) of other closing conditions, including obtaining of the requisite company vote, we anticipate that the merger will be completed early in the calendar year 2021. If our stockholders vote to approve the merger proposal in accordance with the requisite company vote, the merger will become effective no later than the fifth (5th) business day following the satisfaction or waiver (to the extent permitted by applicable law) of the other conditions to the merger, subject to the terms and conditions of the merger agreement. See the section entitled “The Merger Agreement—Closing and Effective Time” beginning on page 100.

Rights of Stockholders Who Seek Appraisal

If the merger is completed, the Company’s stockholders who do not vote in favor of the adoption of the merger agreement are entitled to appraisal rights under Section 262 of the DGCL in connection with the merger, but only if they fully comply with all the applicable legal requirements for Section 262 of the DGCL. This means that you may be entitled to have the fair value of your shares of our common stock determined by the Delaware Court of Chancery and to receive payment based on that valuation in lieu of the per share merger consideration if you follow exactly the procedures set forth in Section 262 of the DGCL. The ultimate amount you may receive in an appraisal proceeding may be less than, equal to or more than the amount you would have received under the merger agreement.

To exercise your appraisal rights, you must, among other things, submit a written demand for appraisal to the Company before the vote is taken on the merger proposal and you must not vote (either in person or by proxy) in favor of the merger proposal. If you fail to follow exactly the procedures set forth in Section 262 of the DGCL, you will lose your appraisal rights. The requirements for exercising appraisal rights are further described in the section entitled “Appraisal Rights” beginning on page 134 and the text of the DGCL appraisal rights statute is reproduced in its entirety as Annex D to this proxy statement. We encourage you to read these provisions carefully and in their entirety. If you hold your shares of our common stock through a bank, broker,

 

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the Tiffany 401(k) Plan or other nominee and you wish to exercise your appraisal rights, you should consult with your bank, broker, Tiffany 401(k) Plan trustee or other nominee to determine the appropriate procedures for the making of a demand for appraisal by your bank, broker, Tiffany 401(k) Plan trustee or other nominee. In view of the complexity of the DGCL, stockholders who may wish to pursue appraisal rights should consult their legal and financial advisors promptly.

Adjournments

Although it is not currently expected, the special meeting may be adjourned or postponed. Pursuant to the Company’s by-laws, if a quorum is not present at the special meeting, the chair of the special meeting or the holders of a majority of the voting power of the outstanding shares of capital stock entitled to be voted at the special meeting that are present, in person or by proxy, may adjourn the special meeting to another place, date or time and the Company otherwise retains full authority to the extent permitted under Delaware law to adjourn the special meeting for any purpose, or to postpone the special meeting before it is convened, without the consent of any stockholder of the Company, subject to certain limitations on the Company’s ability to postpone or adjourn the special meeting set forth in the merger agreement. If a quorum is present at the special meeting but there are not sufficient votes at the time of the special meeting to approve the merger proposal in accordance with the requisite company vote, then the stockholders of the Company may be asked to vote on the adjournment proposal. In the event that the adjournment proposal is not approved by the Company’s stockholders at such time, the Company may not be able to postpone or adjourn the special meeting if there are insufficient votes to approve the merger proposal.

If the special meeting is adjourned, we are not required to give notice of the time and place of the adjourned meeting if announced at the special meeting at which the adjournment is taken, unless the adjournment is for more than thirty (30) days or the Board fixes a new record date for the special meeting. At any adjourned meeting, any business may be transacted which might have been transacted at the original special meeting. All proxies will be voted in the same manner as they would have been voted at the original convening of the special meeting, except for any proxies that have been effectively revoked or withdrawn prior to the time the proxy is voted at the reconvened meeting.

Technical Difficulties or Trouble Accessing the Virtual Meeting Website

If the Company experiences technical difficulties during the special meeting (e.g., a temporary or prolonged power outage), it will determine whether the special meeting can be promptly reconvened (if the technical difficulty is temporary) or whether the special meeting will need to be reconvened on a later day (if the technical difficulty is more prolonged). In any such situation, the Company will promptly notify stockholders of the decision via http://www.virtualshareholdermeeting.com/TIF2021SM.

Broadridge Financial Solutions will have technicians ready to assist you with any individual technical difficulties you may have accessing the virtual meeting website. Contact information for technical support will appear on the virtual meeting website prior to the start of the special meeting.

Solicitation of Proxies; Payment of Solicitation Expenses

We will bear the costs of the solicitation of proxies for the special meeting. In addition to solicitation by mail, directors, officers and our employees may solicit proxies from stockholders by telephone, by facsimile, by mail, on the Internet or in person. These directors, officers and employees will not receive additional compensation, but may be reimbursed for out-of-pocket expenses in connection with this solicitation. In addition to solicitation by our directors, officers and employees, we have engaged Innisfree to assist in the solicitation of proxies and provide related advice and informational support, for a fee of $25,000 plus additional potential fees to be determined at the conclusion of the solicitation. The Company has agreed to reimburse Innisfree for certain out-of-pocket fees, telephone charges and expenses and will also indemnify Innisfree, its subsidiaries and their

 

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respective directors, officers, employees and agents against certain claims, liabilities, losses, damages and expenses related to the proxy solicitation. The Company may advance monies to Innisfree to pay on the Company’s behalf charges rendered by banks, brokers, trustees or their agents for their expenses in forwarding proxy materials to beneficial owners of shares of our common stock.

Questions and Additional Information

If you have more questions about the merger, merger agreement or special meeting, need assistance in submitting your proxy or voting your shares of our common stock, or need additional copies of the proxy statement or the enclosed proxy card or voting instructions, please contact Innisfree, our proxy solicitor, by calling toll-free at (877) 687-1874. Banks, brokers and other nominees should call at (212) 750-5833.

 

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THE MERGER

This discussion of the merger is qualified in its entirety by reference to the merger agreement, which is attached to this proxy statement as Annex A. You should read the entire merger agreement carefully and in its entirety as it is the legal document that governs the merger.

Upon the terms and subject to the conditions set forth in the merger agreement, and in accordance with the applicable provisions of the DGCL, at the effective time, Merger Sub will merge with and into the Company, whereupon the separate corporate existence of Merger Sub will cease and the Company will continue as the surviving corporation in the merger and an indirect wholly owned subsidiary of Parent. As a result of the merger, the Company will no longer be a publicly held corporation. You will not own any shares of the capital stock of the surviving corporation. The Company’s common stock will be delisted from the NYSE and deregistered under the Exchange Act, and the Company will no longer file periodic reports with the SEC on account of our common stock.

Per Share Merger Consideration

At the effective time, each eligible share will be automatically canceled and will cease to exist, and will be converted into the right to receive, upon the terms and subject to the conditions set forth in the merger agreement, $131.50 in cash, without interest, less any required withholding taxes.

Changes to the Original Merger Agreement Pursuant to the Merger Agreement

The original merger agreement was amended and restated pursuant to the merger agreement to, among other things, (i) reduce the per share merger consideration to $131.50 from $135.00 in cash, in each case, without interest, less any required withholding taxes, (ii) expressly permit the Company to declare and pay regular quarterly dividends of up to $0.58 per share in the Company’s sole discretion, (iii) eliminate certain conditions to the closing such as (A) the absence of a material adverse effect on the Company, and (B) the absence of (1) any legal prohibition by a governmental entity that is in effect and enjoins, prevents or otherwise prohibits, materially restrains or materially impairs or makes unlawful consummation of the transactions contemplated by the merger agreement and (2) any proceeding instituted by a governmental entity that seeks to temporarily or permanently impose a legal restraint, (iv) narrow the condition to the closing with respect to the accuracy of the Company’s representations and warranties be limited to only select fundamental representations and warranties (relating to the Company’s organization, good standing and qualification, capital structure (except for de minimis inaccuracies), corporate authority and approval, actions taken to render inapplicable takeover statutes, absence of rights plans, absence of undisclosed broker’s or finder’s fees and receipt of financial advisor opinions), (v) expand the meaning of ordinary course of business to include the manner in which the Company and its subsidiaries have been operating since the date of the original merger agreement through the date of the merger agreement, and any COVID-19 measures taken after the signing of the merger agreement, and (vi) provide that if the merger has not been consummated within six (6) business days after the date on which the requisite company vote has been obtained as a result of the material breach of the merger agreement by Parent or Merger Sub (it being understood that the closing cannot take place prior to January 7, 2021), the Company will have no further obligation to comply with certain obligations in respect of the conduct of its business pending the merger. Parent further agreed that, in the event that any proceeding is brought by the Company to enforce the terms of the merger agreement or for money damages, the “per share merger consideration” will be deemed, for all purposes in that proceeding, including any award of specific performance or damages, to be $135.00 in cash, without interest and less any required withholding taxes.

In addition, under the merger agreement, Parent agreed that, at the special meeting, any adjournment thereof or any other meeting of the stockholders of the Company in connection with the merger, Parent will vote, and cause to be voted, any shares of common stock owned by it or any of its affiliates, as of the record date of such special meeting, in favor of the adoption of the merger agreement, the approval of the merger, and the approval

 

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of any actions required in furtherance thereof and against any proposal that could, or could reasonably be expected to, prevent, delay or impair consummation of the merger.

Merger Litigation Settlement

As described in the section entitled “The Merger—Background of the Merger”, the Company filed a lawsuit against Parent, Holding and Merger Sub, and Parent, Holding and Merger Sub filed counterclaims against the Company in the Delaware Court of Chancery related to the merger under the original merger agreement. Concurrently with the execution of the merger agreement, the Company, Parent, Holding and Merger Sub also entered into a settlement agreement (the “settlement agreement”) pursuant to which, among other things, each party agreed to dismiss with prejudice all claims that it brought in the merger litigation and filed a stipulation and order of dismissal dismissing with prejudice all claims asserted by the parties in the merger litigation.

Background of the Merger

From time to time, the Board, together with senior management of the Company, has reviewed and evaluated the Company’s business strategies, opportunities and challenges as part of its consideration and evaluation of the Company’s prospects and ways to increase stockholder value. These reviews and evaluations have focused on a diverse array of topics, including, among others, internal growth strategies, potential divestitures, commercial collaborations with third parties, potential strategic partnerships and potential acquisitions by the Company. The Board has also periodically reviewed with senior management and external advisors the luxury retail industry, trends and landscape and discussed the possibility of an acquisition of the Company by a financial or strategic buyer. In addition, in an effort to enhance preparedness in the event of potential strategic opportunities or activity, members of the Company’s senior management and the Chairman of the Board have from time to time met with representatives of investment banks and financial advisory firms to discuss various banking and financial advisory services, including mergers and acquisition advisory services. Nonetheless, except as otherwise described below, in the two years prior to Parent’s proposal to acquire the Company received on October 15, 2019, the Company did not have any discussions with any other party regarding a potential acquisition of the Company that led to the point of entering into a confidentiality or standstill agreement or sharing non-public information with any such party.

In February 2017, JANA Partners LLC (“JANA Partners”), together with Francesco Trapani, announced a 5.1% stake in the Company. Until 2012, Mr. Trapani served as the Chief Executive Officer of Bulgari S.p.A., which was acquired by Parent in 2011, and until February 2017, he was a director of Bulgari S.p.A. From 2011 to 2014, Mr. Trapani also served as Chairman and CEO of Parent’s Watches and Jewelry Division and on Parent’s Board of Directors, and following 2014, he continued to serve on Parent’s Board of Directors and as a senior advisor to Bernard Arnault, the Chairman and Chief Executive Officer of Parent, until 2016. On February 20, 2017, the Company entered into cooperation agreements (the “cooperation agreements”) with JANA Partners and Mr. Trapani pursuant to which, among other things, the Company agreed to appoint three new independent directors to the Board: Roger Farah, James Lillie and Mr. Trapani. Mr. Trapani was also appointed to the Board’s Search Committee, which was primarily responsible for overseeing the Company’s search for a new Chief Executive Officer, and the Board’s Nominating/Corporate Governance Committee. Mr. Trapani was subsequently appointed the following May to the Board’s Audit Committee. Under the cooperation agreements, JANA Partners and Mr. Trapani agreed to customary standstill commitments, prohibiting them from, among other things, soliciting proxies with respect to the voting of any securities of the Company, acquiring any securities of the Company and effecting or seeking to effect any extraordinary transaction, such as a merger, asset sale or tender or exchange offer, involving the Company or any of its subsidiaries or joint ventures or any of their respective securities or a material amount of any of their respective assets or businesses. The cooperation agreements also contained other substantive provisions, the effectiveness of which was tied to the term of the standstill commitments. The standstill commitments and, consequently, the other key terms of the cooperation agreements, expired in February 2020.

 

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On July 12, 2017, the Company appointed Alessandro Bogliolo as its Chief Executive Officer, a role he commenced in October 2017. Mr. Bogliolo had previously served as Chief Executive Officer of Diesel S.p.A, and prior to that served as a senior executive of, among other companies, each of Bulgari S.p.A. (serving in various management roles from 1996 to 2012) and Sephora USA Inc. (serving as Chief Operating Officer from 2012 to 2013), which are both owned by Parent. Upon becoming Chief Executive Officer of the Company, Mr. Bogliolo conducted a review of the Company’s multi-year strategic plan and announced numerous strategic initiatives for the Company.

On October 15, 2019, Mr. Bogliolo met with Antonio Belloni, Group Managing Director of Parent, whom Mr. Bogliolo knew from his prior experiences in the luxury retail industry. At the lunch meeting, which had been scheduled at Mr. Belloni’s request without advising Mr. Bogliolo of any agenda for discussion, Mr. Belloni presented a letter containing an unsolicited, non-binding proposal for Parent to acquire all of the issued and outstanding shares of our common stock at a value of $120.00 per share in cash (the “$120.00 proposal”). On the same day, Mr. Belloni reached out to Roger Farah, Chairman of the Board, to inform him of the earlier meeting with Mr. Bogliolo and the $120.00 proposal. The closing market price of our common stock on that date was $91.04. Parent requested a response from the Company by October 23, 2019.

On October 16, 2019, the Board held a meeting, with representatives from the Company’s outside legal counsel at the time present. The closing market price of our common stock on that date was $91.40. The Board discussed, in consultation with outside legal counsel, the proposed terms set forth in the $120.00 proposal, including Parent’s request for a response by October 23, 2019, and the process for formulating a response to Parent, including the role of the Board and the Company’s senior management in any potential sale process, the Board’s fiduciary duties, the potential engagement of financial advisors and plans to prepare for and convene a meeting of the Board to determine whether it was the right time for the Company to consider strategic alternatives to its stand-alone plan. The Board also discussed with management and outside counsel the expertise, experience and qualifications of potential financial advisors that could represent the Company in connection with a potential acquisition of the Company by Parent, as well as the Company’s relationship with Goldman Sachs under a pre-existing and unrelated engagement by the Company. The Board authorized Mr. Farah to reach out to Centerview in respect of potential financial advisory services.

Also on October 16, 2019, following a discussion with the Company’s outside legal counsel at the time and in view of his personal, business and financial relationships with Parent and his actual or potential conflicts of interest in relation to the matters to be discussed by the Board in relation to a potential acquisition of the Company by Parent, Mr. Trapani informed Mr. Farah that he decided to recuse himself from the Company’s consideration of a potential acquisition of the Company by Parent and any potential alternative proposals (including all future Board meetings convened to discuss such matters). Mr. Trapani subsequently agreed to communicate only with Mr. Farah and the Company’s General Counsel regarding a potential acquisition of the Company by Parent and to waive notice of all board meetings related to the Board’s consideration of matters related to Parent and any potential alternative proposals as well as receipt of all materials provided to directors in connection therewith. At that time, the Company’s outside counsel also discussed with Mr. Bogliolo his prior employment with subsidiaries of Parent and determined that he did not have a conflict in relation to a potential acquisition of the Company by Parent. Mr. Bogliolo has informed the Company that, as of the date of the filing of this proxy statement, Mr. Bogliolo has neither sought nor received any offer of employment from Parent or its representatives nor made any determination concerning whether he would accept any such offer.

On October 17, 2019, Mr. Farah contacted Centerview to discuss Centerview’s expertise and experience and to evaluate whether the Company should engage Centerview to advise the Company with respect to a potential acquisition of the Company by Parent.

Also on October 17, 2019, the Board held a meeting to continue the discussion from October 16, 2019, regarding the $120.00 proposal, with representatives from the Company’s outside legal counsel at the time present. Representatives from the Company’s outside legal counsel discussed with the Board its fiduciary duties

 

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and the process for evaluating potential strategic alternatives to the Company’s stand-alone plan. The closing market price of our common stock on that date was $91.58.

On October 18, 2019, after consultation with the Board, Mr. Farah sent a letter to Parent, stating that the Board would need to do further internal work and analysis with input from external advisors to evaluate the $120.00 proposal and requesting that all future communications from Parent be directed solely to him. Also on this date, following discussion with Centerview regarding the prospect of retaining Centerview to act as financial advisor to the Company, the Company executed a confidentiality agreement with Centerview.

On October 20, 2019, Centerview provided the Company with a letter describing Centerview’s relationships with Parent and its subsidiaries and Mr. Arnault and entities in which Mr. Arnault has a significant ownership interest or management involvement.

On October 21, 2019, the Finance Committee of the Board met to discuss the potential engagement of financial advisors in connection with a potential acquisition of the Company by Parent. Mr. Farah noted that, in the ordinary course, he and Mr. Bogliolo had met with several investment banks over the preceding twelve months to discuss various services, including activism and mergers and acquisitions advisory services, were the Company to be approached at some future date by an activist investor or potential acquirer. Mr. Farah presented his and Mr. Bogliolo’s recommendation that Centerview and Goldman Sachs be engaged to serve as financial advisors with respect to a potential acquisition of the Company by Parent, subject to the negotiation and approval of satisfactory engagement terms, the review of their relationship disclosures, and a determination that such disclosures did not present any significant conflicts in relation to a potential acquisition of the Company by Parent. The Finance Committee of the Board expressed its support for the engagement of Centerview and Goldman Sachs, subject to the resolution of the foregoing points, and authorized the Company to continue to engage in discussions with Centerview and Mr. Farah to reach out to Goldman Sachs.

In the days following the meeting of the Finance Committee of the Board on October 21, 2019, Mr. Farah contacted Goldman Sachs, given the Company’s pre-existing and unrelated engagement of that firm, to discuss Goldman Sachs’ expertise and experience, to advise Goldman Sachs of the $120.00 proposal, and to request Goldman Sachs to confirm it would not have any material conflicts if Goldman Sachs were engaged to represent the Company with respect to a potential acquisition of the Company by Parent.

On October 22, 2019, Parent acknowledged receipt of the Company’s response letter dated October 18, 2019 and noted that Parent would continue to maintain confidentiality with respect to its communications with the Company and direct all communication solely to the attention of Mr. Farah.

On October 25, 2019, the Company executed a confidentiality agreement with Goldman Sachs. Also on that date, Goldman Sachs provided a disclosure letter to the Company regarding certain of its relationships with Parent and Groupe Arnault SAS, a significant shareholder of Parent (“Groupe Arnault”) and their majority-owned subsidiaries or managed funds.

Also on October 25, 2019, the Company’s management, after discussion with Mr. Farah, contacted Sullivan & Cromwell LLP (“Sullivan & Cromwell”) to discuss its credentials and expertise in handling matters similar to a potential acquisition of the Company by Parent. Sullivan & Cromwell confirmed that it did not have any conflicts.

On October 26, 2019, the Board held a meeting and, at management’s and Mr. Farah’s recommendation, engaged Sullivan & Cromwell as its outside legal counsel to advise with respect to matters related to a potential acquisition of the Company by Parent. At the meeting, with representatives of Sullivan & Cromwell and Centerview present, the Board discussed the latest interactions between representatives of Parent and the Company and the Company’s potential response to the $120.00 proposal. The closing market price of our common stock on the last trading day prior to October 26, 2019 was $98.55. Mr. Farah informed the directors

 

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that Mr. Belloni had stated that Parent would require “encouragement” of some kind or would withdraw the $120.00 proposal. Mr. Farah explained that he had informed Parent that the Board was considering the $120.00 proposal and expressed willingness to maintain an open dialogue with Parent. At this meeting, a representative of Sullivan & Cromwell discussed with the Board its fiduciary duties, and the Board agreed to convene another Board meeting the following week to review the Company’s stand-alone prospects with the management team to better inform the Board’s assessment of how the $120.00 proposal compared to the Company’s stand-alone value. The Board noted that Parent had approached the Company at a time when the Company’s management had not yet completed its annual strategic planning process (which is typically completed after the Company’s fiscal year end) and, as such, the Company’s management would need to prepare a multi-year strategic plan on a greatly accelerated basis, and without the benefit of any insight into fourth quarter results, which typically account for approximately 30% of the Company’s annual revenue. The Board requested this new multi-year management plan so that it could have an updated perspective on the Company’s current performance and projected future performance, since the last multi-year plan had been approved more than seven months prior and global macroeconomic and geopolitical conditions had materially changed since such time. Also on this date, the Finance Committee of the Board discussed the relationship disclosures provided by Centerview and Goldman Sachs and authorized management to negotiate potential fee arrangements for the financial advisors.

Also on October 26, 2019, certain media outlets published articles discussing that Parent had made a proposal to acquire the Company. Representatives from Citigroup Global Markets Inc. (“Citi”), one of Parent’s financial advisors with respect to a potential acquisition of the Company by Parent, and Centerview discussed with each other the news accounts of Parent’s proposal.

On October 27, 2019, Mr. Belloni and Mr. Farah had a phone conversation regarding the news accounts concerning the $120.00 proposal, in which they discussed potential sources of the leak and mutually reiterated the importance of confidentiality. On this date, Mark Erceg, Chief Financial Officer of the Company, also received an email from a party that appeared to be a small asset management fund (“Party A”) requesting a discussion of a potential proposal to acquire the Company. The email did not contain any potential price or other terms. After researching publicly available information concerning Party A and consulting with Mr. Farah, its financial advisors and Sullivan & Cromwell, the Company determined that Party A’s inquiry was not credible and that Party A was unlikely to have the resources to pay a higher price for the Company than Parent or to execute a transaction with an equity value of the Company’s size, and determined not to pursue discussions with Party A.

Also on this date, multiple media outlets reported that Parent had offered the Company a price of “roughly $120.00 a share.”

On October 28, 2019, Parent issued a press release disclosing that Parent had held preliminary discussions regarding a possible transaction with the Company. On the same day, the Company issued a press release confirming that Parent had made an unsolicited, non-binding proposal to purchase the Company for $120.00 per share in cash and disclosing that, while the parties were not in discussions at the time, the Board was carefully reviewing the proposal consistent with its fiduciary duties. The closing market price of our common stock on that date was $129.72.

Also on October 28, 2019, a representative of Goldman Sachs received a call from Mr. Arnault in which Mr. Arnault noted the disclosure in the Company’s press release issued earlier in the day that Goldman Sachs had been retained as financial advisor to the Company with respect to a potential acquisition of the Company by Parent. Mr. Arnault indicated that he would be available to speak with representatives of the Company at any point during the process, if appropriate. No discussion of the $120.00 proposal occurred during the call.

Also on October 28, 2019, Mr. Bogliolo and Mr. Erceg met with Centerview, Goldman Sachs and Sullivan & Cromwell to discuss preparation of the November 2019 management projections (as defined in the section entitled “The Merger—Certain Company Forecasts” beginning on page 81) by the Company’s

 

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management, as well as a general overview of the current macroeconomic environment, the luxury sector, trading multiples and current market perceptions concerning the Company. During the remainder of the week of October 28, 2019, the Company’s senior management worked to further develop the November 2019 management projections, consulting multiple times with the Company’s financial advisors and with Mr. Farah. Although the Company’s financial advisors had not yet been formally engaged by the Company, in the interest of time they discussed with management the development of the November 2019 management projections since the financial advisors would need to use that information in connection with their financial analyses.

Also on October 28, 2019, a representative of a law firm contacted a representative of Goldman Sachs on behalf of a stockholder of the Company that is a publicly traded company owning businesses in a variety of industries. The representative indicated that the stockholder strongly supported maintaining the independence of the Company and had capital to put towards that objective. The Company’s financial advisors did not consider the in-bound suggestion to be relevant to the Company’s situation. Nonetheless, Goldman Sachs informed the law firm representative that the Company was prepared to listen to any proposal from the stockholder. Neither the law firm nor the stockholder ever submitted a proposal to the Company.

On October 31, 2019, the Finance Committee of the Board met to discuss the terms of engagement for each of Centerview and Goldman Sachs and authorized Sullivan & Cromwell to proceed with negotiation of the engagements in consultation with Mr. Farah and the Chair of the Finance Committee. Later that same day, the Board met, with representatives of Sullivan & Cromwell, Centerview and Goldman Sachs present, to discuss the $120.00 proposal, certain considerations relevant to the Board’s assessment of the Company’s stand-alone prospects and third parties that could also potentially be interested in acquiring the Company. The closing market price of our common stock on that date was $124.51.

On November 3, 2019, the Board held a meeting, with representatives of Sullivan & Cromwell, Centerview and Goldman Sachs present for portions of the meeting. The closing market price of our common stock on the last trading day prior to the meeting was $127.00. During the meeting, the Board reviewed Centerview’s and Goldman Sachs’ relationship disclosures and concluded that nothing in such disclosures would prevent Centerview or Goldman Sachs from representing the Company as a financial advisor in connection with the engagement. The Board approved Centerview’s engagement as the Company’s financial advisor, and, because the terms of Goldman Sachs’ engagement were still being negotiated, the Board agreed that it would consider authorization of the engagement of Goldman Sachs at a subsequent meeting. Also at the meeting, a representative of Sullivan & Cromwell reviewed and discussed with the Board its fiduciary duties under Delaware law. Also at the meeting, Company management presented the November 2019 management projections to the Board, which represented management’s most probable assessment of the Company’s results based on its good faith expectations and assumptions. Management noted that the November 2019 management projections projected less robust performance for the Company in fiscal 2020 than currently assumed by Wall Street analyst consensus estimates because the Wall Street analyst consensus estimates did not yet fully take into account adverse impacts on the Company’s performance resulting from certain macroeconomic and socio-political events such as unrest in Hong Kong, the worsening of U.S.-China trade relations, the Yellow Vest movement in Paris and the slowdown in Chinese tourism. Management stated its expectation that the Wall Street consensus estimates would be revised downward once the Company announced its third quarter earnings on December 5, 2019, disclosing the impact of those and other recent developments. The Board observed that, in connection with preparation of an annual budget for fiscal 2020 and with setting fiscal 2020 compensation targets for management, the Board would push management to outperform the metrics projected to be achieved in 2020 under the November 2019 management projections. Following discussion, the Board approved the November 2019 management projections for use by the financial advisors in connection with analyzing the Company’s stand-alone value in relation to the $120.00 proposal and any other proposals to acquire the Company. Centerview and Goldman Sachs then discussed with the Board their preliminary financial perspectives based on the November 2019 management projections. The financial advisors also presented information about Parent, and the Board discussed whether there were any other potential buyers for the Company and the likelihood of any other party being willing to pay more to acquire the Company than Parent. The financial advisors observed that they had not received credible

 

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inbound indications of interest from any other parties since the $120.00 proposal had become public and shared their view that a private equity buyer likely would not be willing to pay more for the Company than the $120.00 proposal. After discussion and consideration of the presentations of management and the financial advisors, the Board instructed Mr. Farah to contact Parent to convey that the Board had rejected the $120.00 proposal but authorized Mr. Farah to continue his discussions with Parent to explore whether Parent would be willing to increase its proposed price.

On November 4, 2019, Mr. Farah contacted Mr. Belloni and rejected the $120.00 proposal and communicated that there would be no substantive engagement with Parent at a price of $120.00 per share of our common stock. Mr. Belloni acknowledged this response and said Parent would discuss the matter further internally.

Also on November 4, 2019, the Board met and received an update regarding the Company’s recent interactions with Parent and on the status of the engagement terms for Goldman Sachs.

Also on November 4, 2019, the Company and Centerview executed the engagement letter for Centerview’s engagement as the Company’s financial advisor.

During the weeks of November 4, 2019 and November 11, 2019, representatives of Centerview and Goldman Sachs, at the direction of Mr. Farah, reached out informally in ordinary course investment banking coverage discussions to four potential alternative bidders that they believed were most likely to be interested in an acquisition of the Company due to their financial capacity and/or potential synergistic opportunities to inquire whether such parties would have any interest in acquiring, or had any plans to seek to acquire, the Company. All four parties indicated that they did not have any interest in acquiring the Company at this time for a price in excess of the price contemplated by the $120.00 proposal.

On November 6, 2019, Mr. Belloni and Mr. Farah spoke via telephone, and Mr. Belloni asked whether Parent could begin conducting due diligence on the Company if Parent were to make a non-binding proposal to acquire all of the issued and outstanding shares of our common stock at a value of $125.00 per share in cash (the “$125.00 proposal”). The closing market price of our common stock on that date was $124.69. Later on this date, a representative of Citi called a representative of Centerview to communicate the same message. Members of the Board convened and received an update from Mr. Farah regarding the $125.00 proposal and Parent’s request for due diligence, and subsequently Mr. Farah conveyed to Mr. Belloni, and representatives of Centerview conveyed to representatives of Citi, that the $125.00 proposal would be insufficient to warrant the Company providing Parent with access to the Company’s confidential information for due diligence purposes.

Also on November 6, 2019, multiple news outlets reported that the Board had decided that the $120.00 proposal was too low to become the basis for negotiations and that the Company would open its books and provide confidential due diligence if Parent were to make a non-binding proposal to acquire all of the issued and outstanding shares of our common stock at a higher price per share.

On November 7, 2019, during a phone conversation with Mr. Belloni, Mr. Farah stated that Parent would need to counter with a higher price per share than the price per share contemplated by the $125.00 proposal for an opportunity to conduct due diligence on the Company. Mr. Belloni informed Mr. Farah that Parent could be required to issue external communications regarding a proposal to acquire the Company and that Parent could delay further communication with the Company about a potential acquisition of the Company by Parent until after the Company’s earnings release on December 5, 2019, in anticipation of potential negative results being released on such date and the consequential impact on the Company’s stock price. On the same date, a representative of Centerview received a call from a representative of Citi regarding the $125.00 proposal, and the representative of Centerview communicated the same message to Citi that Mr. Farah had communicated to Mr. Belloni.

 

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On November 8, 2019, the Board met, with representatives from Centerview, Goldman Sachs and Sullivan & Cromwell present, and received an update regarding the Company’s recent interactions with Parent and next steps.

On November 11, 2019, Mr. Belloni informed Mr. Farah that Parent would be prepared to make a revised non-binding proposal to acquire all of the issued and outstanding shares of our common stock at a price of $130.00 per share in cash (the “$130.00 proposal”) if Parent could begin a confirmatory due diligence process with the Company. The closing market price of our common stock on that date was $125.57.

On November 15, 2019, the Board held a meeting, which was also attended by members of management and representatives of Sullivan & Cromwell, Centerview and Goldman Sachs, to discuss the $130.00 proposal. The closing market price of our common stock on that date was $125.08. Representatives of Centerview and Goldman Sachs discussed with the Board preliminary financial perspectives related to the $130.00 proposal. The Board also discussed potential alternative bidders, including the informal outreach performed by the Company’s financial advisors to four potential counterparties that had all indicated they would not be interested in acquiring the Company at a price greater than the $120.00 proposal. After discussion and consideration of the presentation of management and its discussion with the financial advisors, the Board determined to hold further discussions and begin a confirmatory due diligence process with Parent with the expectation that any potential acquisition of the Company by Parent be at a price per share higher than the price per share contemplated by the $130.00 proposal, and further that Parent not be granted exclusivity. The Board authorized Mr. Farah to engage with Mr. Belloni on such basis and instructed management to present to Parent selected details of the Company’s strategic plans, highlighting to Parent the potential additional value that was not yet reflected in the Company’s market price. Also during the meeting, the Board approved Goldman Sachs’ engagement as financial advisor to the Company, and, subsequently on that date, the Company and Goldman Sachs executed the engagement letter for Goldman Sachs’ engagement as the Company’s financial advisor.

On November 16, 2019, Mr. Farah informed Mr. Belloni of the Board’s willingness to proceed with discussions and a confirmatory due diligence process, but also expressed the Board’s view that the price per share contemplated by the $130.00 proposal was not sufficient to warrant granting exclusivity and would not be sufficient to warrant a sale of the Company to Parent. Mr. Farah emphasized his belief that Parent would find more value for the Company through the confirmatory due diligence process.

On November 17, 2019, at the direction of Mr. Farah, Sullivan & Cromwell sent a draft confidentiality agreement to Skadden, Arps, Slate, Meagher & Flom LLP (“Skadden”), Parent’s outside legal counsel, with respect to a potential acquisition of the Company by Parent. On November 18, 2019, the parties and their respective legal advisors exchanged several drafts of the confidentiality agreement, and on November 19, 2019, the parties executed the confidentiality agreement. Pursuant to the executed confidentiality agreement, Parent agreed to, among other things, a customary standstill for a period of six months, prohibiting Parent from (i) acquiring any beneficial ownership interest in the Company’s equity securities, (ii) seeking to influence the management, Board or governance of the Company or (iii) publicly announcing an intention to or entering into any arrangement prohibited by the standstill. The standstill under the confidentiality agreement expired on May 19, 2020.

On November 19, 2019, the Company opened a virtual data room to Parent and its advisors. The confirmatory due diligence process commenced and continued through November 24, 2019 and included, among other things, a review of financial, operational and legal information and a series of due diligence in-person meetings and calls with representatives of the Company and Parent and their respective advisors.

On November 20, 2019, Mr. Bogliolo and Mr. Erceg made a presentation to representatives of Parent regarding the Company, including the Company’s business, operations and financial information. The Company provided a portion of the November 2019 management projections to Parent, including estimates for sales, earnings before interest, income taxes, depreciation and amortization (“EBITDA”), capital expenditures and cash

 

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flows, and a high-level overview of certain key drivers of the November 2019 management projections, such as creation of a strong product innovation pipeline, increase in average transaction value, growth in China, rejuvenation of the Company’s U.S. retail network and acceleration of the Company’s e-commerce and digital presence.

Also on November 20, 2019, Skadden sent a draft of the original merger agreement to Sullivan & Cromwell. From November 20, 2019 until the execution of the original merger agreement on November 24, 2019, the parties and their respective legal and financial advisors exchanged several drafts of, and engaged in numerous discussions and negotiations concerning the terms of, the original merger agreement. Significant areas of discussion and negotiation included, among others, the amount of the merger consideration, the scope and terms of representations, warranties and covenants, including the interim operating restrictions, “deal protection” provisions of the original merger agreement (including the termination fee), Parent’s obligation to obtain regulatory approvals and certain employee-related issues.

Also on November 20, 2019, various media outlets reported that Parent and the Company had entered into discussions after Parent had made the $130.00 proposal. The closing market price of our common stock on that date was $123.33.

On November 21, 2019, Sullivan & Cromwell sent a revised draft of the original merger agreement to Skadden. Also on November 21, 2019, various in-person due diligence sessions were held with representatives of the Company and Parent and their respective advisors.

Also on November 21, Mr. Farah and Mr. Belloni met and discussed progress on the confirmatory due diligence process and Mr. Belloni’s perspectives on the Company, its prospects and Parent’s synergistic opportunities. Mr. Belloni reiterated Parent’s then-current $130.00 proposal, noting that it was the best price per share Parent could consider with respect to a potential acquisition of the Company. Mr. Belloni also noted that Parent could withdraw the $130.00 proposal and reevaluate at a later date, at which point the Company’s stock price could have decreased from its then-current price.

On November 22, Centerview and Citi held a series of discussions on price in consultation with Mr. Farah and Mr. Belloni, respectively. After Parent initially indicated that it would only be willing to increase its $130.00 proposal to a price of $131.00 per share of our common stock, Parent later indicated that it would be willing to discuss a potential acquisition of the Company at a price of $133.00 per share of our common stock (the “$133.00 proposal”). After further negotiations over the course of the day on November 22, 2019, during which Centerview conveyed that the $133.00 proposal was not sufficient, Citi informed Centerview that Parent was willing to further increase the price per share contemplated by its $133.00 proposal to a price of $135.00 per share of our common stock (the “$135.00 proposal”), but only if Mr. Farah could assure Parent that a deal would be agreed at that price, subject to the completion of the confirmatory due diligence process and the finalization of a merger agreement. Citi also signaled to Centerview that Parent would not consider an acquisition of the Company at a price per share above the $135.00 proposal and indicated that Parent would not further pursue a potential acquisition of the Company if the Company did not agree to proceed with the $135.00 proposal. Centerview then informed Mr. Farah of the $135.00 proposal. Mr. Farah discussed the $135.00 proposal with all but two members of the Board (with Mr. Trapani recused from such discussion), and after consultation with Mr. Farah, Centerview conveyed to Citi that while no Board approval could be assured, Mr. Farah would be willing to advocate for the $135.00 proposal and call a Board meeting to discuss the $135.00 proposal. Mr. Farah communicated this same message directly to Mr. Belloni, who then formally offered the $135.00 proposal directly to Mr. Farah. The closing market price of our common stock on that date was $125.51.

Also on November 22, 2019, Sullivan & Cromwell and Skadden exchanged revised drafts of the original merger agreement.

On November 23, 2019, Skadden sent Sullivan & Cromwell a revised draft of the original merger agreement. Also on November 23, 2019, members of the Finance Committee of the Board held a meeting that

 

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was also attended by members of management, Mr. Farah and representatives of Sullivan & Cromwell and Centerview, during which the Finance Committee discussed with Sullivan & Cromwell updates on the key open issues in the original merger agreement and the Finance Committee prepared a proposal addressing certain of such key open issues to present to Parent.

Later on November 23, 2019, Sullivan & Cromwell sent Skadden a revised draft of the original merger agreement, and representatives of Sullivan & Cromwell continued to negotiate the original merger agreement with representatives of Skadden. As of the morning of November 24, 2019, key open issues remaining in the draft original merger agreement included the allocation of regulatory risk in the transaction.

On the morning of November 24, 2019, at a meeting of the Board, with representatives of Company management, Centerview, Goldman Sachs and Sullivan & Cromwell in attendance, Mr. Farah reviewed the status of discussions and negotiations with Parent. Representatives of Sullivan & Cromwell then reviewed a summary of the key terms of the original merger agreement and the Board’s fiduciary duties under Delaware law. The Board also discussed the adoption of a proposed amendment to the Company’s by-laws that would designate certain courts located in Delaware as the exclusive forum for certain actions brought against the Company or any director, officer or other employee of the Company. Representatives of Centerview and Goldman Sachs reviewed the per share price progression for the directors and discussed financial analyses of the $135.00 proposal. Representatives of Centerview and Goldman Sachs also confirmed that there had been no changes to their relationship disclosures previously provided to the Board. The Board, with input from Centerview and Goldman Sachs, also discussed that no other bidders had emerged and that it was unlikely that any third party would be interested in acquiring the Company at a price greater than the price per share contemplated by the $135.00 proposal.

Also on the morning of November 24, 2019, various media outlets reported that Parent and the Company were both set to meet that day to approve the $135.00 proposal and that the potential acquisition could be announced as soon as the following day.

During the Board meeting on the morning of November 24, 2019, Mr. Farah spoke with Mr. Belloni, during which conversation Mr. Belloni communicated that Parent would accept a hell-or-high-water regulatory provision in the original merger agreement and addressed a number of other requests that the Board, the Company and its advisors had made during the course of negotiations.

Later in the day on November 24, 2019, at a meeting of the Board with representatives of Company management, Centerview, Goldman Sachs and Sullivan & Cromwell in attendance, Sullivan & Cromwell updated the Board with respect to changes in the original merger agreement since earlier in the day. Centerview rendered its oral opinion (which was subsequently confirmed by delivery of a written opinion dated November 24, 2019) that, as of the date of such opinion and based upon and subject to the various assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of review undertaken by Centerview as set forth in its written opinion, the per share merger consideration of $135.00 per share in cash to be paid to the holders of shares of our common stock (other than excluded shares) pursuant to the original merger agreement, was fair, from a financial point of view, to such holders. Goldman Sachs also rendered its oral opinion (which was subsequently confirmed by delivery of a written opinion dated November 24, 2019) to the effect that, as of the date of such opinion and based upon and subject to the various assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of review undertaken by Goldman Sachs as set forth in its written opinion, the per share merger consideration of $135.00 per share in cash to be paid to the holders of shares of our common stock (other than Parent and its affiliates) pursuant to the original merger agreement, was fair, from a financial point of view, to such holders. Following further discussion and consideration of the presentations of management, the financial advisors and its legal advisors, the Board unanimously (with Mr. Trapani recused and abstaining from voting) determined that the merger and the other transactions contemplated by the original merger agreement were advisable to, and in the best interests of, the Company and its stockholders and approved and declared advisable the original merger

 

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agreement and the merger and the other transactions contemplated by the original merger agreement. The Board also resolved that each of Parent, Holding and Merger Sub, and any of their respective “affiliates” or “associates”, shall not become an “interested stockholder” of the Company solely by virtue of entry into the original merger agreement, and that the restrictions on “business combinations” set forth in Section 203 of the DGCL shall not apply to Parent, Holding or Merger Sub, or any of their respective “affiliates” or “associates”, as a result of the original merger agreement or the transactions contemplated thereby (each such term as defined in Section 203 of the DGCL). The Board also resolved that the original merger agreement be submitted for adoption by the stockholders of the Company at a special meeting of stockholders and recommended that the stockholders of the Company vote to adopt the original merger agreement. The Board also adopted the forum selection by-law amendment.

Parent, Holding, Merger Sub and the Company executed the original merger agreement in the evening of November 24, 2019.

The following morning, on November 25, 2019, the Company and Parent issued a joint press release announcing the transaction and the execution of the original merger agreement.

On November 26, 2019, Mr. Trapani tendered his resignation from the Board with immediate effect in order to pursue other opportunities.

Also on November 26, 2019, the Company received an email from a party (“Party B”) claiming that the Company could “get more money.” Representatives of Sullivan & Cromwell forwarded Party B’s email to Parent and Skadden. After consulting with representatives of Sullivan & Cromwell, the Company determined that Party B’s inquiry was not credible, and determined not to pursue discussions with Party B.

Following the execution of the original merger agreement, representatives of the Company met with representatives of Parent and provided Parent with access to certain books, records and personnel of the Company and its Subsidiaries in accordance with the original merger agreement.

Also following the execution of the original merger agreement, the parties prepared and submitted regulatory filings in the jurisdictions in which the parties agreed that regulatory filings may be required.

On December 10, 2019, the Company received an email from a party (“Party C”) offering to discuss a possible divestiture of a division of the Company to potential buyers known to Party C. That same day, representatives of Sullivan & Cromwell forwarded Party C’s email to Parent and Skadden. After consulting with representatives of Sullivan & Cromwell, the Company determined that Party C’s inquiry was not credible, and determined not to pursue discussions with Party C.

The Company filed a preliminary proxy statement on December 18, 2019 and a definitive proxy statement on January 6, 2020 in advance of the special meeting of stockholders held on February 4, 2020, in which the holders of our shares of common stock voted to approve the adoption of the original merger agreement and, by non-binding, advisory vote, certain compensation arrangements for the Company’s named executive officers in connection with the merger proposed under the original merger agreement. At the stockholder meeting, 99.3% of the votes cast (representing more than 71% of all outstanding shares of our stock) approved the adoption of the original merger agreement.

On February 3, 2020, the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 expired with respect to the merger.

On or about February 5, 2020, it was reported that Parent had successfully raised more than $10 billion to help pay for its acquisition of the Company.

 

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On March 11, 2020, the World Health Organization designated the COVID-19 outbreak as a global pandemic. On March 13, 2020, the President of the United States declared COVID-19 a national emergency and announced a ban on non-U.S. citizens traveling from Europe to the United States. Starting the week of March 16, 2020, our common stock traded at a price as low as $104 per share, which was a 23% discount to the agreed-upon acquisition price of $135 per share.

On March 17, 2020, a representative of Parent inquired of a representative of the Company about the possibility of Parent obtaining a waiver of the confidentiality agreement’s standstill provision that would allow Parent to purchase shares of our common stock. On or about March 19, 2020, certain media outlets reported that Parent was considering the purchase of shares of our common stock. On March 23, 2020, Parent announced that it recalled that it was committed not to buy shares of our common stock at that time.

On March 26, 2020, the Committee on Foreign Investment in the United States cleared the merger.

On March 30, 2020, the Australian Competition and Consumer Commission issued a no-action letter, clearing the merger.

On April 7, 2020, the Canadian Competition Bureau indicated that it does not intend to challenge the merger, thereby clearing the merger.

Beginning on May 29, 2020, Parent sent the Company a series of letters requesting information about the Company’s business and performance, each of which the Company promptly responded to in writing.

In early June 2020, certain media outlets reported that the Board of Directors of Parent held a meeting on June 2, 2020 at which Parent’s directors discussed the merger “amid a deteriorating situation in the U.S. market” “as U.S. social unrest and the coronavirus pandemic weigh on the retail sectors.”

Also in early June 2020, certain media outlets reported that Mr. Arnault had been exploring ways to renegotiate the terms of the merger and that he had met with advisors during the first week of June to identify strategies to reduce the purchase price to below the agreed per share consideration of $135.

On June 4, 2020, Parent announced in a press release that its Board of Directors had met on June 2 and “notably focused [the Board of Directors’] attention on the development of the pandemic and its potential impact on the results and perspectives of Tiffany & Co with respect to the agreement that links the two groups.” Parent also reiterated that it was not considering buying shares of our common stock in the open market.

Also on June 4, 2020, the Federal Antimonopoly Service of Russia formally cleared the merger.

Also on June 4, 2020, the Company received an email from a party (“Party D”) expressing interest in throwing its “hat into the ring.” Representatives of Sullivan & Cromwell forwarded Party D’s email to Skadden. After consulting with representatives of Sullivan & Cromwell, the Company determined that Party D’s inquiry was not credible, and determined not to pursue discussions with Party D.

On June 12, 2020, the Korea Fair Trade Commission of South Korea formally cleared the merger.

On June 15, 2020, in response to a request by Parent, the Company provided Parent with the June 2020 management projections (as defined in the section entitled “The Merger—Certain Company Forecasts” beginning on page 81) which included certain forecasted information for the Company’s fiscal years 2020 to 2024.

On July 3, 2020, the Australian Foreign Investment Review Board issued a notification indicating that it has no objection to the merger.

 

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On July 25, 2020, the State Administration for Market Regulation of China decided that it will not prohibit the merger.

On August 14, 2020, the Company sent Parent a notice extending the outside date under the original merger agreement to November 24, 2020, pursuant to the terms of the original merger agreement and proposing to further extend the outside date to December 31, 2020.

On August 17, 2020, Parent sent the Company a letter in response to the Company’s August 14, 2020, letter stating that Parent was reserving all of its rights under the original merger agreement, including a purported right to challenge the validity of the Company’s extension of the outside date under the original merger agreement and its right to terminate the original merger agreement.

On August 18, 2020, Mr. Belloni called Mr. Farah and stated that Parent was reserving its purported right to challenge the Company’s extension of the outside date under the original merger agreement and suggested that a material adverse effect may have occurred with respect to the Company.

On August 24, 2020, the Company sent Parent a confirmatory notice of the extension of the outside date to November 24, 2020. Parent responded by disputing the Company’s right to extend the outside date and stating that it reserved the right to challenge the validity of the extension of the outside date under the original merger agreement.

On August 27, 2020, in response to a request by Parent, the Company provided Parent with certain financial and other information, including the August 2020 management projections (as defined in the section entitled “The Merger—Certain Company Forecasts” beginning on page 81).

On September 8, 2020, Parent informed the Company that Parent received a letter from the Ministre de l’Europe et des Affaires Etrangères, dated August 31, 2020 (the “French Ministry Letter”), which, according to a purported English translation of the French Ministry Letter provided by Parent to the Company, stated that Parent “should defer the closing of the pending Tiffany transaction until January 6, 2021” in order to support France’s intention to “take measures in order to dissuade the American authorities from putting [additional customs duty on the import of certain French goods] into effect.” Parent also advised the Company of its intent to honor the request set forth in the French Ministry Letter by refusing to close before January 6, 2021, while also informing the Company that Parent’s Board of Directors determined that Parent would not agree to extend the outside date under the original merger agreement beyond November 24, 2020. Parent also informed the Company of Parent’s beliefs that the Company did not have the right to extend the outside date from August 24, 2020 to November 24, 2020, that the Company had suffered a material adverse effect under the original merger agreement and that the Company had not operated the Company’s business in accordance with the original merger agreement such that Parent was not required to complete the merger. The Company understood these statements to mean that Parent was no longer willing to comply with its obligations under the original merger agreement to close the transaction on the agreed terms. Parent also shared its view that the Company should not have paid its regular quarterly dividends in 2020.

On September 9, 2020, Parent issued a press release announcing that its Board of Directors learned of the French Ministry Letter and concluded that Parent would not be able to complete the merger.

Also on September 9, 2020, the Company initiated the merger litigation by filing suit against Parent in the Delaware Court of Chancery, seeking, among other things, an order of specific performance requiring Parent to perform its obligations under the original merger agreement, including making all necessary antitrust filings and taking all other actions necessary to obtain the required antitrust approvals for the merger, and completing the transactions contemplated by the original merger agreement, and a declaratory judgment that Parent had breached certain of its obligations under the original merger agreement. The Company also filed an accompanying motion to expedite the proceedings, and requested that the trial take place before the outside date of November 24, 2020 under the original merger agreement.

 

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On September 10, 2020, the Japan Fair Trade Commission and the Mexican competition authority (Comisión Federal de Competencia Económica) granted clearance of the merger.

Also on September 10, Parent publicly announced its intent to file a lawsuit against the Company.

On September 16, 2020, an individual close to Parent (the “Individual”), on behalf of Parent, contacted a representative of Centerview to inquire about the possibility of a settlement between the parties. The representative of Centerview conveyed to the Individual that the Company was confident in its legal position and was not prepared to settle at that time. The representative of Centerview consulted with Mr. Farah about the discussion with the Individual.

Also on September 16, 2020, Parent filed its response in opposition to the Company’s motion to expedite the proceedings in this matter.

On September 18, 2020, the Company filed a reply in further support of its motion to expedite proceedings.

On September 21, 2020, the Delaware Court of Chancery granted the Company’s motion to expedite proceedings and set January 5, 2021 to begin a four-day trial.

On September 23, 2020, the Company received an email from a party (“Party E”) claiming that an unidentified company proposed to acquire the Company for $17 billion and that, in a few years, Party E and the unidentified company would cause the Company to have a capitalization of 300 billion in unidentified currency. That same day, a representative of Sullivan & Cromwell forwarded Party E’s email to Skadden. After consulting with a representative of Sullivan & Cromwell, the Company determined that Party E’s inquiry was not credible, and determined not to pursue discussions with Party E.

On September 28, 2020, Parent answered the Company’s complaint and filed a counterclaim against the Company in the Delaware Court of Chancery, seeking a declaration that, among other things, various conditions precedent to Parent’s obligation to close the merger had not been met and that Parent had the right to terminate the original merger agreement.

On September 29, 2020, the Taiwan Fair Trade Commission determined to waive its jurisdiction over the merger, granting clearance of the merger.

On October 2, 2020, the Individual again contacted the representative of Centerview, asserting the view that Parent’s litigation claims were strong, but that, in the interest of the Company’s business, it would be beneficial for both parties to settle. Thereafter, the Individual contacted the representative of Centerview to indicate that Parent might be willing to engage in settlement discussions at a price of $120.00 per share. The representative of Centerview responded that the $120.00 price was unlikely to be acceptable to the Company. Thereafter, over the course of the ensuing two weeks, the Individual and the representative of Centerview engaged in a series of discussions in which the Individual indicated a willingness of Parent to increase the share price to the mid-$120s and then to the high-$120s price ranges. Promptly following each of these discussions, the representative of Centerview consulted with Mr. Farah. After consulting with Mr. Farah, the representative of Centerview informed the Individual that the Company would only be likely to consider a price reduction if the reduction was small and if Parent explicitly agreed that the Company could continue paying its regular quarterly dividend.

On October 13, 2020, the Company filed an answer to Parent’s counterclaim in the Delaware Court of Chancery.

On October 15, 2020, the Company announced its preliminary unaudited sales and operating results for August and September 2020, which reported an increase in operating earnings and nearly double the growth in global e-commerce sales from the comparable 2019 two-month period along with positive sales trends continuing into October, strong sales in mainland China, and a slight decline in worldwide net sales from the comparable period in 2019, among other things.

 

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On October 18, 2020, the Individual and the representative of Centerview had a number of discussions, promptly following which, in each case, the representative of Centerview consulted with Mr. Farah concerning each discussion. The Individual indicated to the representative of Centerview that Parent might be willing to consider a price of $130.00 per share, which the representative of Centerview indicated was not likely to be sufficient to warrant a settlement by the Company. The representative of Centerview suggested that the Company would likely only consider a price reduction to the previously negotiated deal price of $135.00 per share under the original merger agreement if such reduction was linked to the amount of the Company’s dividends per share paid since the date of the original merger agreement. The Individual then proposed a price of $131.00 per share to the representative of Centerview. The representative of Centerview responded that the price would need to be $132.00 per share, adding that the Company would likely require an “airtight” contract that did not include any closing conditions that would excuse Parent from consummating the merger, apart from the required stockholder vote under Delaware law, and a settlement agreement approved by the Delaware Court of Chancery. The Individual indicated that Parent was prepared to settle for a price of $131.50 per share, but was not willing to include an express agreement that the Company could pay its fourth-quarter dividend.

On October 21, 2020, a representative of Sullivan & Cromwell received an email from an individual claiming to represent a wealthy family (“Party F”) and requesting a discussion of a potential proposal to acquire the Company. Party F also claimed to have a contract with a law firm that represents Parent on certain matters. The email did not contain any potential price or other terms. A representative of Sullivan & Cromwell forwarded Party F’s email to Skadden. After researching publicly available information concerning Party F, the Company determined that Party F’s inquiry was not credible, and determined not to pursue discussions with Party F.

Thereafter, on October 23, 2020, Mr. Farah and Mr. Belloni discussed a $131.50 per share price (the “$131.50 proposal”) which would be paired with an agreement that the Company would be expressly permitted to pay a fourth-quarter dividend. Mr. Belloni later proposed a share price of $131.00 as a headline figure, but stated that the Company could increase its quarterly dividend to be paid in January 2021 as part of the value the Company’s stockholders would receive in the aggregate. Mr. Farah declined that proposal. Mr. Farah also indicated that, in an amended and restated merger agreement, no terms providing for conditionality would be accepted. Mr. Belloni later indicated to Mr. Farah that Parent would consider accepting the $131.50 share price that was previously discussed.

On October 23, 2020, Mr. Farah discussed the $131.50 proposal individually with each of the other directors of the Company and thereafter communicated to Mr. Belloni that while no Board approval could be assured, Mr. Farah would be willing to bring the $131.50 proposal to the Board. The closing market price of our common stock on that date was $123.54.

On October 24, 2020, the Board held a meeting that was also attended by a member of management and representatives of Sullivan & Cromwell and Centerview to discuss the recent settlement negotiations with Parent, including the $131.50 proposal, the status of the litigation with Parent, the potential terms for an amended merger agreement and next steps regarding the merger. The Board instructed the Company and its advisors to continue to explore a potential settlement with Parent based on the $131.50 proposal, while continuing to pursue the litigation.

Following the Board meeting on October 24, 2020, a representative of Sullivan & Cromwell sent a draft of the merger agreement to Skadden. From October 24, 2020 until the execution of the merger agreement on October 28, 2020, the parties and their respective legal advisors exchanged several drafts of, and engaged in multiple discussions and negotiations concerning the terms of, the merger agreement. Significant areas of discussion and negotiation included, among others, the conditions to closing the merger, the scope of the interim operating restrictions, Parent’s obligation to obtain regulatory approvals and to avoid governmental restraints on the merger, and certain employee-related issues.

On October 26, 2020, the European Commission granted clearance of the merger, at which point the merger had received all required regulatory clearances.

 

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On October 28, 2020, the Board met to discuss the terms of the merger agreement and the terms of a settlement agreement, with representatives of Company management, Centerview, Goldman Sachs and Sullivan & Cromwell in attendance. Representatives of Sullivan & Cromwell discussed the differences between the terms of the amended and restated merger agreement and the original merger agreement, and summarized the terms of the settlement agreement to the Board. Management discussed the October 2020 management projections (as defined in the section entitled “The Merger—Certain Company Forecasts” beginning on page 81). Centerview rendered its oral opinion (which was subsequently confirmed by delivery of a written opinion dated October 28, 2020) that, as of the date of such opinion and based upon and subject to the various assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of review undertaken by Centerview as set forth in its written opinion, the per share merger consideration of $131.50 per share in cash to be paid to the holders of shares of our common stock (other than excluded shares) pursuant to the merger agreement, was fair, from a financial point of view, to such holders. Goldman Sachs also rendered its oral opinion (which was subsequently confirmed by delivery of a written opinion dated October 28, 2020) to the effect that, as of the date of such opinion and based upon and subject to the various assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of review undertaken by Goldman Sachs as set forth in its written opinion, the per share merger consideration of $131.50 per share in cash to be paid to the holders of shares of our common stock (other than Parent and its affiliates) pursuant to the merger agreement, was fair, from a financial point of view, to such holders. Following further discussion and consideration of the presentations of management, the financial advisors and its legal advisors, the Board unanimously determined that the merger and the other transactions contemplated by the merger agreement were advisable to, and in the best interests of, the Company and its stockholders and approved and declared advisable the merger agreement and the merger and the other transactions contemplated by the merger agreement. The Board also approved the settlement agreement as being advisable and in the best interests of the Company and its stockholders and authorized the execution and delivery of the settlement agreement. The terms of the merger agreement (as amended and restated) and the settlement agreement are described in the section entitled “The Merger—Changes to the Original Merger Agreement Pursuant to the Merger Agreement Amendment” on page 41 and “The Merger Agreement” beginning on page 99. See the section entitled “The Merger—Reasons for the Merger; Recommendation of the Company’s Board of Directors” beginning on page 57. The Board also resolved that each of Parent, Holding and Merger Sub, and any of their respective “affiliates” or “associates”, shall not become an “interested stockholder” of the Company solely by virtue of entry into the merger agreement, and that the restrictions on “business combinations” set forth in Section 203 of the DGCL shall not apply to Parent, Holding or Merger Sub, or any of their respective “affiliates” or “associates”, as a result of the merger agreement or the transactions contemplated thereby (each such term as defined in Section 203 of the DGCL). The Board also resolved that the merger agreement be submitted for adoption by the stockholders of the Company at a special meeting of stockholders and recommended that the stockholders of the Company vote to adopt the merger agreement.

Also on October 28, 2020, the Company and Centerview executed an amendment to the engagement letter for Centerview’s engagement as the Company’s financial advisor.

Later that evening, Parent, Holding, Merger Sub and the Company executed the merger agreement, which amended and restated the original merger agreement. Immediately thereafter, Parent and the Company entered into a settlement agreement, pursuant to which, among other things, each party was required to dismiss all claims that it brought in the merger-related litigation with prejudice and agree to a stipulated order of dismissal that dismisses all claims asserted by the parties with prejudice.

The following morning on October 29, 2020, the Company and Parent issued a joint press release announcing the execution of the merger agreement and the settlement agreement.

Also on October 29, 2020, pursuant to the settlement agreement, the Company filed a joint stipulation of dismissal in the Delaware Court of Chancery dismissing the parties’ litigation claims against one another.

 

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Reasons for the Merger; Recommendation of the Company’s Board of Directors

The Board recommends that you vote “FOR” approval of the merger proposal.

The Board, at a meeting held on October 28, 2020, (i) determined that the merger agreement, the merger and the other transactions contemplated by the merger agreement are advisable to, and in the best interests of, the Company and its stockholders; (ii) approved and declared advisable the merger agreement and the execution, delivery, and performance of the merger agreement by the Company and the consummation of the merger and the other transactions contemplated by the merger agreement; (iii) directed that the merger agreement be submitted to the stockholders for adoption at the special meeting; and (iv) recommended that the stockholders vote to adopt the merger agreement and to approve and/or adopt such other matters that are submitted for their approval and/or adoption in connection with the merger agreement at the special meeting. Approval of the merger proposal requires the affirmative vote of holders of a majority of the shares of our common stock issued and outstanding and entitled to vote on such proposal.

In the course of reaching its determination and recommendation, the Board consulted with and received the advice and assistance of its outside legal and financial advisors and senior management at various times.

Potential Positive Factors. In recommending that stockholders vote in favor of adoption of the merger agreement, the Board considered a number of factors, including, among others, the following (not necessarily in order of relative importance) that the Board believes support its decision:

 

   

Attractive Value. The Board’s belief that the per share merger consideration of $131.50 per share of our common stock provides stockholders with an attractive value for their shares of our common stock in light of a number of factors, including:

 

   

Premium. The per share merger consideration constitutes a premium of:

 

   

approximately 45.7% to the closing price of our common stock on October 14, 2019, the last trading day prior to the receipt by the Company of Parent’s initial $120.00 proposal in October 2019;

 

   

approximately 33.4% to the closing price of our common stock on October 25, 2019, the last trading day prior to the first media accounts regarding a possible acquisition of the Company by Parent;

 

   

approximately 7.1% to the closing price of our common stock on October 26, 2020, the last trading day prior to the first media accounts regarding a possible settlement and renegotiation of the terms of the merger; and

 

   

approximately 1.2% to the closing price of our common stock on October 28, 2020, the last trading date prior to the date the merger agreement was announced.

 

   

Aggregate Value to Stockholders. If the Board declares and sets a record date for a dividend of $0.58 per share for the fourth quarter of fiscal year 2020 prior to the closing, as it is expressly permitted to do under the merger agreement, in addition to the per share merger consideration of $131.50, the aggregate amount that stockholders will receive after the execution of the merger agreement will be at least $132.08 per share. Moreover, when that $132.08 per share is combined with the $2.32 per share in quarterly dividends the Company has already paid since the original merger agreement was announced through the date of the merger agreement, the aggregate amount of the per share merger consideration will be not less than $134.40 per share, representing a less than 1% discount relative to the original per share merger consideration (without taking into account the time value of money).

 

   

Inherent Uncertainty of Litigation. Although the Board believed its claims against Parent were strong, litigation is inherently uncertain and the Board could not be assured of a successful

 

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  resolution of the merger litigation. Further, even if the Company succeeded on its claims, the Company could not be assured that the Delaware Court of Chancery would order Parent to complete the transaction on the terms of the original merger agreement as opposed to awarding financial damages. In addition, the timing of a final, non-appealable decision from the Delaware Court of Chancery was uncertain, as the Delaware Court of Chancery’s ruling date was not known, nor was the length of time that might be required for an appeal. Moreover, even if a decision in favor of the Company became final and non-appealable by early 2021, the Company could not be assured that Parent would not frustrate the enforcement of such a decision.

 

   

Uncertainty of Foreign Government Intervention. Even if the Company were successful in the merger litigation, it was also not certain whether the French government would permit the merger to proceed. In addition, at the time the Board reached its decision to recommend that stockholders approve the adoption of the merger agreement, the outcome of the U.S. presidential election was uncertain and the Board believed that such outcome could impact the U.S. trade policies that the French government asserted were the basis for its request that Parent delay consummating the merger and/or result in additional efforts by the French government to intervene in the transaction.

 

   

Likelihood of Reduced Market Price of Our Common Stock. Informed by discussions with its financial advisors, the Board considered that it was likely that, if the transaction with Parent were terminated, whether due to a judgment in favor of Parent in the merger litigation, a governmental action, or any other reason, the Company’s share price would trade significantly below the per share merger consideration of $131.50.

 

   

Impact of the Extended Pendency of the Merger under the Original Merger Agreement. Informed by discussions with management, the Board considered that a further extension of the period during which the Company was subject to interim operating covenants imposed by the original merger agreement could adversely impact the Company’s flexibility to operate the business, particularly to respond effectively to changing circumstances and exogenous events. The Board also considered that those constraints, together with continued uncertainty as to whether the merger would close in the near term or at all and the original merger agreement’s restrictions on the Company’s ability to take certain compensation actions with respect to the Company’s 2021 fiscal year or otherwise compensate employees using equity, could have adverse impacts on employee retention.

 

   

Negotiations with Parent. The Board considered the improvement in the per share merger consideration offered by Parent in connection with the settlement of the merger litigation, after negotiation with the Company and its advisors, from $120.00 per share of our common stock at the time of Parent’s initial settlement proposal in early October 2020, to price ranges of the mid-$120s and high-$120s per share of our common stock later in October, to $130.00 per share of our common stock and then $131.00 per share of our common stock soon thereafter, and finally to $131.50 per share of our common stock on October 23, 2020, the fact that representatives of the Company considered that Parent would not be likely to increase its offer price above $131.50 per share of our common stock, the fact that Parent was willing to agree that the Company’s regular quarterly dividends are expressly excluded from the interim operating covenant prohibition on dividends, and other changes to the merger agreement favorable to the Company, as described in the section entitled “The Merger—Background of the Merger” beginning on page 42.

 

   

Receipt of Fairness Opinions from Centerview Partners and Goldman Sachs. The Board considered the financial analyses presented to the Board by Centerview and Goldman Sachs. The Board also considered the oral opinion of Centerview rendered to the Board, subsequently confirmed in Centerview’s written opinion dated as of October 28, 2020, to the effect that, as of October 28, 2020, and based upon and subject to the assumptions made, procedures followed, matters considered, and qualifications and limitations upon the reviews undertaken, by Centerview in preparing such opinion, the per share merger consideration proposed to be paid to the holders of

 

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  shares of our common stock (other than excluded shares) pursuant to the merger agreement was fair, from a financial point of view, to such holders, as more fully described below in the section entitled “The Merger—Opinions of the Company’s Financial Advisors—Opinion of Centerview Partners” beginning on page 65 and which written opinion is attached in its entirety as Annex B hereto. The Board also considered the oral opinion of Goldman Sachs rendered to the Board, subsequently confirmed in Goldman Sachs’ written opinion dated as of October 28, 2020, to the effect that, as of October 28, 2020, and based upon and subject to the assumptions made, procedures followed, matters considered, and qualifications and limitations upon the reviews undertaken, by Goldman Sachs in preparing such opinion, the per share merger consideration to be paid to the holders of shares of our common stock (other than Parent and its affiliates) pursuant to the merger agreement was fair, from a financial point of view, to such holders, as more fully described below in the section entitled “The Merger—Opinions of the Company’s Financial Advisors—Opinion of Goldman Sachs” beginning on page 72 and which written opinion is attached in its entirety as Annex C hereto.

 

   

Certainty of Value. The per share merger consideration is all cash, which provides our stockholders immediate certainty of value and liquidity for their shares and enables our stockholders to realize value that has been created at the Company while eliminating long-term business and execution risk.

 

   

Value Relative to Stand-Alone Prospects. The Board’s belief that the per share merger consideration compares favorably to the potential long-term value of a share of our common stock if the Company were to remain as a stand-alone entity after taking into account the risks and uncertainties associated with this alternative, including the Company’s business, competitive position and current market and financial conditions. Specifically, among other things, the Board considered:

 

   

that taking into account the short-term impact that the pandemic has already had on the Company’s business to date (including, store closures, delays in the flagship renovation, a loss in profits in the first quarter of fiscal year 2020, the steep decrease in travel and tourism, the inherent uncertainty regarding the level of consumer spending during the holiday season, and potentially worsening economic conditions impacting consumer spending), the adverse impact of the pandemic could be sustained or even deepened in the future, and that at the time the Board approved the merger agreement, a “second wave” of COVID-19 cases in Europe appeared to be in the beginning stages and it was likely that a renewed round of related shutdowns and curfews would follow;

 

   

that over the five years prior to the announcement of the original merger agreement, our common stock has traded on average at a discount to the trading multiples of other single-brand luxury peer companies;

 

   

that the Company is currently executing against a multi-year strategic plan that seeks to reinvigorate its organic growth trajectory and that, although the Company has made meaningful progress, it is still in the early stages of execution with a significant portion of its projected growth dependent on macro factors that are outside of the Company’s control, such as the strength and accessibility of the Chinese consumer market, the strength of the U.S. economy and consumer confidence in the U.S. and the favorability of commodity input costs, and that the timing of implementation of its strategic plan and certain of the foregoing macro-economic factors have been impacted in the short term by the COVID-19 pandemic;

 

   

the Board’s assessment of the Company’s historical and projected financial performance, including the October 2020 management projections;

 

   

the challenges of operating as a public company, including balancing the competing needs for improved or stable stockholder returns on a quarter-to-quarter basis, on the one hand, with the need for increased spending to advance implementation of the Company’s growth initiatives under its long-term strategic plan, on the other hand;

 

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the macroeconomic factors currently affecting the global luxury market and the broad economic, political and commercial trends affecting the Company’s business and financial results, including the COVID-19 pandemic, the impact of unrest in both the United States and Hong Kong, shifts in global tourism patterns, the potential impact of United States trade relations with China, the risk of a slowdown in the Chinese or U.S. economies, and certain other risk factors detailed in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2020;

 

   

the fact that the October 2020 management projections forecasted that, despite expectations for a swift recovery in business during fiscal year 2021, it would take until fiscal year 2022 for sales and operating earnings to exceed fiscal year 2019 levels;

 

   

the execution risks implicit in the October 2020 management projections, including the risk that new product designs may not succeed as planned, the risk that key systems implementations may be delayed or fail to generate the expected benefits, the risk that organic growth may slow as the Company’s store footprint becomes more saturated, the risk that the planned renovation of the Company’s New York Flagship store on Fifth Avenue in New York City may be further delayed or fail to generate the expected benefits, the risk that the Company’s omni-channel strategy may not be successful in driving in-store sales and the risk that the Company’s effort to capture more share with gold jewelry, rather than silver jewelry, may not be successful;

 

   

the execution risks related to the effects of the COVID-19 pandemic; and

 

   

the risks and uncertainties relating to the competition in the global jewelry industry, including the increased competition for engagement jewelry sales, competition from the lab-grown diamond market and competition from luxury fashion brands expanding into jewelry.

 

   

Value Relative to Other Strategic Alternatives. Following consultation with its financial advisors, the Board’s belief that Parent would be the potential transaction partner, and that seeking to consummate the merger under the terms of the merger agreement rather than the terms of the original merger agreement would be, most likely to offer the best combination of value and closing certainty to stockholders. In reaching that determination, the Board considered, among other things:

 

   

that after the Company issued a press release publicly confirming Parent’s initial $120.00 proposal in October 2019 and continuing after the announcement of the original merger agreement, the Company did not receive any inquiries from any other credible parties relating to potential acquisitions of the Company, as described in the section entitled “The Merger—Background of the Merger” beginning on page 42;

 

   

that its financial advisors had informal discussions with four other potential counterparties that the Board considered to be among the parties most likely to be interested in an acquisition of the Company due to their financial capacity to acquire the Company and/or the potential synergistic opportunities, and all four potential counterparties informed the financial advisors that they were not interested in pursuing an acquisition of the Company at the time of the negotiation of the original merger agreement at a price greater than Parent’s initial $120.00 proposal in October 2019, as described in the section entitled “The Merger—Background of the Merger” beginning on page 42;

 

   

the Board’s belief, following consultation with Centerview and Goldman Sachs, that a financial sponsor would not be likely to pay a price greater than Parent’s initial $120.00 proposal in October 2019 given the size of the equity commitment that would be needed given the Company’s equity value, the private equity funds’ internal rate of return requirements and the likely leverage levels that a financial sponsor could impose on the Company, as described in the section entitled “The Merger—Background of the Merger” beginning on page 42; and

 

   

the Company’s rights under the merger agreement, subject to certain conditions, to respond to and negotiate with respect to certain unsolicited acquisition proposals made prior to the time the

 

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  Company’s stockholders approve the merger proposal and, in certain instances, to terminate the merger agreement to enter into an agreement with respect to a superior proposal, subject to Parent’s right to receive payment of the termination fee of $575 million, which amount the Board believed to be reasonable under the circumstances, taking into account the size of the transaction and the range of similar termination fees in comparable transactions, as described in the sections entitled “The Merger Agreement—No Solicitation of Acquisition Proposals; Board Recommendation Changes” beginning on page 112 and “The Merger Agreement—Termination Fee” beginning on page 124.

 

   

High Likelihood of Completion; Certainty of Payment. The Board’s belief that the merger represented a transaction that would likely be consummated based on, among other factors:

 

   

the Board’s belief, informed by the advice of representatives of Sullivan & Cromwell, that the outcome of the settlement, particularly given the terms of the merger agreement, is more certain than the outcome of the merger litigation;

 

   

the Board’s belief, informed by unsolicited communications from certain of the Company’s stockholders, that the Company’s stockholders would likely vote in favor of a more certain agreement providing for a price that is a discount to the price per share provided in the original merger agreement, in addition to the payment of another quarterly dividend;

 

   

the fact that the conditions to the closing of the merger are specific and limited in scope, including that the merger agreement removed certain conditions to the consummation of the merger that were included in the original merger agreement, namely (i) the absence of a law or order in effect that enjoins, prevents or otherwise prohibits the consummation of the merger issued by a governmental entity; (ii) the absence of a material adverse effect; and (iii) the requirement that most representations and warranties (other than select fundamental representations and warranties) of the Company that were made as of the signing must also be true and correct as of the closing date, each as described in the section entitled “The Merger—Changes to the Original Merger Agreement Pursuant to the Merger Agreement” beginning on page 41;

 

   

the fact that if the merger has not been consummated within six (6) business days after the date on which the requisite company vote (it being understood that the closing cannot take place prior to January 7, 2021) has been obtained as a result of the material breach of the merger agreement by Parent or Merger Sub, the Company will have no further obligation to comply with the Company’s interim operating covenants in respect of the conduct of its business pending the merger (and, in such event, the Company’s non-compliance with such obligations after the later of (i) January 7, 2021, and (ii) six (6) business days after the date of the requisite company vote, shall not be taken into account for purposes of assessing whether any of the conditions set forth in the section entitled “The Merger Agreement—Conditions to the Merger” beginning on page 122 has been satisfied);

 

   

the fact that, if the closing does not occur by January 31, 2021, the Company will be permitted to take certain compensation actions with respect to the Company’s 2021 fiscal year, including, among other things, granting annual equity awards in respect of fiscal year 2021 in the ordinary course of business consistent with past practice (with time-based equity awards granted in the form of Company RSUs);

 

   

the fact that all the required existing regulatory clearances have been obtained for the merger pursuant to the original merger agreement, that such clearances will be deemed to satisfy the condition to the extent these are still in effect at the time the Merger is consummated, and that, in the event the SEC does not confirm orally or in writing that it has no further comments on this proxy statement or that it does not intend to review this proxy statement prior to December 15, 2020, Parent, Holding, Merger Sub and the Company are required, no later than December 18, 2020, to file a notification and report form with respect to the proposed merger with the FTC and DOJ under the HSR Act and will request early termination of the waiting period under the HSR Act;

 

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Parent’s obligation under the merger agreement to use its reasonable best efforts to obtain the regulatory approvals necessary to consummate the merger, without any limitation on the amount of assets that Parent may be required to divest or hold separate in order to secure the requisite regulatory approvals, as described in the sections entitled “The Merger Agreement—Filings; Other Actions; Notification” beginning on page 117 and “The Merger—Regulatory Approvals” beginning on page 97;

 

   

Parent and the Company’s obligations not to take any action that could, or could reasonably be expected to, cause any governmental entity to prevent, delay or impair consummation of the merger;

 

   

Parent and the Company’s obligations not to permit their respective representatives to participate in any discussions or meetings with any governmental entity in respect of the transactions contemplated by the merger agreement unless the Company or Parent consults with the other in advance and, to the extent permitted by such governmental entity, gives the other the opportunity to attend and participate;

 

   

Parent’s obligation to notify the Company within twenty-four hours of any communication or request for information from any governmental entity relating to the merger or the Company and to consult with the Company with respect to all aspects of its response to such communication or request prior to providing any substantive response to any Governmental Entity with respect to the merger or the Company;

 

   

the fact that the outside date will be automatically extended to December 31, 2021 if the merger will not have closed by June 30, 2021, provided that all closing conditions (other than those that by their nature are to be satisfied at closing) are satisfied or waived (to the extent permitted by applicable law) other than the closing conditions relating to receipt of regulatory approvals;

 

   

the fact that the merger agreement provides that, in the event that the Company brings any claim, litigation, or other similar proceeding to enforce the terms of the merger agreement or for money damages, the per share merger consideration will be deemed, for all purposes in such proceeding, including any award of specific performance or damages, to be $135.00 in cash, without interest and less any required tax withholding, as was in the original merger agreement.

 

   

the fact that the merger is not subject to the approval of Parent’s stockholders;

 

   

the absence of any financing condition to consummation of the merger;

 

   

Parent’s representation that it and its controlled affiliates will have, at the closing, sufficient cash, available lines of credit or other sources of funds necessary to consummate the transactions contemplated by the merger agreement and that it and its controlled affiliates have the financial resources and capabilities to fully perform all of Parent’s, Holding’s and Merger Sub’s obligations under the merger agreement, as described in the section entitled “The Merger Agreement—Financing of the Merger” beginning on page 119;

 

   

Non-Price Terms of the Merger Agreement. The Board considered the non-price terms and conditions of the merger agreement and related transaction documents, including:

 

   

the provision allowing the Board to change its recommendation prior to obtaining the stockholder approval in specified circumstances relating to a superior proposal or intervening event, subject to Parent’s right to terminate the merger agreement and receive payment of the termination fee of $575 million;

 

   

the provision allowing the Board to terminate the merger agreement to enter into a superior proposal, subject to certain conditions (including certain rights of Parent to match the superior proposal and payment of the termination fee of $575 million), as described in the sections entitled “The Merger Agreement—No Solicitation of Acquisition Proposals; Board Recommendation

 

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  Changes” beginning on page 112, “The Merger Agreement—Termination” beginning on page 123, and “The Merger Agreement—Termination Fee” beginning on page 124;

 

   

the provisions requiring the Company and Parent to use their respective reasonable best efforts to take or cause to be taken all actions, and do or cause to be done all things, necessary or advisable on their respective parts under the merger agreement and applicable law to consummate and make effective the merger and the other transactions contemplated by the merger agreement as promptly as practicable, including among other things, maintaining in effect the existing regulatory clearances obtained for the merger pursuant to the original merger agreement, as described in the sections entitled “The Merger Agreement—Filings; Other Actions; Notification” beginning on page 117 and “The Merger—Regulatory Approvals” beginning on page 97;

 

   

the provisions requiring Parent to notify the Company of any matter that Parent believes is a breach of the Company’s interim operating covenants, following which the Company has fourteen (14) days to cure or take efforts to cure, as applicable, such breach before the breach can be taken into account for purposes of assessing whether the condition to the merger with respect to the Company’s performance of its obligations in all material respects has been satisfied, as described in the section entitled “The Merger Agreement—Conduct of Our Business Pending the Merger” beginning on page 107;

 

   

the outside date of the merger agreement on which either party, subject to certain exceptions, can terminate the merger agreement, and the Board’s view that the outside date which the merger agreement extended to June 30, 2021, and which will be automatically extended to December 31, 2021 if all conditions are satisfied other than the receipt of the regulatory approvals, allow for sufficient time to consummate the merger.

 

   

Opportunity for the Company’s Stockholders to Vote. The Board considered the fact that the merger would be subject to the approval of the stockholders, and the stockholders would be free to evaluate the merger and vote for or against the adoption of the merger agreement at the special meeting.

 

   

Appraisal Rights. The Board considered the availability of statutory appraisal rights under Delaware law in connection with the merger for stockholders who timely and properly exercise such rights in compliance with Section 262 of the DGCL and the absence of any closing conditions in the merger agreement related to the exercise of appraisal rights by the Company’s stockholders.

Potential Negative Factors. In the course of reaching its recommendation, the Board also considered a variety of risks and potentially negative factors concerning the merger and the merger agreement, including the following (not necessary in order of relative importance) among others:

 

   

that the Board believed in the strength of the Company’s claims against Parent in the merger litigation;

 

   

that, as of the Company’s public announcement on October 15, 2020, while the Company still expected full-year results for fiscal year 2020 to be substantially impacted by COVID-19, the Company was pleased with how its business had rebounded following the first quarter, and continued to rebound in the third quarter, especially in mainland China, and to recover in the United States;

 

   

that the stockholders will have no ongoing equity participation in the Company following the merger and the stockholders will cease to participate in the Company’s future earnings, dividends or growth, if any, and will not benefit from increases, if any, in the value of the Company following the merger;

 

   

that the Company is an iconic and unique luxury brand that has 90% or greater global brand awareness, and in recent years has significantly improved its brand strength in China, an important market for luxury goods;

 

   

that the Company has a proven track record of growing revenue, dividends and earnings per share (“EPS”), and has created significant shareholder value, since its initial public offering;

 

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that the Company’s share price has not yet reflected all of the potential benefits of the Company’s investments in its strategic plan, including the potential benefits of its pending renovation of its New York Flagship store on Fifth Avenue in New York City and its plans to renovate its other U.S. stores, its strong product pipeline and planned faster cadence of new product launches, its higher spending on advertising and promotion with increased focus on China to drive growth, its new marketing and brand messaging that is increasing affinity with younger generations, its refreshed omni-channel strategy, and its investments in its systems and supply chain;

 

   

that our common stock traded at a price higher than the per share merger consideration of $131.50 between the announcement of the original merger agreement and as recently as March 10, 2020;

 

   

that, in the preceding twenty years, the Company has been able to recover from prior macroeconomic shocks, including the September 11, 2001 attacks on New York City and the 2008 credit crisis, within approximately two years in each case;

 

   

that the entry into the settlement of the merger litigation would release all claims against Parent arising prior to the settlement and relating to the original merger agreement;

 

   

the risk that all conditions to the parties’ obligations to consummate the merger, including obtaining or maintaining certain regulatory approvals, will not be satisfied on a timely basis or at all and that the merger therefore will be delayed or will not be consummated, including the risk that obtaining or maintaining such approvals could be affected adversely by potential changes in governance of the relevant jurisdictions;

 

   

the risk that the pendency of the merger or failure to consummate the merger could adversely affect the operations of the Company and its subsidiaries and the relationships of the Company and its subsidiaries with their respective employees (including making it more difficult to attract and retain key personnel), customers, key designers, suppliers and others with whom they have business dealings;

 

   

the effect that a failure to consummate the merger could have on the price of our common stock and on the market’s perceptions of the Company’s prospects, resulting in loss of value to stockholders;

 

   

the restrictions imposed by the terms of the merger agreement on the conduct of the Company’s business prior to consummation of the merger, which may delay or prevent the Company from capitalizing on business opportunities that may arise pending consummation of the merger, and the resultant risk if the merger is not consummated, as described in the section entitled “The Merger Agreement—Conduct of Our Business Pending the Merger” beginning on page 107;

 

   

the significant effort and cost involved in connection with negotiating the original merger agreement and the merger agreement and consummating the merger (including certain costs and expenses if the merger is not consummated), the substantial time and effort of management required to consummate the merger and the potential further disruptions to the Company’s day-to-day operations during the pendency of the merger;

 

   

the possibility that the Company may be required to pay Parent a termination fee of $575 million under certain circumstances following termination of the merger agreement, including if the Board changes its recommendation in light of an intervening event or terminates the merger agreement to accept a superior proposal, which, while as a percentage of the equity value of the Company is within a customary range for similar transactions, may discourage other parties that otherwise might have an interest in a business combination with, or an acquisition of, the Company or may reduce the price offered by such other parties in a competing bid, as described in the section entitled “The Merger Agreement—Termination Fee” beginning on page 124;

 

   

the restrictions imposed by the merger agreement on soliciting competing acquisition proposals from third parties, as described in the section entitled “The Merger Agreement—No Solicitation of Acquisition Proposals; Board Recommendation Changes” beginning on page 112;

 

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the effect that the right afforded to Parent under the merger agreement to match acquisition proposals from third parties may have to discourage other parties that might otherwise have an interest in a business combination with, or an acquisition of, the Company, as described in the section entitled “The Merger Agreement—No Solicitation of Acquisition Proposals; Board Recommendation Changes” beginning on page 112;

 

   

the fact that the receipt of cash in exchange for our common stock pursuant to the merger will be a taxable transaction for U.S. federal income tax purposes for many of our stockholders; and

 

   

the fact that the Company’s directors and executive officers may have interests in the merger that are different from, or in addition to, the interests of the stockholders, including, among other things, the settlement of equity awards held by directors and executive officers, the payment of severance benefits to executive officers upon a qualifying termination of employment within the two (2) year period following the merger, accelerated vesting with respect to benefits under the Supplemental Plan for certain executive officers, cash retention bonuses granted in connection with the transaction, and the interests of the Company’s directors and officers in being entitled to continued indemnification, advancement of expenses and insurance coverage from the surviving corporation, as described in the section entitled “The Merger—Interests of Certain Persons in the Merger” beginning on page 90.

The foregoing discussion of the information and factors considered by the Board is intended to be illustrative and not exhaustive, but includes the material factors considered by the Board. In reaching its determination and recommendation, the Board did not quantify, rank or assign any relative or specific weight to any of the foregoing factors, and individual members of the Board may have considered various factors differently. The Board did not undertake to make any specific determination as to whether any specific factor, or any particular aspect of any factor, supported or did not support its ultimate recommendation. Moreover, in considering the information and factors described above, each individual member of the Board applied his or her own personal business judgment to the process and may have given differing weights to differing factors. The Board based its recommendation on the totality of the information presented. The explanation of the factors and reasoning set forth above contain forward-looking statements that should be read in conjunction with the section of this proxy statement entitled “Cautionary Statement Regarding Forward-Looking Statements.”

Opinions of the Company’s Financial Advisors

Opinion of Centerview Partners

On October 28, 2020, Centerview rendered to the Board its oral opinion, subsequently confirmed in a written opinion dated October 28, 2020 that, as of such date and based upon and subject to various assumptions made, procedures followed, matters considered, and qualifications and limitations upon the review undertaken by Centerview in preparing its opinion, the merger consideration to be paid to the holders of shares of common stock (other than excluded shares) pursuant to the merger agreement was fair, from a financial point of view, to such holders.

The full text of Centerview’s written opinion, dated October 28, 2020, which describes the assumptions made, procedures followed, matters considered, and qualifications and limitations upon the review undertaken by Centerview in preparing its opinion, is attached as Annex B and is incorporated by reference. The summary of the written opinion of Centerview set forth below is qualified in its entirety to the full text of Centerview’s written opinion attached as Annex B. Centerview’s financial advisory services and opinion were provided for the information and assistance of the Board (in their capacity as directors and not in any other capacity) in connection with and for purposes of its consideration of the transaction and Centerview’s opinion only addressed the fairness, from a financial point of view, as of the date thereof, to the holders of shares of common stock (other than excluded shares) of the merger consideration to be paid to such holders pursuant to the merger agreement. Centerview’s opinion did not address any other

 

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term or aspect of the merger agreement or the transaction and does not constitute a recommendation to any stockholder of the Company or any other person as to how such stockholder or other person should vote with respect to the merger or otherwise act with respect to the transaction or any other matter.

The full text of Centerview’s written opinion should be read carefully in its entirety for a description of the assumptions made, procedures followed, matters considered, and qualifications and limitations upon the review undertaken by Centerview in preparing its opinion.

In connection with rendering the opinion described above and performing its related financial analyses, Centerview reviewed, among other things:

 

   

a draft of the merger agreement, dated October 28, 2020, referred to in this summary of Centerview’s opinion as the “draft merger agreement”;

 

   

Annual Reports on Form 10-K of the Company for the years ended January 31, 2020, January 31, 2019 and January 31, 2018;

 

   

certain interim reports to shareholders and Quarterly Reports on Form 10-Q of the Company;

 

   

certain publicly available research analyst reports for the Company;

 

   

certain other communications from the Company to its shareholders; and

 

   

certain internal information relating to the business, operations, earnings, cash flow, assets, liabilities and prospects of the Company, including the October 2020 management projections as described in the section entitled “The Merger—Certain Company Forecasts” beginning on page 81 and furnished to Centerview by the Company for purposes of Centerview’s analysis (collectively, the “internal data”).

Centerview also participated in discussions with members of the senior management and representatives of the Company regarding their assessment of the internal data. In addition, Centerview reviewed publicly available financial and stock market data, including valuation multiples, for the Company and compared that data with similar data for certain other companies, the securities of which are publicly traded, in lines of business that Centerview deemed relevant. Centerview also compared certain of the proposed financial terms of the transaction with the financial terms, to the extent publicly available, of certain other transactions that Centerview deemed relevant, and conducted such other financial studies and analyses and took into account such other information as Centerview deemed appropriate.

Centerview assumed, without independent verification of or any responsibility for, the accuracy and completeness of the financial, legal, regulatory, tax, accounting and other information supplied to, discussed with, or reviewed by Centerview for purposes of its opinion and, with the Company’s consent, Centerview relied upon such information as being complete and accurate. In that regard, Centerview assumed, at the Company’s direction, that the internal data (including, without limitation, the October 2020 management projections) were reasonably prepared on bases reflecting the best currently available estimates and judgments of the management of the Company as to the matters covered by the internal data and Centerview relied, at the Company’s direction, on the internal data for purposes of Centerview’s analysis and opinion. Centerview expressed no view or opinion as to the internal data or the assumptions on which it was based. In addition, at the Company’s direction, Centerview did not make any independent evaluation or appraisal of any of the assets or liabilities (contingent, derivative, off-balance-sheet or otherwise) of the Company, nor was Centerview furnished with any such evaluation or appraisal, and was not asked to conduct, and did not conduct, a physical inspection of the properties or assets of the Company. Centerview assumed, at the Company’s direction, that the final executed merger agreement would not differ in any respect material to Centerview’s analysis or opinion from the draft merger agreement reviewed by Centerview. Centerview also assumed, at the Company’s direction, that the transaction will be consummated on the terms set forth in the merger agreement and in accordance with all applicable laws and other relevant documents or requirements, without delay or the waiver, modification or amendment of any term, condition or agreement, the effect of which would be material to Centerview’s analysis or Centerview’s

 

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opinion and that, in the course of obtaining the necessary governmental, regulatory and other approvals, consents, releases and waivers for the transaction, no delay, limitation, restriction, condition or other change will be imposed, the effect of which would be material to Centerview’s analysis or Centerview’s opinion. Centerview did not evaluate and did not express any opinion as to the solvency or fair value of the Company, or the ability of the Company to pay its obligations when they come due, or as to the impact of the transaction on such matters, under any state, federal or other laws relating to bankruptcy, insolvency or similar matters. Centerview is not a legal, regulatory, tax or accounting advisor, and Centerview expressed no opinion as to any legal, regulatory, tax or accounting matters.

Centerview’s opinion expressed no view as to, and did not address, the Company’s underlying business decision to proceed with or effect the transaction, or the relative merits of the transaction as compared to any alternative business strategies or transactions that might be available to the Company or in which the Company might engage. Centerview’s opinion was limited to and addressed only the fairness, from a financial point of view, as of the date of Centerview’s written opinion, to the holders of the shares of common stock (other than excluded shares) of the merger consideration to be paid to such holders pursuant to the merger agreement. For purposes of its opinion, Centerview was not asked to, and Centerview did not, express any view on, and its opinion did not address, any other term or aspect of the merger agreement or the transaction, including, without limitation, the structure or form of the transaction, or any other agreements or arrangements contemplated by the merger agreement or entered into in connection with or otherwise contemplated by the transaction, including, without limitation, the fairness of the transaction or any other term or aspect of the transaction to, or any consideration to be received in connection therewith by, or the impact of the transaction on, the holders of any other class of securities, creditors or other constituencies of the Company or any other party. In addition, Centerview expressed no view or opinion as to the fairness (financial or otherwise) of the amount, nature or any other aspect of any compensation to be paid or payable to any of the officers, directors or employees of the Company or any party, or class of such persons in connection with the transaction, whether relative to the merger consideration to be paid to the shareholders pursuant to the merger agreement or otherwise. Centerview also did not express any view on, and Centerview’s opinion did not address, the per share merger consideration as compared to the consideration per share that was to be paid to the holders of shares of common stock (other than excluded shares) pursuant to the original merger agreement, or the likelihood that the Company would be successful in compelling the consummation of the transaction in accordance with the terms of the original merger agreement. Centerview’s opinion was necessarily based on financial, economic, monetary, currency, market and other conditions and circumstances as in effect on, and the information made available to Centerview as of, the date of Centerview’s written opinion, and Centerview does not have any obligation or responsibility to update, revise or reaffirm its opinion based on circumstances, developments or events occurring after the date of Centerview’s written opinion. Centerview’s opinion does not constitute a recommendation to any stockholder of the Company or any other person as to how such stockholder or other person should vote with respect to the merger or otherwise act with respect to the transaction or any other matter. Centerview’s financial advisory services and its written opinion were provided for the information and assistance of the Board (in their capacity as directors and not in any other capacity) in connection with and for purposes of its consideration of the transaction. The issuance of Centerview’s opinion was approved by the Centerview Partners LLC Fairness Opinion Committee.

 

 

Summary of Centerview Financial Analysis

The following is a summary of the material financial analyses prepared and reviewed with the Board in connection with Centerview’s opinion, dated October 28, 2020. The summary set forth below does not purport to be a complete description of the financial analyses performed or factors considered by, and underlying the opinion of, Centerview, nor does the order of the financial analyses described represent the relative importance or weight given to those financial analyses by Centerview. Centerview may have deemed various assumptions more or less probable than other assumptions, so the reference ranges resulting from any particular portion of the analyses summarized below should not be taken to be Centerview’s view of the actual value of the Company. Some of the summaries of the financial analyses set

 

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forth below include information presented in tabular format. In order to fully understand the financial analyses, the tables must be read together with the text of each summary, as the tables alone do not constitute a complete description of the financial analyses performed by Centerview. Considering the data in the tables below without considering all financial analyses or factors or the full narrative description of such analyses or factors, including the methodologies and assumptions underlying such analyses or factors, could create a misleading or incomplete view of the processes underlying Centerview’s financial analyses and its opinion. In performing its analyses, Centerview made numerous assumptions with respect to industry performance, general business and economic conditions and other matters, many of which are beyond the control of the Company or any other parties to the transaction. None of the Company, Parent, Holding, Merger Sub or Centerview or any other person assumes responsibility if future results are materially different from those discussed. Any estimates contained in these analyses are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than as set forth below. In addition, analyses relating to the value of the Company do not purport to be appraisals or reflect the prices at which the Company may actually be sold. Accordingly, the assumptions and estimates used in, and the results derived from, the financial analyses are inherently subject to substantial uncertainty. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before October 26, 2020 and is not necessarily indicative of current market conditions.

 

 

Selected Public Company Analysis

Centerview reviewed certain financial information of the Company and compared it to corresponding financial information of certain publicly traded companies that Centerview selected based on its experience and professional judgment (which are referred to as the “selected companies” in this summary of Centerview’s opinion). Although none of the selected companies are directly comparable to the Company, the companies listed below were chosen by Centerview, among other reasons, because they are publicly traded luxury and premium consumer goods companies with certain operational, business and/or financial characteristics that, for purposes of Centerview’s analysis, may be considered similar to those of the Company.

However, because none of the selected companies is exactly the same as the Company, Centerview believed that it was inappropriate to, and therefore did not, rely solely on the quantitative results of the selected company analysis. Accordingly, Centerview also made qualitative judgments, based on its experience and professional judgment, concerning differences between the business, financial and operating characteristics and prospects of the Company and the selected companies that could affect the public trading values of each in order to provide a context in which to consider the results of the quantitative analysis.

Using publicly available information obtained from SEC filings and other data sources as of October 26, 2020, Centerview calculated, among other things, for each selected company set forth below, the enterprise value (calculated, to the extent publicly available, as the market value of common equity (determined using the treasury stock method and taking into account outstanding in the money options, other equity awards and other convertible securities, as applicable, plus the principal balance of outstanding debt, preferred stock and non-controlling interests less cash and cash equivalents (excluding cash held in trust and restricted cash, as applicable) and equity investments)) which is referred to in this summary of Centerview’s opinion as “EV”, as a multiple of Wall Street research analyst consensus estimated EBITDA for the calendar years 2021 and 2022. Centerview also calculated each selected company’s ratio of its current stock price to its projected calendar year

 

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2021 EPS and projected calendar year 2022 EPS (a ratio commonly referred to as a price to earnings ratio, or “P/E”). The results of these analyses are summarized as follows:

 

Selected Companies    EV / 2021E
EBITDA
     EV / 2022E
EBITDA
     2021E
P/E
     2022E
P/E
 

Hermès International S.A.

     29.7x        26.2x        55.4x        48.2x  

Ferrari N.V.

     20.3x        17.5x        39.9x        33.0x  

LVMH Moët Hennessy-Louis Vuitton SE

     15.8x        14.7x        30.1x        26.2x  

Kering S.A.

     13.0x        11.3x        23.8x        20.4x  

Brunello Cucinelli S.p.A.

     12.3x        10.8x        n.m. 1       41.1x  

Compagnie Financière Richemont S.A.

     10.7x        9.2x        31.4x        23.3x  

Prada S.p.A.

     10.3x        8.9x        60.7x        37.4x  

The Swatch Group Ltd.

     8.7x        7.2x        21.8x        15.6x  

Salvatore Ferragamo S.p.A.

     8.5x        7.0x        n.m. 2       37.4x  

Burberry Group plc

     7.6x        6.9x        22.1x        18.7x  

Capri Holdings Limited

     7.1x        6.0x        9.3x        6.5x  

Ralph Lauren Corporation

     6.7x        5.5x        15.0x        11.1x  

Tapestry, Inc.

     6.6x        6.1x        10.4x        9.0x  
     EV / 2021E
EBITDA
     EV / 2022E
EBITDA
     2021E
P/E
     2022E
P/E
 

Median (Luxury Conglomerates)3

     13.0x        11.3x        30.1x        23.3x  

Median (Luxury Brands)4

     10.3x        8.9x        39.9x        37.4x  

Median (Premium Brands)5

     6.7x        6.0x        10.4x        9.0x  

 

  1.

Brunello Cucinelli S.p.A. 2021 EPS of $0.45 implies a multiple of 70.4x.

  2.

Salvatore Ferragamo S.p.A. 2021 EPS of $0.11 implies a multiple of 136.6x.

  3.

“Luxury Conglomerates” include Kering S.A., LVMH Moët Hennessy-Louis Vuitton SE and Compagnie Financière Richemont S.A.

  4.

“Luxury Brands” include Brunello Cucinelli S.p.A., Burberry Group plc, Hermès International S.A., Salvatore Ferragamo S.p.A., Ferrari N.V., Prada S.p.A. and The Swatch Group Ltd.

  5.

“Premium Brands” include Capri Holdings Limited, Ralph Lauren Corporation and Tapestry, Inc.

Based on the foregoing analyses and other considerations that Centerview deemed relevant in its professional judgment and experience, Centerview selected a reference range of multiples of enterprise value to estimated 2021 calendar year EBITDA of 10.0x – 16.0x, a reference range of multiples of enterprise value to estimated 2022 calendar year EBITDA of 9.0x – 15.0x, a reference range of multiples of price to estimated 2021 calendar year earnings of 22.0x – 30.0x and a reference range of multiples of price to estimated 2022 calendar year earnings of 19.0x – 26.0x. In selecting these reference ranges, Centerview made qualitative judgments based on its experience and professional judgment concerning differences between the business, financial and operating characteristics and prospects of the Company and the selected companies that could affect the public trading values in order to provide a context in which to consider the results of the quantitative analyses. Centerview applied the reference range of enterprise value to estimated 2021 calendar year EBITDA to the Company’s estimated 2021 fiscal year EBITDA of approximately $839 million (from the October 2020 management projections), which resulted in a range of implied values per share of common stock of approximately $65 to $106, rounded to the nearest dollar. Centerview applied the reference range of enterprise value to estimated 2022 calendar year EBITDA to the Company’s estimated 2022 fiscal year EBITDA of approximately $1,136 million (from the October 2020 management projections), which resulted in a range of implied values per share of common stock of approximately $80 to $135, rounded to the nearest dollar. Centerview applied the reference range of price to estimated 2021 calendar year earnings to the Company’s estimated 2021 fiscal year EPS of approximately $3.21 (from the October 2020 management projections), which resulted in a range of implied values per share of common stock of approximately $71 to $96, rounded to the nearest dollar. Centerview also applied the reference range of price to estimated 2022 calendar year earnings to the Company’s estimated 2022

 

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fiscal year EPS of approximately $4.98 (from the October 2020 management projections), which resulted in a range of implied values per share of common stock of approximately $95 to $129, rounded to the nearest dollar. Centerview compared these ranges to the per share merger consideration of $131.50 to be paid to the holders of shares of common stock (other than excluded shares) pursuant to the merger agreement.

 

 

Selected Precedent Transaction Analysis

Centerview reviewed and analyzed certain information relating to the following selected transactions that Centerview, based on its experience and professional judgment, deemed relevant to consider in relation to the Company and the transaction. These transactions were selected, among other reasons, because their participants, size or other factors, for purposes of Centerview’s analysis, may be considered similar to the transaction. Centerview used its experience, expertise and knowledge of the luxury and premium consumer goods industries to select transactions that involved companies with certain operations, results, business mix or product profiles that, for purposes of this analysis, may be considered similar to certain operations, results, business mix or product profiles of the Company.

Using publicly available information, Centerview calculated, for each selected transaction set forth below, among other things, the enterprise value (calculated as described above) implied for the applicable target company based on the consideration payable in the applicable selected transaction as a multiple of the target company’s EBITDA for the latest twelve (12) month period (“LTM”) at the time of the announcement of the transaction. The results of this analysis are summarized as follows:

 

Date Announced

  

Target

  

Acquiror

   EV / LTM
EBITDA
 
March 2011    Bulgari S.p.A.    LVMH Moët Hennessy-Louis Vuitton SE      25.8x  
January 2013    Harry Winston Inc.    The Swatch Group Ltd.      24.4x  
July 2013    Loro Piana S.p.A.    LVMH Moët Hennessy-Louis Vuitton SE      21.0x  
February 2014    Zale Corporation    Signet Jewelers Ltd.      15.6x  
April 2016    SMCP S.A.    Shandong Ruyi Technology Group Co., Ltd.      12.4x  
April 2017    Christian Dior S.E.    LVMH Moët Hennessy Louis Vuitton S.E.      15.6x  
May 2017    Kate Spade & Company    Coach, Inc.      10.4x  
July 2017    Jimmy Choo PLC    Michael Kors Holdings Limited      17.5x  
September 2018    Gianni Versace S.r.l.    Michael Kors Holdings Limited      22.0x  
Median            17.5x  

No company or transaction used in this analysis is identical or directly comparable to the Company or the transaction. The companies included in the selected transactions listed above were selected, among other reasons, based on Centerview’s experience and professional judgment, because they have certain characteristics that, for the purposes of this analysis, may be considered similar to certain characteristics of the Company. The reasons for and the circumstances surrounding each of the selected transactions analyzed were diverse and there are inherent differences in the business, operations, financial conditions and prospects of the Company and the companies included in the selected transactions analysis. Accordingly, Centerview believed that it was inappropriate to, and therefore did not, rely solely on the quantitative results of the selected transactions analysis. This analysis involves complex considerations and qualitative judgments concerning differences in financial and operating characteristics and other factors that could affect the public trading, acquisition or other values of the selected target companies and the Company.

Based on its analysis and other considerations that Centerview deemed relevant in its professional judgment and experience, Centerview selected a reference range of multiples of enterprise value to LTM EBITDA of 15.0x

 

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to 20.0x derived from the selected target companies in the selected precedent transactions. In selecting this reference range, Centerview made qualitative judgments based on its experience and professional judgment concerning differences between the business, financial and operating characteristics and prospects of the Company and the selected target companies included in the selected transactions and other factors that could affect the public trading, acquisition or other values of such companies or the Company in order to provide a context in which to consider the results of the quantitative analysis. Centerview applied this reference range to the Company’s LTM EBITDA of $649 million for the period ended July 31, 2020 (based on the internal data), which resulted in an implied per share equity value range for the shares of common stock of approximately $76 to $102, rounded to the nearest dollar. Centerview also applied this reference range to the Company’s 2019 fiscal year EBITDA of $1,009 million for the period ended January 31, 2020 (based on the internal data), which resulted in an implied per share equity value range for the shares of common stock of approximately $120 to $160, rounded to the nearest dollar. Centerview compared these ranges to the per share merger consideration of $131.50 to be paid to the holders of shares of common stock (other than excluded shares) pursuant to the merger agreement.

 

 

Discounted Cash Flow Analysis

Centerview performed a discounted cash flow analysis of the Company based on the October 2020 management projections. A discounted cash flow analysis is a traditional valuation methodology used to derive a valuation of an asset by calculating the “present value” of estimated future cash flows of the asset. “Present value” refers to the current value of future cash flows or amounts and is obtained by discounting those future cash flows or amounts by a discount rate that takes into account macroeconomic assumptions and estimates of risk, the opportunity cost of capital, expected returns and other appropriate factors.

In performing this analysis, Centerview calculated a range of equity values for the Company by (a) discounting to present value as of July 31, 2020 using discount rates ranging from 7.5% to 8.5% (reflecting Centerview’s analysis of the Company’s weighted average cost of capital) and the mid-year convention: (i) the forecasted fully taxed unlevered free cash flows of the Company over the period beginning July 31, 2020 and ending on January 31, 2026 as calculated by Centerview as set forth in the section entitled “The Merger—Certain Company Forecasts” beginning on page 81, and (ii) a range of implied terminal values of the Company at the end of the Forecast period, calculated by Centerview applying an illustrative range of enterprise value to EBITDA multiples of 12.0x to 18.0x, which Centerview selected utilizing its professional judgment and expertise, to the Company’s EBITDA for the terminal year (approximately $1.7 billion), as set forth in the section entitled “The Merger—Certain Company Forecasts” beginning on page 81 and (b) subtracting from the foregoing results the Company’s net debt as of July 31, 2020 (approximately $455 million), calculated based on the internal data. Centerview divided the result of the foregoing calculations by the number of fully diluted outstanding shares of common stock as of October 26, 2020 (approximately 123 million, calculated based on the internal data) to derive a reference range of implied values per share of approximately $119 to $179, rounded to the nearest dollar. Centerview compared this range to the per share merger consideration of $131.50 to be paid to the holders of shares of common stock (other than excluded shares) pursuant to the merger agreement.

 

 

General

The preparation of a financial opinion is a complex analytical process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances and, therefore, a financial opinion is not readily susceptible to summary description. In arriving at its opinion, Centerview did not draw, in isolation, conclusions from or with regard to any factor or analysis that it considered. Rather, Centerview made its determination as to fairness on the basis of its experience and professional judgment after considering the results of all of the analyses.

Centerview’s financial analyses and opinion together represented only one of many factors taken into consideration by the Board in its evaluation of the transaction. Consequently, the analyses described above

 

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should not be viewed as determinative of the views of the Board or senior management of the Company with respect to the merger consideration or as to whether the Board would have been willing to determine that a different consideration was fair. The consideration for the transaction was determined through arm’s-length negotiations between the Company and Parent and was approved by the Board. Centerview provided advice to the Company during these negotiations. Centerview did not, however recommend any specific amount of consideration to the Company or the Board or that any specific amount of consideration constituted the only appropriate consideration for the transaction.

Centerview is a securities firm engaged directly and through affiliates and related persons in a number of investment banking, financial advisory and merchant banking activities. In the two years prior to the date of its written opinion, Centerview was not (except for its current engagement) engaged to provide financial advisory or other services to the Company, and Centerview did not receive any compensation from the Company during such period (other than $3 million in compensation that it received in connection with its current engagement). In the two years prior to the date of its written opinion, Centerview was not engaged to provide financial advisory or other services to Parent and Centerview did not receive any compensation from Parent during such period. In the two years prior to the date of its written opinion, Centerview had been engaged to provide and was providing financial advisory services unrelated to the Company or the transaction to two portfolio companies of L Catterton Management Limited (“L Catterton”), an affiliate of Parent, including Il Makiage Cosmetics (2013) Ltd., and Centerview received compensation of less than $1 million for certain of the foregoing services, and may in the future receive additional compensation for certain of the foregoing services. Centerview may provide financial advisory and other services to or with respect to the Company, L Catterton, Parent or their respective affiliates in the future, for which Centerview may receive compensation. Certain (i) of Centerview and Centerview’s affiliates’ directors, officers, members and employees, or family members of such persons, (ii) of Centerview’s affiliates or related investment funds and (iii) investment funds or other persons in which any of the foregoing may have financial interests or with which they may co-invest, may at any time acquire, hold, sell or trade, in debt, equity and other securities or financial instruments (including derivatives, bank loans or other obligations) of, or investments in, the Company, Parent, L Catterton or any of their respective affiliates or portfolio companies, or any other party that may be involved in the transaction.

The Board selected Centerview as its financial advisor in connection with the transaction based on Centerview’s expertise and experience. Centerview is an internationally recognized investment banking firm that has substantial experience in transactions similar to the transaction.

In connection with Centerview’s services as a financial advisor to the Board and pursuant to an engagement letter, as amended, between the Company and Centerview, the Company agreed to pay Centerview an aggregate fee of $45 million, $3 million of which was paid upon the rendering of Centerview’s opinion in connection with the original merger agreement, $3 million of which was paid upon the rendering of Centerview’s opinion in connection with the merger agreement and $39 million of which is payable contingent upon consummation of the merger. In addition, the Company has agreed to reimburse certain of Centerview’s expenses arising, and to indemnify Centerview against certain liabilities that may arise, out of Centerview’s engagement.

Opinion of Goldman Sachs

At a meeting of the Board held on October 28, 2020 Goldman Sachs rendered to the Board its oral opinion, subsequently confirmed in its written opinion dated October 28, 2020, to the effect that, as of the date of Goldman Sachs’ written opinion, and based upon and subject to the factors and assumptions set forth in Goldman Sachs’ written opinion, the per share merger consideration of $131.50 to be paid to the holders (other than Parent and its affiliates) of shares of common stock pursuant to the merger agreement was fair from a financial point of view to such holders.

The full text of the written opinion of Goldman Sachs, dated October 28, 2020, which sets forth the assumptions made, procedures followed, matters considered, qualifications and limitations on the review

 

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undertaken in connection with Goldman Sachs’ opinion, is attached to this proxy statement as Annex C. The summary of Goldman Sachs’ opinion contained in this proxy statement is qualified in its entirety by reference to the full text of Goldman Sachs’ written opinion. Goldman Sachs’ advisory services and opinion were provided for the information and assistance of the Board in connection with its consideration of the merger and the opinion does not constitute a recommendation as to how any holder of shares of common stock should vote with respect to the merger or any other matter.

In connection with rendering the opinion described above and performing its related financial analyses, Goldman Sachs reviewed, among other things:

 

   

the merger agreement;

 

   

annual reports to stockholders and Annual Reports on Form 10-K of the Company for the five fiscal years ended January 31, 2020;

 

   

certain interim reports to stockholders and Quarterly Reports on Form 10-Q of the Company;

 

   

certain other communications from the Company to its stockholders;

 

   

certain publicly available research analyst reports for the Company; and

 

   

certain updated internal financial analyses and forecasts for the Company prepared by its management, as approved for Goldman Sachs’ use by the Company (referred to in this section as the “October 2020 management projections” and which are summarized in the section entitled “The MergerCertain Company Forecasts” beginning on page 81).

Goldman Sachs also held discussions with members of the senior management of the Company regarding their assessment of the past and current business operations, financial condition and future prospects of the Company; reviewed the reported price and trading activity for the common stock; compared certain financial and stock market information for the Company with similar information for certain other companies the securities of which are publicly traded; reviewed the financial terms of certain recent business combinations in the luxury goods industry and in other industries; and performed such other studies and analyses, and considered such other factors, as it deemed appropriate.

For purposes of rendering its opinion, Goldman Sachs, with the consent of the Board, relied upon and assumed the accuracy and completeness of all of the financial, legal, regulatory, tax, accounting and other information provided to, discussed with or reviewed by, Goldman Sachs, without assuming any responsibility for independent verification thereof. In that regard, Goldman Sachs assumed with the consent of the Board that the October 2020 management projections were reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of the Company. Goldman Sachs did not make an independent evaluation or appraisal of the assets and liabilities (including any contingent, derivative or other off-balance-sheet assets and liabilities) of the Company or any of its subsidiaries and Goldman Sachs was not furnished with any such evaluation or appraisal. Goldman Sachs assumed that all governmental, regulatory or other consents and approvals necessary for the consummation of the merger would be obtained without any adverse effect on the expected benefits of the merger in any way meaningful to its analysis. Goldman Sachs assumed that the merger would be consummated on the terms set forth in the merger agreement, without the waiver or modification of any term or condition the effect of which would be in any way meaningful to its analysis.

Goldman Sachs’ opinion does not address the underlying business decision of the Company to engage in the merger, or the relative merits of the merger as compared to any strategic alternatives that may be available to the Company; nor does it address any legal, regulatory, tax or accounting matters. Goldman Sachs’ opinion addresses only the fairness from a financial point of view to the holders (other than Parent and its affiliates) of shares of common stock, as of the date of its opinion, of the per share merger consideration of $131.50 to be paid to such holders pursuant to the merger agreement. Goldman Sachs did not express any view on, and its opinion does not address, any other term or aspect of the merger agreement or the merger, or any term or aspect of any

 

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other agreement or instrument contemplated by the merger agreement or entered into or amended in connection with the merger, including the fairness of the merger to, or any consideration received in connection therewith by the holders of any other class of securities, creditors, or other constituencies of the Company; nor as to the fairness of the amount or nature of any compensation to be paid or payable to any of the officers, directors or employees of the Company, or class of such persons, in connection with the merger, whether relative to the per share merger consideration of $131.50 to be paid to the holders (other than Parent and its affiliates) of shares of common stock pursuant to the merger agreement or otherwise. Goldman Sachs also did not express any view on, and its opinion did not address, the per share merger consideration of $131.50 to be paid to the holders (other than Parent and its affiliates) of shares of common stock pursuant to the merger agreement as compared to the consideration per share of common stock that was to be paid to the holders (other than Parent and its affiliates) of shares of common stock pursuant to the original merger agreement or the likelihood that the Company would be successful in compelling consummation of the transaction contemplated by the original merger agreement in accordance with the terms of the original merger agreement. Goldman Sachs did not express any opinion as to the potential effects of volatility in the credit, financial and stock markets on the Company or Parent or the proposed transaction, or as to the impact of the merger on the solvency or viability of the Company or Parent or the ability of the Company or Parent to pay their respective obligations when they come due. Goldman Sachs’ opinion was necessarily based on economic, monetary, market and other conditions as in effect on, and the information made available to Goldman Sachs as of, the date of its opinion and Goldman Sachs assumed no responsibility for updating, revising or reaffirming its opinion based on circumstances, developments or events occurring after the date of the opinion. Goldman Sachs’ advisory services and its opinion were provided for the information and assistance of the Board in connection with its consideration of the merger and such opinion does not constitute a recommendation as to how any holder of shares of common stock should vote with respect to the merger or any other matter. Goldman Sachs’ opinion was approved by a fairness committee of Goldman Sachs.

 

 

Summary of Financial Analyses

The following is a summary of the material financial analyses presented by Goldman Sachs to the Board in connection with Goldman Sachs’ rendering to the Board of the opinion described above. The following summary, however, does not purport to be a complete description of the financial analyses performed by Goldman Sachs, nor does the order of analyses described represent relative importance or weight given to those analyses by Goldman Sachs. Some of the summaries of the financial analyses include information presented in tabular format. The tables must be read together with the full text of each summary and are alone not a complete description of Goldman Sachs’ financial analyses. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before October 26, 2020, and is not necessarily indicative of current market conditions.

 

 

Implied Premia and Multiples

Goldman Sachs calculated and compared the implied premia and implied multiples described below based on the per share merger consideration of $131.50 to be paid to the holders (other than Parent and its affiliates) of common stock pursuant to the merger agreement:

the implied premia represented by the per share merger consideration of $131.50 relative to:

$122.82, the closing price of our common stock on October 26, 2020 (the “October 26 share price”);

$90.26, the closing price of our common stock on October 14, 2019, the last trading day prior to the date Parent submitted the $120.00 proposal in connection with the original merger agreement (the “pre-initial offer share price”);

$98.55, the closing price of our common stock on October 25, 2019, the last trading day prior to the first media accounts regarding a possible acquisition of the Company by Parent, prior to announcement of the original merger agreement (the “pre-publication share price”);

 

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$139.50, the highest closing price of our common stock over the 104-week period ended October 25, 2019, prior to announcement of the original merger agreement (the “104-week high”);

the implied enterprise value for the Company as a multiple of estimated EBITDA for the Company for fiscal years 2020, 2021 and 2022 (referred to in the table below as “FY2020E EBITDA,” “FY2021E” and “FY2022 EBITDA”), as reflected in the October 2020 management projections; and

the per share merger consideration of $131.50 as a multiple of estimated EPS for the Company for fiscal years 2020, 2021 and 2022 (referred to in the table below as “FY2020E EPS,” “FY2021E EPS” and “FY2022E EPS”), as reflected in the October 2020 management projections.

Goldman Sachs calculated the implied equity value of the Company for purposes of calculating the foregoing multiples by multiplying the per share merger consideration of $131.50 by the total number of fully diluted shares of common stock outstanding as of October 26, 2020 of approximately 123 million, calculated using information provided by the Company’s management using the treasury stock method. Goldman Sachs calculated the implied enterprise value of the Company for purposes of calculating the foregoing multiples by adding to the implied equity value it calculated as described above, the Company’s net debt (defined for this purpose as the Company’s debt less cash, including the value of non-controlling interest, and referred to as “Net Debt”) as of July 31, 2020 of approximately $455 million, calculated using information provided by the Company’s management.

The results of these calculations and comparisons were as follows:

 

     Implied Premium
Represented by
the Per Share Merger
Consideration of
$131.50
 
Reference Price Per Share:   

October 26, 2020 Share Price of $122.82

     7.1

Pre-Initial Offer Share Price of $90.26

     45.7

Pre-Publication Share Price of $98.55

     33.4

104-Week High of $139.50

     (5.7 )% 

Implied Enterprise Value as a Multiple of:

   Multiples  

FY2020E EBITDA (October 2020 Management Projections)

     22.9x  

FY2021E EBITDA (October 2020 Management Projections)

     19.8x  

FY2022E EBITDA (October 2020 Management Projections)

     14.6x  

Implied Price as a Multiple of:

   Multiples  

FY2020E EPS (October 2020 Management Projections)

     50.2x  

FY2021E EPS (October 2020 Management Projections)

     41.0x  

FY2022E EPS (October 2020 Management Projections)

     26.4x  

 

 

Illustrative Present Value of Future Share Price Analysis

Goldman Sachs performed an illustrative analysis to derive a range of illustrative present values per share of common stock, based on theoretical future prices calculated by Goldman Sachs for the shares of common stock.

 

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Goldman Sachs derived a range of theoretical future values per share for the shares of common stock as of January 31 of each of 2021, 2022, 2023 and 2024 by applying illustrative one-year forward price to EPS multiples ranging from 18.5x to 23.3x to estimates of the EPS of the Company for each of fiscal years 2020, 2021, 2022 and 2023 as reflected in the October 2020 management projections. By applying a discount rate of 7.2%, reflecting an estimate of the Company’s cost of equity, Goldman Sachs discounted to present value, as of October 26, 2020 both the theoretical future values per share it derived for the Company and the estimated dividends to be paid per share of common stock through the end of the applicable year as reflected in the October 2020 management projections, to yield illustrative present values per share of common stock ranging from $59 to $144, as rounded to the nearest dollar.

The illustrative one-year forward price to EPS multiples used in the foregoing analysis were derived by Goldman Sachs using its professional judgement and experience, taking into account the share price to EPS multiples calculated by Goldman Sachs for the Company and certain selected companies as summarized below under the section entitled “The Merger—Opinions of the Company’s Financial Advisors—Opinion of Goldman Sachs—Selected Publicly Traded Companies Analysis” beginning on page 77. Goldman Sachs derived the discount rate used in the foregoing analysis by application of the capital asset pricing model, which requires certain company-specific inputs, including a beta for the company, as well as certain financial metrics for the United States financial markets generally.

 

 

Premia Paid Analysis

Goldman Sachs reviewed and analyzed, using publicly available data obtained from Dealogic databases, the premia paid in 352 acquisitions of publicly traded companies in the United States announced during the period from January 1, 2014 through October 26, 2020 in which the target company had an implied enterprise value of $1 billion or more. For the entire period and for each calendar year through October 26, 2020, Goldman Sachs calculated the average premia, and for the entire period also the median premia, of the price paid in acquisitions announced during such period relative to (i) the target company’s share price one trading day prior to the announcement or leak of the transaction (the “undisturbed price”), (ii) the target company’s highest closing share price over the 52-week period prior to the original announcement of the transaction and (iii) the target company’s highest closing share price over the 104-week period prior to the original announcement of the transaction. The following shows a summary of the results of the review:

 

     Premium to
Undisturbed
Price
    Premium to
52-Week High
    Premium/
(Discount) to
104-Week High
 

Entire Period

      

Average

     36     7     0

Median

     29     5     1

Calendar Years

      

2014 average

     33.0     13.5     5.6

2015 average

     35.6     5.0     1.5

2016 average

     44.9     1.9     (6.3 )% 

2017 average

     31.6     10.0     0.5

2018 average

     27.8     3.8     0.8

2019 average

     32.4     7.4     (0.5 )% 

2020 year to date average

     53.2     13.6     3.5

Based on its review of the foregoing data and its professional judgment and experience, Goldman Sachs applied a reference range of illustrative premia of 30%-45% to the pre-initial offer share price of $90.26 per share. This analysis resulted in a range of implied values per share of common stock of $117 to $131, as rounded to the nearest dollar.

 

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Selected Publicly Traded Companies Analysis

Using publicly available information, Goldman Sachs calculated and compared certain multiples with respect to the implied enterprise value and share price of the Company with corresponding information for the following selected group of publicly traded companies that are luxury conglomerates, luxury brand companies and U.S. premium brand companies and which are referred to in this section as the “selected companies”:

Luxury Conglomerates

LVMH Moët Hennessy-Louis Vuitton, SE

Kering SA

Compagnie Financiere Richemont AG

Luxury Brand Companies

Hermès International SCA

Ferrari N.V.

Brunello Cucinelli S.p.A.

Prada S.P.A

Salvatore Ferragamo SPA

Burberry Group plc

The Swatch Group AG

U.S. Premium Brand Companies

Ralph Lauren Corporation

Capri Holdings Limited

Tapestry, Inc.

For each of the Company and the selected companies, Goldman Sachs calculated and compared its implied enterprise value as a multiple of its estimated EBITDA for the twelve (12) month period ended January 31, 2023 (or December 31, 2022 for companies with a December 31st fiscal year end) (“EV / FY2022E EBITDA”) and its closing share price as of October 26, 2020 (and, for the Company, also the pre-publication share price) as a multiple of its estimated EPS for the twelve (12) month period ended January 31, 2023 (or December 31, 2022 for companies with a December 31st fiscal year end) (“Price / FY2022E EPS”). Goldman Sachs calculated an implied enterprise value for each of the Company and the selected companies by multiplying its closing share price as of October 26, 2020 (and for the Company also the pre-publication share price) by the number of fully diluted shares of the company to derive an implied equity value for each company, and adding to the resulting implied equity value the amount of each company’s net debt and the value of its non-controlling interests. All such amounts for the selected companies were calculated based on information in the applicable company’s most recent publicly available filings as of October 26, 2020, and for the Company, as of October 26, 2020, as provided by the Company’s management.

 

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For purposes of its calculations, Goldman Sachs used estimates of the EBITDA for the twelve (12) month period ended January 31, 2023 and EPS for the twelve (12) month period ended January 31, 2023 for the Company and each of the selected companies based on the median analyst estimates published as of October 26, 2020 by the Institutional Brokers’ Estimated System.

The results of these calculations were as follows:

 

Selected Company    EV / FY2022E EBITDA      Price / FY2022E EPS  
Luxury Conglomerates      

LVMH Moët Hennessy-Louis Vuitton, SE

     14.1x        26.4x  

Kering SA

     11.3x        20.3x  

Compagnie Financiere Richemont AG

     9.4x        22.8x  

Median

     11.3x        22.8x  

Luxury Brand Companies

     

Hermès International SCA

     26.3x        48.5x  

Ferrari N.V.

     17.6x        33.6x  

Brunello Cucinelli S.p.A.

     10.3x        40.5x  

Prada S.P.A

     8.9x        36.8x  

Salvatore Ferragamo SPA

     6.9x        34.5x  

Burberry Group plc

     7.7x        18.4x  

The Swatch Group AG

     7.2x        16.5x  

Median

     8.9x        34.5x  

U.S. Premium Brand Companies

     

Ralph Lauren Corporation

     6.2x        11.3x  

Capri Holdings Limited

     5.9x        6.4x  

Tapestry, Inc.

     6.2x        9.1x  

Median

     6.2x        9.1x  

Tiffany & Co. (October 26 Share Price)

     14.8x        25.5x  

Tiffany & Co. (Pre-Publication Share Price)

     11.9x        20.5x  

Although none of the selected companies are directly comparable to the Company, Goldman Sachs selected these companies because they are publicly traded companies with certain operations that, for purposes of analysis, may be considered similar to certain operations of the Company.

Based on the results of the foregoing calculations of implied EV / FY2022E EBITDA and Goldman Sachs’ professional judgment and experience, Goldman Sachs applied a range of enterprise value to EBITDA multiples of 6.9x to 14.1x to the Company’s estimated EBITDA for fiscal year 2022 as reflected in the October 2020 management projections, to derive a range of implied enterprise values for the Company. Goldman Sachs subtracted from this range of implied enterprise values the Company’s Net Debt as of July 31, 2020 of approximately $455 million, calculated using information provided by management, and divided the result by the implied total number of fully diluted shares of common stock outstanding as of October 26, 2020 ranging from 122 million to 123 million, based on the derived range of illustrative equity values, and calculated using information provided by management and the treasury stock method, to derive a range of implied values per share of common stock of $60 to $127, as rounded to the nearest dollar.

 

 

Selected Precedent Transactions Analysis

Goldman Sachs analyzed certain publicly available information relating to certain acquisition transactions announced since March 1, 2011 involving target companies in the luxury goods and premium brands industries.

 

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While none of the target companies in the selected transactions are directly comparable to the Company and none of the selected transactions are directly comparable to the proposed transaction, the target companies in the selected transactions are companies with certain operations that, for the purposes of analysis, may be considered similar to certain operations of the Company.

Using publicly available information, for each of the selected transactions, Goldman Sachs calculated the implied enterprise value of the applicable target company based on the consideration paid in the applicable transaction, as a multiple of the target company’s estimated LTM EBITDA for the period ended prior to announcement of each applicable transaction, as disclosed in public company filings and other publicly available information. The selected transactions and the implied enterprise value to LTM EBITDA multiples calculated for the transactions are set forth below.

 

Announced   Acquiror   Target   EV / LTM EBITDA  
Mar-11   LVMH   Bulgari S.p.A.     25.8x  
Mar-13   The Swatch Group AG   Harry Winston, Inc.     24.4x  
Jul-13   LVMH   Loro Piana S.p.A.     21.0x  
Mar-15   Compagnie Financiere Richemont AG   YOOX Net-A-Porter Group S.p.A.     15.9x  
Aug-16   Samsonite International S.A.   Tumi Holdings, Inc.     13.6x  
Apr-17   LVMH   Christian Dior SE     15.6x  
May-17   Coach, Inc.   Kate Spade & Company     10.4x  
Jul-17   Michael Kors Holdings Limited   Jimmy Choo Group Plc     17.5x  
Sep-18   Michael Kors Holdings Limited   Gianni Versace S.p.A.     22.0x  
Dec-18   LVMH   Belmond Ltd.     22.9x  

Mean (All Targets)

        18.9x  

Mean (US Targets, Kate Spade and Tumi)

        12.0x  

Mean (Non US Targets)

        20.6x  

Based on the results of the foregoing calculations and Goldman Sachs’ analyses of the various transactions and its professional judgment and experience, Goldman Sachs applied a reference range of enterprise value to LTM EBITDA multiples of 12.0x to 20.6x to the Company’s estimated EBITDA for the Company’s fiscal year 2019 of approximately $1,009 million, as reflected in the Company’s publicly available filings, to derive a range of implied enterprise values for the Company. Goldman Sachs subtracted from this range of implied enterprise values the Company’s Net Debt as of January 31, 2021, as reflected in the Company’s publicly available filings, and divided the result by the implied total number of fully diluted common stock outstanding as of October 26, 2020 of approximately 123 million, based on the derived range of illustrative equity values, and calculated using information provided by management and the treasury stock method, to derive a range of implied values per share of common stock of $95 to $165, as rounded to the nearest dollar.

 

 

Illustrative Discounted Cash Flow Analysis

Using the October 2020 management projections, Goldman Sachs performed an illustrative discounted cash flow analysis on the Company to derive a range of illustrative present values per share of common stock.

Using discount rates ranging from 6.5% to 7.5%, reflecting estimates of the Company’s weighted average cost of capital, and a mid-year convention, Goldman Sachs derived a range of illustrative enterprise values for the Company, by discounting to present value as of July 31, 2020, (a) the estimates of the unlevered free cash flow to be generated by the Company for the period from August 1, 2020 to January 31, 2026, as reflected in the

 

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October 2020 management projections, and (b) a range of illustrative terminal values for the Company as of January 31, 2026, calculated by applying a range of terminal year multiples of 12.0x to 15.0x to the Company’s estimated terminal year EBITDA of approximately $1.7 billion as reflected in the October 2020 management projections (which analysis implied perpetuity growth rates ranging from 1.4% to 3.5%). Goldman Sachs derived such discount rates by application of the capital asset pricing model, which requires certain company-specific inputs, including the company’s target capital structure weightings, the cost of long-term debt, future applicable marginal cash tax rate and a beta for the company, as well as certain financial metrics for the United States financial markets generally. The range of terminal year multiples of enterprise value to EBITDA was estimated by Goldman Sachs utilizing its professional judgment and experience, taking into account the October 2020 management projections and the multiples calculated by Goldman Sachs and summarized above under the section entitled “The Merger—Opinions of the Company’s Financial Advisors—Opinion of Goldman Sachs—Selected Publicly Traded Companies Analysis” beginning on page 77.

Goldman Sachs derived ranges of illustrative enterprise values for the Company by adding the ranges of present values it calculated for the unlevered free cash flow and illustrative terminal values, as described above. Goldman Sachs then subtracted from the range of illustrative enterprise values it derived the Company’s Net Debt as of October 26, 2020 of approximately $455 million, calculated using information provided by management, to derive a range of illustrative equity values for the Company. Goldman Sachs then divided the range of illustrative equity values by the implied total number of fully diluted common stock outstanding as of October 26, 2020 of approximately 123 million, based on the derived range of illustrative equity values, and calculated using information provided by management and the treasury stock method, to derive a range of illustrative present values per share of common stock of $125 to $160, as rounded to the nearest dollar.

 

 

General

The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Selecting portions of the analyses or of the summary set forth above, without considering the analyses as a whole, could create an incomplete view of the processes underlying Goldman Sachs’ opinion. In arriving at its fairness determination, Goldman Sachs considered the results of all of its analyses and did not attribute any particular weight to any factor or analysis considered by it. Rather, Goldman Sachs made its determination as to fairness on the basis of its experience and professional judgment after considering the results of all of its analyses. No company or transaction used in the above analyses as a comparison is directly comparable to the Company or Parent or the merger.

Goldman Sachs prepared these analyses for purposes of providing its opinion to the Board as to the fairness from a financial point of view to the holders (other than Parent and its affiliates) of shares of common stock, as of the date of the opinion, of the per share merger consideration of $131.50 to be paid to such holders pursuant to the merger agreement. These analyses do not purport to be appraisals nor do they necessarily reflect the prices at which businesses or securities actually may be sold. Analyses based upon projections of future results are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by these analyses. Because these analyses are inherently subject to uncertainty, being based upon numerous factors or events beyond the control of the parties or their respective advisors, none of the Company, Parent, Goldman Sachs or any other person assumes responsibility if future results are materially different from those forecast.

The per share merger consideration of $131.50 was determined through arm’s-length negotiations between the Company and Parent and was approved by the Board. Goldman Sachs provided advice to the Board during the Company’s negotiations with Parent in connection with the merger agreement. Goldman Sachs did not, however, recommend any specific amount of consideration to the Company or that any specific amount of consideration constituted the only appropriate consideration for the merger.

As described above, Goldman Sachs’ opinion to the Board was one of many factors taken into consideration by the Board in making its determination to approve the merger. The foregoing summary does not purport to be a

 

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complete description of the analyses performed by Goldman Sachs in connection with the delivery of its fairness opinion to the Board and is qualified in its entirety by reference to the written opinion of Goldman Sachs, attached as Annex C to this proxy statement.

Goldman Sachs and its affiliates are engaged in advisory, underwriting and financing, principal investing, sales and trading, research, investment management and other financial and non-financial activities and services for various persons and entities. Goldman Sachs and its employees, and funds or other entities they manage or in which they invest or have other economic interests or with which they co-invest, may at any time purchase, sell, hold or vote long or short positions and investments in securities, derivatives, loans, commodities, currencies, credit default swaps and other financial instruments of the Company, Parent, any of their respective affiliates and third parties, including Groupe Arnault, and its affiliates and portfolio companies, or any currency or commodity that may be involved in the merger. Goldman Sachs has acted as financial advisor to the Company in connection with, and has participated in certain of the negotiations leading to, the merger. Goldman Sachs expects to receive fees for its services in connection with the merger, all of which are contingent upon consummation of the merger, and the Company has agreed to reimburse certain of its expenses arising, and indemnify Goldman Sachs against certain liabilities that may arise, out of its engagement. During the two (2) year period ended October 28, 2020, the Investment Banking Division of Goldman Sachs has not been engaged by the Company and/or Parent and/or their respective affiliates to provide financial advisory and/or underwriting services for which Goldman Sachs has recognized compensation. Goldman Sachs has provided certain financial advisory and/or underwriting services to Groupe Arnault and/or its affiliates and portfolio companies from time to time for which its Investment Banking Division has received, and may receive, compensation, including having acted as a bookrunning manager with respect to a bank loan (aggregate principal amount $225,000,000) to Equinox Holdings Inc., a portfolio company of L Catterton Management Limited (“L Catterton”), an affiliate of Groupe Arnault and Parent, in March 2019 as joint lead book-running manager with respect to a public offering of 21,500,000 shares of common stock of Vroom, Inc., a portfolio company of L Catterton, in June 2020; and as joint lead book-running manager with respect to a follow on public offering of 10,800,000 shares of common stock of Vroom, Inc., in September 2020. During the two (2) year period ended October 28, 2020, Goldman Sachs has recognized compensation for financial advisory and/or underwriting services provided by its Investment Banking Division to L Catterton and its affiliates of approximately $25 million. Goldman Sachs may also in the future provide financial advisory and/or underwriting services to the Company, Parent, Groupe Arnault, L Catterton and their respective affiliates and, as applicable, portfolio companies for which the Investment Banking Division of Goldman Sachs may receive compensation. Goldman Sachs also may have co-invested with Groupe Arnault or L Catterton or their respective affiliates from time to time and may have invested in limited partnership units or affiliates of Groupe Arnault or L Catterton from time to time and may do so in the future. In addition, a Director on the board of directors of Parent is affiliated with Goldman Sachs as a Regional Advisor.

The Company selected Goldman Sachs as one of its financial advisors because it is an internationally recognized investment banking firm that has substantial experience in transactions similar to the merger. Pursuant to an engagement letter between the Company and Goldman Sachs, dated November 15, 2019, the Company engaged Goldman Sachs to act as one of its financial advisors in connection with the merger. The engagement letter provides for a transaction fee that is estimated, based on the information available as of the date of announcement, at approximately $32 million plus an additional discretionary fee of up to approximately $16 million (the amount of such fee, if any, to be determined by the Company in its sole discretion), all of which is contingent upon completion of the merger. In addition, the Company agreed to reimburse Goldman Sachs for certain of its expenses, including reasonable attorneys’ fees and disbursements, and to indemnify Goldman Sachs and related persons against various liabilities, including certain liabilities under the federal securities laws.

Certain Company Forecasts

The Company does not, as a matter of course, publicly disclose long-term financial projections as to future revenues, earnings or other results due to, among other reasons, the uncertainty, unpredictability and subjectivity

 

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of the underlying assumptions and estimates. However, at the request of the Board, prior to the execution of the original merger agreement, the Company’s management prepared and reviewed with the Board certain unaudited financial forecasts for internal use for the fiscal years 2019 to 2024 (the “November 2019 management projections”). The Company also provided the November 2019 management projections to Centerview and Goldman Sachs in November 2019 and, with the approval of the Company, representatives of Centerview and Goldman Sachs used the November 2019 management projections in connection with their financial analyses and for purposes of their opinions with respect to the original merger agreement. In June 2020, the Company’s management prepared certain unaudited financial forecasts for the fiscal years 2020 to 2024 (the “June 2020 management projections”). The Company provided the June 2020 management projections to Parent in June 2020 at Parent’s request.

At the request of the Board, in August 2020, the Company’s management prepared certain unaudited financial forecasts for the third and fourth quarters of fiscal year 2020 (the “August 2020 management projections”). The Company provided the August 2020 management projections to Parent in August 2020 at Parent’s request.

At the request of the Board, the Company’s management prepared and reviewed with the Board certain unaudited financial forecasts for internal use for the fiscal years 2020-2025 in October 2020 (the “October 2020 management projections”). The Company provided the October 2020 management projections to Centerview and Goldman Sachs. With the approval of the Company, representatives of Centerview and Goldman Sachs used the October 2020 management projections in connection with their financial analyses and for purposes of their opinions described under the sections entitled “The Merger—Opinions of the Company’s Financial Advisors—Opinion of Centerview Partners” beginning on page 65 and “The Merger—Opinions of the Company’s Financial Advisors—Opinion of Goldman Sachs” beginning on page 72.

A summary of certain projections from the November 2019 management projections, the June 2020 management projections, the August 2020 management projections and the October 2020 management projections is being included in this document not to influence the decision of our stockholders as to whether to vote for or against the merger proposal, but rather because certain of the management projections were made available to the Board, the November 2019 management projections and the October 2020 management projections were made available to Centerview and Goldman Sachs, and the November 2019 management projections, the June 2020 management projections and the August 2020 management projections were made available to Parent. The inclusion of this information should not be regarded as an indication that the Board, its advisors or any other person considered, or now considers, any of the management projections to be material or to be a reliable prediction of actual future results, and none of the management projections should be relied upon as such. All of the management projections are subjective in many respects. While all of the management projections were prepared in good faith by management, there can be no assurance that any of the management projections will be realized or that actual results will not be significantly higher or lower than forecasted. All of the management projections cover multiple periods, and such information by its nature becomes subject to greater uncertainty with each successive period. As a result, the inclusion of management projections in this proxy statement should not be relied on as necessarily predictive of actual future events.

None of the management projections were prepared with a view toward public disclosure or toward complying with generally accepted accounting principles (“GAAP”), the published guidelines of the SEC regarding projections or the use of non-GAAP measures, or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information. Neither the Company’s independent registered public accounting firm nor any other independent accountants have compiled, examined or performed any procedures with respect to any of the management projections, nor have they expressed any opinion or any other form of assurance on such information or its achievability. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP, and non-GAAP financial measures as used by the Company may not be comparable to similarly titled amounts used by other companies. The non-GAAP financial measures used in the

 

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October 2020 management projections were relied upon by Centerview and Goldman Sachs for purposes of their financial analyses and opinions and by the Board in connection with its consideration of the merger and the Company’s entry into the merger agreement. The management projections are not subject to SEC rules requiring reconciliation of a non-GAAP financial measure to a GAAP financial measure.

Additionally, although the management projections presented below are presented with numerical specificity, they are not facts. The management projections were based on numerous variables and assumptions that were deemed to be reasonable as of the date when the applicable management projections were finalized. Such assumptions are inherently uncertain, are subject to change and are often beyond the control of the Company. Important factors that may affect actual results and cause the management projections not to be achieved include, but are not limited to, risks and uncertainties relating to the Company’s business (including its ability to achieve strategic goals, objectives and targets and its ability to retain key employees), industry performance, the legal and regulatory environment, global political conditions, the financial markets, the luxury and jewelry markets, general business and economic conditions and other factors described or referenced under “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 28. In addition, the management projections were based solely upon information available to management at the time of their preparation and do not reflect updated prospects for the Company’s business, changes in general business or economic conditions, or any other transaction or event that has occurred or that may occur and that was not anticipated at the time the management projections were prepared, including, without limitation, the restrictions on the conduct of the Company’s business imposed by the terms of the merger agreement. The Company has not prepared revised forecasts to take into account these or any other variables that have changed since the date on which the October 2020 management projections were finalized. There can be no assurance that the management projections will be realized or that the Company’s future financial results will not materially vary from the management projections.

In developing the October 2020 management projections, as described above, the Company’s management made numerous assumptions. These include, without limitation, that:

 

   

sales will begin to recover from the impacts of the COVID-19 pandemic into fiscal year 2021 and grow through fiscal year 2025, with sales in fiscal year 2022 exceeding that of fiscal year 2019;

 

   

foreign currency exchange rates, commodity input costs and China duties and tariffs will remain unchanged from fiscal year 2020 through the end of fiscal year 2025;

 

   

selling, general & administrative expense (excluding marketing) as a percentage of sales is expected to decrease from fiscal year 2020 to the end of fiscal year 2025;

 

   

marketing expenditures as a percentage of sales will increase annually from fiscal year 2020 through fiscal year 2024 and remain unchanged in fiscal year 2025;

 

   

operating margin will increase from fiscal year 2020 to the end of fiscal year 2025;

 

   

gross margin will improve from fiscal year 2021 through the end of fiscal year 2025;

 

   

capital expenditures will increase dramatically in fiscal year 2021 (due primarily to the renovation of the Company’s flagship retail store in New York City and the delay in construction due to governmental edicts relating to the COVID-19 pandemic) before decreasing, but remaining above fiscal year 2020 levels from fiscal year 2022 to the end of fiscal year 2025 while also decreasing as a percentage of sales;

 

   

dividends will continue to be paid in the amount of $2.32 per share in fiscal year 2021, following which dividends per share will increase in fiscal years 2022 through 2025 in order to achieve a dividend payout ratio (calculated as dividends per share divided by EPS) of approximately 50% over time, in line with the Company’s previously stated objectives; and

 

   

there will be no material economic slowdown or significant macro shocks, outside of the impacts of the continued COVID-19 pandemic, and the contraction of sales in Hong Kong in fiscal year 2020.

 

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The October 2020 management projections set forth the following estimates of the Company’s future revenue, EBITDA and EPS over the six (6) year period from fiscal year 2020 through fiscal year 2025, assuming the Company remains a public company. The following estimate of unlevered free cash flow over the same period was calculated from the October 2020 management projections by representatives of Centerview and Goldman Sachs.

Projections Included in or Calculated from the October 2020 Management Projections

($ in millions, except for EPS and Dividends Per Share)

 

     FY 2020(3)     FY 2021     FY 2022      FY 2023      FY 2024      FY 2025  

Revenue

   $ 3,599 (4)    $ 4,259     $ 4,950      $ 5,511      $ 6,015      $ 6,376  

EBITDA(1)

   $ 726 (5)    $ 839     $ 1,136      $ 1,361      $ 1,543      $ 1,655  

Unlevered Free Cash Flow(2)

   $ 340 (6)    ($ 12   $ 369      $ 605      $ 769      $ 890  

EPS

   $ 2.62     $ 3.21     $ 4.98      $ 6.30      $ 7.39      $ 7.97  

Dividends Per Share

   $ 2.32     $ 2.32     $ 2.40      $ 3.00      $ 3.48      $ 3.80  

 

(1)

Refers to earnings before interest, taxes, depreciation and amortization.

(2)

Calculated as net operating profit after tax less capital expenditures and investment in working capital plus depreciation and amortization. Unlevered free cash flow was arithmetically calculated by representatives of Centerview and Goldman Sachs from the October 2020 management projections prepared and provided for, and approved by the Company for use by, Centerview and Goldman Sachs.

(3)

Excludes costs related to the pending merger, and amounts received as compensation for the previous acquisition of the premises containing one of the Company’s leased retail stores and an administrative office in Sydney, Australia under compulsory acquisition laws in that country and a charitable contribution to the Tiffany & Co. Foundation funded in connection with the compensation referenced above.

(4)

For purposes of the discounted cash flow analyses, Centerview and Goldman Sachs used an estimate of revenues calculated from the October 2020 management projections for the second half of the fiscal year of 2020 of $2,296 million.

(5)

For purposes of the discounted cash flow analyses, Centerview and Goldman Sachs used an estimate of EBITDA calculated from the October 2020 management projections for the second half of the fiscal year of 2020 of $608 million.

(6)

For purposes of the discounted cash flow analyses, Centerview and Goldman Sachs used an estimate of unlevered free cash flow calculated from the October 2020 management projections for the second half of the fiscal year of 2020 of $513 million.

In developing the November 2019 management projections, as described above, the Company’s management made numerous assumptions. These include, without limitation, that:

 

   

foreign currency exchange rates, commodity input costs and China duties and tariffs will remain unchanged from fiscal year 2020 through the end of fiscal year 2024;

 

   

selling, general & administrative expense (excluding marketing) as a percentage of sales is expected to increase from fiscal year 2019 to fiscal year 2020 and then decrease from fiscal year 2020 to the end of fiscal year 2024;

 

   

marketing expenditures as a percentage of sales will increase annually through fiscal year 2022 and remain unchanged in fiscal years 2023 and 2024;

 

   

operating margin will decrease from fiscal year 2019 to fiscal year 2020 and then increase from fiscal year 2020 to the end of fiscal year 2024;

 

   

current product category gross margins will remain unchanged through the end of fiscal year 2024;

 

   

inventory will remain flat in fiscal year 2020 and will grow at half the rate of Company sales from fiscal year 2021 to the end of fiscal year 2024;

 

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capital expenditures will increase dramatically in fiscal year 2020 and remain moderately elevated in fiscal year 2021 (due primarily to the renovation of the Company’s flagship retail store in New York City) before returning to fiscal year 2019 levels from fiscal year 2022 to the end of fiscal year 2024; and

 

   

there will be no material economic slowdown or significant macro shocks, outside of continued contraction of sales in Hong Kong of nearly 20% in fiscal year 2020 compared to fiscal year 2019.

The November 2019 management projections set forth the following estimates of the Company’s future revenue, EBITDA and EPS over the six (6) year period from fiscal year 2019 through fiscal year 2024, assuming the Company remains a public company. The following estimate of unlevered free cash flow over the same period was calculated from the November 2019 management projections by representatives of Centerview and Goldman Sachs.

Projections Included in or Calculated from the November 2019 Management Projections

($ in millions, except for EPS and Dividends Per Share)

 

     FY 2019     FY 2020      FY 2021      FY 2022      FY 2023      FY 2024  

Revenue

   $ 4,405     $ 4,554      $ 4,836      $ 5,209      $ 5,615      $ 6,042  

EBITDA(1)

   $ 1,002     $ 1,023      $ 1,100      $ 1,227      $ 1,359      $ 1,503  

Unlevered Free Cash Flow(2)

   $ 379 (3)    $ 309      $ 386      $ 528      $ 613      $ 711  

EPS

   $ 4.55     $ 4.66      $ 5.14      $ 5.81      $ 6.62      $ 7.51  

Dividends Per Share

   $ 2.29     $ 2.35      $ 2.59      $ 2.93      $ 3.33      $ 3.78  

 

(1)

Refers to earnings before interest, taxes, depreciation and amortization.

(2)

Calculated as net operating profit after tax less capital expenditures and investment in working capital plus depreciation and amortization. Unlevered free cash flow was arithmetically calculated by representatives of Centerview and Goldman Sachs from the November 2019 management projections prepared and provided for, and approved by the Company for use by, Centerview and Goldman Sachs.

(3)

For purposes of its discounted cash flow analysis, Goldman Sachs used estimates of unlevered free cash flow calculated from the November 2019 management projections for the fourth fiscal quarter of 2019 of $338 million.

The June 2020 management projections set forth the following estimates of the Company’s future revenue and EBITDA over the five (5) year period from fiscal year 2020 through fiscal year 2024, assuming the Company remains a public company.    

Projections Included in the June 2020 Management Projections

($ in millions rounded to the nearest hundred million)

 

     FY 2020(1)      FY 2021      FY 2022      FY 2023      FY 2024  

Revenue

   $ 3,200      $ 4,300      $ 5,000      $ 5,500      $ 6,000  

EBITDA(2)

   $ 500      $ 800      $ 1,100      $ 1,400      $ 1,500  

 

(1)

Excludes costs related to the pending merger, and amounts received as compensation for the previous acquisition of the premises containing one of the Company’s leased retail stores and an administrative office in Sydney, Australia under compulsory acquisition laws in that country and a charitable contribution to the Tiffany & Co. Foundation funded in connection with the compensation referenced above.

(2)

Refers to earnings before interest, taxes, depreciation and amortization.

 

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The August 2020 management projections set forth the following estimates of the Company’s future revenue and EBITDA over the six (6) month period comprising the third and fourth quarters of fiscal year 2020, assuming the Company remains a public company.

Projections Included in the August 2020 Management Projections

($ in millions rounded to the nearest million)(1)

 

     Q3 2020      Q4 2020     

 

     FY 2020(3)  

Revenue

   $ 932.0      $ 1,297.2           $ 3,531.8  

EBITDA(2)

   $ 171.7      $ 372.8           $ 662.6  

 

(1)

Excludes costs related to the pending merger.

(2)

Refers to earnings before interest, taxes, depreciation and amortization.

(2)

Also excludes amounts received as compensation for the previous acquisition of the premises containing one of the Company’s leased retail stores and an administrative office in Sydney, Australia under compulsory acquisition laws in that country and a charitable contribution to the Tiffany & Co. Foundation funded in connection with the compensation referenced above.

Financing of the Merger

Financing

The merger is not subject to a financing condition.

Parent, Holding and Merger Sub have represented in the merger agreement that Parent and its controlled affiliates will have sufficient cash, available lines of credit or other sources of funds at the effective time necessary to consummate the transactions contemplated by the merger agreement. Parent, Holding and Merger Sub have further represented in the merger agreement that Parent and its controlled affiliates have the financial resources and capabilities to fully perform all of Parent’s, Holding’s and Merger Sub’s obligations under the merger agreement.

Parent has agreed to notify the Company if Parent or any of its subsidiaries has entered into any commitment letter or other agreement pursuant to which any person (or persons) has committed to provide debt financing for the purposes of financing the transactions contemplated by the merger agreement and to identify to the Company the applicable person (or persons) that has committed to provide such debt financing.

On November 25, 2019, Parent notified the Company that Parent has entered into the facilities agreement, dated as of November 25, 2019, with, among others, Citigroup Global Markets Limited, as coordinator, and Citibank Group plc, UK Branch, as agent, which provides for a $8,500,000,000 bridge loan facility, a $5,750,000,000 364-day revolving credit facility and a €2,500,000,000 revolving credit facility. On February 11, 2020 and April 7, 2020, Parent completed eight bond issuances totaling €10,700,000,000 (the “bonds”), following which the $8,500,000,000 bridge loan facility was terminated. Amongst other sources, proceeds of the 364-day revolving credit facility, the revolving credit facility and the bonds may be used for the payment of the merger consideration and fees and expenses in connection therewith. If the closing of the merger has not occurred on or prior to May 24, 2021, each of the 364-day revolving credit facility and the revolving credit facility shall be canceled and any outstanding amounts thereunder repaid within five (5) business days thereof.

Financing Cooperation

Prior to the closing date, the Company has agreed to, and has agreed to cause its subsidiaries to, use commercially reasonable efforts to cause its and their respective affiliates and representatives to use

 

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commercially reasonable efforts to provide all customary cooperation that is reasonably requested by Parent in connection with any debt financing obtained by Parent or any of its subsidiaries for the purpose of financing the transactions contemplated by the merger agreement. If reasonably requested by Parent, the Company must, and must cause its subsidiaries to, and must use commercially reasonable efforts to cause its and their respective affiliates and representatives to, use commercially reasonably efforts to reasonably cooperate with Parent, Holding and Merger Sub, with respect to certain senior unsecured notes and the related indentures or note purchase agreements of the Company and its subsidiaries, as the case may be, (i) if any of them determines to commence (A) one or more offers to purchase any or all of the outstanding series of such senior unsecured notes for cash or (B) one or more offers to exchange any or all of such outstanding senior unsecured notes for securities issued by Parent or any of its subsidiaries and (ii) to conduct consent solicitations to obtain consent from the requisite holders thereof to certain amendments to, or waivers with respect to, such indentures; provided that (1) such offers and consent solicitations must be consummated no earlier than closing, and (2) such offers and consent solicitations must be made on customary terms and conditions (including the price to be paid and conditionality) as are reasonably proposed by Parent or any of its subsidiaries, are reasonably acceptable to the Company and are permitted or required by the terms of such senior unsecured notes, the applicable indentures and applicable laws, including SEC rules and regulations. Any such transaction described in clause (i) above must be funded using consideration provided by Parent or any of its subsidiaries; and Parent will be responsible for all other liabilities incurred by the Company or any of its subsidiaries in connection therewith.

Subject to the receipt of the requisite consents, in connection with any consent solicitations, the Company must execute supplemental indentures, amendments or waivers to the applicable indentures in accordance with the terms thereof amending the terms and provisions of such indentures in a form as reasonably requested by Parent and reasonably acceptable to the Company, which supplemental indentures, amendments or waivers will become effective no earlier than the closing. In connection with the financing cooperation provided for in the merger agreement, at the expense of Parent and its subsidiaries, the Company must, and must cause its subsidiaries to, and must use commercially reasonable efforts to cause its and their respective affiliates and representatives to, upon the reasonable request of Parent or any of its subsidiaries, use commercially reasonably efforts to provide reasonable assistance and cooperation (i) with Parent’s and its respective agents’ due diligence, (ii) to aid in the preparation by Parent of customary documentation used to complete any offers or consent solicitations and (iii) by requesting, and using commercially reasonable efforts to cause, (A) to the extent historical financial statements of the Company are or would be required to be included by Parent in a relevant registration statement of Parent for any offers or consent solicitations under the rules and regulations of the SEC, the Company’s independent accountants to provide customary consents for use of their reports to the extent customary and necessary in connection with such offers or consent solicitations and (B) the Company’s representatives to furnish any customary or necessary certificates, or comfort letters in connection with the indentures and the offers or consent solicitations. The dealer manager, solicitation agent, information agent, depositary or other agent retained in connection with any offers or consent solicitations will be selected by Parent or its subsidiaries and be reasonably acceptable to the Company and their fees and out-of-pocket expenses will be paid directly by Parent. The merger is not conditioned on the occurrence or success, or the making or obtaining, as applicable, of any offers or consent solicitations.

Parent must (i) promptly upon request by the Company, reimburse (or cause to be reimbursed) the Company and its subsidiaries for all reasonable out-of-pocket fees and expenses (including reasonable out-of-pocket auditor’s and attorneys’ fees and expenses) of the Company and its subsidiaries and all reasonable out-of-pocket fees and expenses of their representatives incurred in connection with any requested financing cooperation under the merger agreement or the original merger agreement and (ii) indemnify (or cause to be indemnified), defend and hold harmless the Company, its subsidiaries, its affiliates and its and their respective representatives against any claim, loss, damage, injury, liability, judgment, award, penalty, fine, tax, cost (including the cost of investigation), expense (including reasonable out-of-pocket fees and expenses of counsel) or settlement payment, of any kind, incurred by, imposed on, sustained by, suffered by or asserted against any of them, directly or indirectly relating to, arising out of or resulting from the financing, or the performance by the Company, its

 

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subsidiaries, its affiliates and its and their respective representatives of any obligations with respect any financing cooperation under the merger agreement or the original merger agreement.

Notwithstanding anything to the contrary in the provisions related to financing cooperation and paying down the Company’s indebtedness in the merger agreement, such provisions: (i) will not require the Company to take any action to the extent it would: (A) unreasonably disrupt or interfere with the conduct of the Company’s or its subsidiaries’ business, (B) require the Company or any of its subsidiaries to incur any fees, expenses or other liability prior to the effective time for which it is not entitled to be reimbursed or indemnified pursuant to the terms of the merger agreement (other than customary authorization letters required in connection with financing the transactions contemplated by the merger agreement), (C) subject any director, officer or employee of the Company or any of its subsidiaries to personal liability, (D) require the Company to breach, waive or amend any terms of the merger agreement, (E) require the Company to provide any information that is prohibited or restricted from being provided by applicable law or is subject to attorney-client privilege or protection, (F) require cooperation to the extent that it would reasonably be expected to conflict with or violate any applicable law or result in a breach of, or a default under, any contract (including a breach of any confidentiality obligation), (G) require the directors of the Company or any subsidiary of the Company to authorize or adopt any resolutions approving the agreements, documents, instruments, actions or transactions contemplated in connection with the above-described financing or indebtedness cooperation covenants, (H) require the Company, any of its subsidiaries or any of its or their respective representatives to make any representation to Parent, any of its affiliates or any other person, in connection with the above-described financing or indebtedness cooperation covenants (other than customary authorization letters required in connection with financing the transactions contemplated by the merger agreement), (I) require the Company to furnish any financial statements, audit reports or financial information other than as required under the merger agreement and other than to the extent such statements, reports or information are readily available to the Company, any of its subsidiaries or any of their respective representatives or (J) require the Company, any of its subsidiaries, or any of its or their respective affiliates or representatives to be the issuer of any securities or issue any offering document prior to the closing date or furnish any legal opinions. The Company and its subsidiaries also will not be required to execute or perform any agreement, document or instrument, including any definitive financing agreement, with respect to the above-described financing or indebtedness cooperation covenants or provide any indemnity the effectiveness of which is not conditioned upon closing occurring.

Closing and Effective Time

Subject to the provisions of the merger agreement, the closing will take place at 12:00 p.m. (Eastern Time) on the day that is no later than the fifth (5th) business day following the date on which the last of the conditions to the closing (described in the section entitled “The Merger Agreement—Conditions to the Merger” beginning on page 122) has been satisfied or waived (to the extent permitted by applicable law) by the party entitled to the benefit of the applicable condition (other than those conditions that by their nature can only be satisfied by action taken at or immediately prior to the closing, but subject to the satisfaction or waiver (to the extent permitted by applicable law) of those conditions) or at such other date and time as the Company and Parent may agree in writing.

All regulatory authorizations, consents, orders, approvals or waivers required for the merger under the merger agreement have been obtained. Assuming the maintenance or, in the event any existing approval or waiver expires and the Company files for such approval or waiver again, receipt of such regulatory approvals or waivers, and the satisfaction or waiver (to the extent permitted by applicable law) of other closing conditions, including obtaining of the requisite company vote, we anticipate that the merger will be completed early in the calendar year 2021. See the section entitled “The Merger Agreement—Closing and Effective Time” beginning on page 100.

Upon the terms and subject to the conditions set forth in the merger agreement, as soon as practicable on the closing date, the parties will (i) cause the certificate of merger to be duly executed and properly filed with the

 

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Secretary of State of the State of Delaware as provided under the DGCL and (ii) make any and all other filings, recordings or publications required to be made by the parties under the DGCL in connection with the merger.

The effective time will occur upon the certificate of merger having been duly filed with and accepted by the Secretary of State of the State of Delaware (or at such later time as the Company and Parent may agree in writing and specify in the certificate of merger in accordance with the relevant provisions of the DGCL).

Notwithstanding anything to the contrary set forth in the merger agreement, the closing may not take place prior to January 7, 2021.

Payment of the Per Share Merger Consideration and Surrender of Shares

Prior to the effective time, Parent will designate a bank or trust company reasonably acceptable to the Company, to serve as paying agent in connection with the merger. Parent will deposit, or cause to be deposited, with the paying agent a cash amount in immediately available funds sufficient to provide all funds necessary for the paying agent to pay the aggregate per share merger consideration in accordance with the merger agreement.

As soon as reasonably practicable after the effective time, and in any event within five (5) business days of the closing date, Parent will cause the paying agent to mail or otherwise provide each stockholder of record of eligible shares that are (A) represented by stock certificates or (B) book-entry shares notice advising such stockholders of the effectiveness of the merger, which notice will include appropriate transmittal materials (including a letter of transmittal) specifying that delivery must be effected, and risk of loss and title to the stock certificates or such book-entry shares must pass, only upon delivery of the stock certificates (or affidavits of loss in lieu of the stock certificates, as provided in the merger agreement) or the surrender of such book-entry shares to the paying agent (which will be deemed to have been effected upon the delivery of a customary “agent’s message” with respect to such book-entry shares or such other reasonable evidence, if any, of such surrender as the paying agent may reasonably request) and instructions describing how such stockholder of record may surrender such certificates (or affidavits of loss in lieu of the stock certificates, as provided in the merger agreement) or such book-entry shares to the paying agent in exchange for the portion of the aggregate per share merger consideration to which such stockholder is entitled to receive as a result of the merger pursuant to the merger agreement.

You should not return your stock certificates with the enclosed proxy card, and you should not forward your stock certificates to the paying agent without a letter of transmittal. Holders of book-entry shares will not be required to deliver a certificate or an executed letter of transmittal to the paying agent to receive the per share merger consideration that such holder is entitled to receive as a result of the merger pursuant to the merger agreement.

Upon surrender to the paying agent of eligible shares in accordance with the terms of the merger agreement, the holder of such eligible shares will be entitled to receive in exchange therefore, and Parent will cause the paying agent to pay and deliver to each such stockholder an amount in cash in immediately available funds (after giving effect to any required tax withholdings as provided in the merger agreement) equal to the product obtained by multiplying (1) the number of such eligible shares surrendered by (2) the per share merger consideration. Interest will not be paid or accrued in respect of the per share merger consideration. From the effective time until the surrender or transfer of certificates or book-entry shares, as the case may be, each such certificate or book-entry share will represent only the right to receive in exchange therefor a cash amount (after giving effect to any required tax withholdings) equal to the per share merger consideration.

From and after the effective time, there will be no further transfers of shares of our common stock that were issued and outstanding immediately prior to the effective time. If, after the effective time, any certificate or acceptable evidence of a book-entry share formerly representing any eligible share is presented to the surviving corporation, Parent or the paying agent for transfer or any other reason, it will be canceled and exchanged for the

 

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aggregate per share merger consideration to which the stockholder of the certificate is entitled to upon the terms and subject to the conditions set forth in the merger agreement.

In the event of a transfer of ownership of any eligible shares represented by a certificate that has not been registered in the transfer records of the Company, or if a holder of shares would like payment of the applicable per share merger consideration to be made to a person other than the person in whose name the surrendered certificate is registered, a check for any cash to be exchanged upon due surrender of the certificate may be issued to such transferee or other person if the certificates formerly representing such eligible shares are properly endorsed and are otherwise in proper form for surrender and are presented to the paying agent, accompanied by all documents reasonably required to evidence and effect such transfer and to evidence that any applicable transfer taxes have been paid or are not applicable, in each case, in form and substance, reasonably satisfactory to Parent and the paying agent. Payment of the applicable portion of the aggregate per share merger consideration with respect to book-entry shares will only be made to the person in whose name such book-entry shares are registered in the transfer records of the Company.

If any cash deposited with the paying agent remains unclaimed for twelve (12) months from and after the closing date, such cash will be delivered to Parent (or such other person caused by Parent to deposit such cash, as the case may be) or the surviving corporation, as determined by Parent. Thereafter, holders of eligible shares who have not exchanged their shares in accordance with the merger agreement will be entitled to look only to the surviving corporation for payment of the aggregate per share merger consideration to which such stockholders are entitled pursuant to the merger agreement as a general creditor thereof for such payment (after giving effect to any required tax withholdings).

If you have lost a certificate, or if it has been stolen or destroyed, then before you will be entitled to receive the per share merger consideration (after giving effect to any required tax withholdings) in a form of a check, you will be required to provide an affidavit of the loss, theft or destruction, in a form reasonably acceptable to Parent, and, if required by Parent or the paying agent, post a bond in a customary amount and upon such terms as may be reasonably required by Parent or the paying agent as an indemnity against any claim that may be made against Parent or the surviving corporation with respect to such certificate. These procedures will be described in the letter of transmittal and related instructions that you will receive, which you should read carefully and in their entirety.

Parent, the surviving corporation and the paying agent will be entitled to deduct and withhold, or cause to be deducted and withheld, from the per share merger consideration such amounts as are required to be deducted and withheld with respect to the making of such payment under any tax law. Any sum that is withheld will be remitted to the appropriate taxing authority, and will be treated for all purposes of the merger agreement as having been paid to the holder of shares with regard to whom it is deducted and withheld.

The per share merger consideration paid upon the surrender of certificates or transfer of book-entry shares in accordance with the merger agreement will be deemed to have been paid in full satisfaction of all rights pertaining to the eligible shares formerly represented by the certificates or book-entry shares so surrendered or transferred.

Interests of Certain Persons in the Merger

In considering the recommendation of the Board that you vote to adopt the merger agreement, you should be aware that aside from their interests as Company stockholders, the Company’s directors and executive officers have interests in the merger that are different from, or in addition to, those of Company stockholders generally. Members of the Board were aware of and considered these interests, among other matters, in evaluating and negotiating the merger agreement and the merger, and in recommending to Company stockholders that the merger agreement be adopted. For additional information, see the sections entitled “The Merger—Background of the Merger” beginning on page 42 and “The Merger—Reasons for the Merger; Recommendation of the

 

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Company’s Board of Directors” beginning on page 57. These interests are described in more detail below, and certain of them are quantified in the narrative and in the section entitled “Non-Binding, Advisory Vote on Merger-Related Compensation for the Company’s Named Executive Officers—Golden Parachute Compensation” beginning on page 128.

Treatment of Outstanding Equity Awards

As described further in the section entitled “The Merger Agreement—Treatment of Common Stock and Equity Awards” beginning on page 100, Company equity awards will be subject to the following treatment:

 

   

Company Options. At the effective time, each Company option that is outstanding immediately prior to the effective time, whether vested or unvested, will be canceled and converted into the right to receive an amount in cash, without interest, equal to the product of (i) the excess, if any, of (A) $131.50 over (B) the per share exercise price for such Company option, multiplied by (ii) the total number of shares underlying such Company option, less any required withholding taxes.

 

   

Company PSUs. At the effective time, each Company PSU that is outstanding immediately prior to the effective time will be canceled and converted into the right to receive an amount in cash, without interest, equal to the sum of (A) any accrued but unpaid cash in respect of dividend equivalent rights representing fractional shares with respect to such Company PSU, plus (B) the product of (i) the total number of shares subject to such Company PSU (including, for the avoidance of doubt, any dividend equivalent units credited in respect of Company PSUs) immediately prior to the effective time, multiplied by (ii) $131.50, less any required withholding taxes; provided that if the consummation of the merger occurs on or following February 1, 2021 and prior to May 1, 2021, 25% of the Company PSUs granted in respect of the Company’s fiscal year 2021 will receive the foregoing treatment and the remainder of such awards will be forfeited.

 

   

Company RSUs. At the effective time, each Company RSU that is outstanding immediately prior to the effective time will be canceled and converted into the right to receive an amount in cash, without interest, equal to the sum of (A) any accrued but unpaid cash in respect of dividend equivalent rights representing fractional shares with respect to such Company RSU, plus (B) the product of (i) the total number of shares underlying such Company RSU (including, for the avoidance of doubt, any dividend equivalent units credited in respect of Company RSUs), multiplied by (ii) $131.50, less any required withholding taxes; provided that if the consummation of the merger occurs on or following February 1, 2021 and prior to May 1, 2021, 25% of the Company RSUs granted in respect of the Company’s fiscal year 2021 will receive the foregoing treatment and the remainder of such awards will be forfeited.

To the extent that the closing is expected to occur following the anticipated vesting date for those Company PSUs granted in 2018, the Company is permitted to take any necessary actions, including the amendment of the Company PSUs, to cause the Company PSUs to vest in the total number of shares subject to each Company PSU (regardless of the actual level of performance during the performance period). Additionally, as permitted by the original merger agreement, in March 2020, the Company caused the Company PSUs granted in 2017 to vest in the total number of shares subject to each Company PSU (regardless of the actual level of performance during the performance period). For an estimate of the additional value of the Company PSUs granted in 2017 that vested pursuant to the original merger agreement (which has been calculated based on the difference between the total number of shares subject to such Company PSUs and the amount earned based on estimated actual performance) for Messrs. Erceg and Galtie and Ms. Harlan, see the section entitled “Non-Binding, Advisory Vote on Merger-Related Compensation for the Company’s Named Executive Officers—Golden Parachute Compensation” beginning on page 128. The additional value of the Company PSUs that vested pursuant to the original merger agreement (which has been calculated based on the difference between the total number of shares subject to such Company PSUs and the amount earned based on estimated actual performance) with respect to one (1) executive officer who is not an NEO is $1,054,036.

 

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The executive officers are subject to restrictive covenants with a post-employment term that will terminate upon the earlier to occur of the closing or the first anniversary of the termination of employment. In addition, the executive officers remain subject to indefinite confidentiality provisions post-closing. See the section entitled “The Merger—Interests of Certain Persons in the Merger—Other Compensation Matters” beginning on page 94 for information regarding new restrictive covenant agreements.

For an estimate of the amounts that would be payable to each of the Company’s named executive officers in settlement of their unvested Company equity awards, see the section entitled “Non-Binding, Advisory Vote on Merger-Related Compensation for the Company’s Named Executive Officers—Golden Parachute Compensation” beginning on page 128. The estimated aggregate amount that would be payable to the Company’s three (3) executive officers who are not named executive officers in settlement of their unvested Company equity awards that are outstanding as of November 13, 2020 if the merger were to be completed at such time is $10,691,985. The estimated aggregate amount that would be payable to the Company’s nine (9) non-employee directors in settlement of their unvested Company equity awards that are outstanding as of November 13, 2020 if the effective time were to occur at such time is $2,795,296. The amounts in this paragraph were determined using the per share merger consideration of $131.50. These amounts do not include any other incentive award grants (including any equity awards that may be granted in respect of fiscal year 2021), issuances or forfeitures that may be made or occur, or dividends or dividend equivalents that may be accrued, or may be accrued after November 13, 2020 and prior to the completion of the merger, and do not reflect any Company equity or other incentive awards that have vested or are expected to vest in accordance with their terms or by the action of the Board or its Compensation Committee after November 13, 2020 and prior to the completion of the merger.

Retention Agreements

Each of the Company’s executive officers (including each of the named executive officers) is party to a retention agreement with the Company that provides for certain severance entitlements. The retention agreements provide that, upon a termination without cause or a voluntary resignation for good reason within two (2) years after a change in control, the executive officer is entitled to the following benefits:

 

  i.

a lump sum payment equal to two (2) times the sum of (a) the greater of such executive officer’s (1) annual rate of base salary from Tiffany in effect immediately prior to the date of the qualifying termination and (2) the highest annual rate of such executive officer’s base salary from Tiffany in effect at any point during the three (3)-year period ended on the date on which a change in control occurs (the “reference salary”); and (b) the target annual bonus applicable to such executive officer for the year in which the qualifying termination occurs (disregarding for this purpose any reduction that is the basis of a good reason event) (the “reference bonus”);

 

  ii.

a lump sum payment of the executive officer’s pro-rated reference bonus for the fiscal year in which the qualifying termination occurs, calculated on the assumption that all performance targets have been or will be achieved at 100%;

 

  iii.

continuation of all insured and self-insured employee medical and dental welfare benefit plans in which the executive officer was entitled to participate prior to his or her date of termination for two (2) years post-termination; provided that such period will terminate earlier on the commencement date of equivalent benefits from a new employer or the executive officer’s attainment of age sixty-five (65), whichever occurs first; and

 

  iv.

any earned but unpaid base salary, vacation pay and bonus or annual incentive award for any completed fiscal year that remains unpaid.

The payments set forth under (i), (ii) and (iv) above will be made within ten (10) days of the executive officer’s date of termination.

 

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The retention agreements provide that any payments and benefits payable to the executive officer will be reduced to the extent necessary to avoid any excise taxes on “excess parachute payments” that would otherwise be imposed under Sections 280G and 4999 of the Code unless the total payments to be received by him or her without reduction would result in a higher after-tax benefit.

Parent and the Company have agreed that the Company’s Chief Executive Officer, Chief Financial Officer and General Counsel will have good reason to resign under their respective retention agreements following the closing, subject to their continued employment through closing and the terms of the retention agreements. However, none of the Chief Executive Officer, Chief Financial Officer or General Counsel will have good reason to resign under their respective retention agreement in the event that the Company determines in good faith that the executive could be terminated from employment for cause on or prior to the closing.

For an estimate of the value of the payments and benefits described above that would be payable to the Company’s named executive officers under the retention agreements upon a qualifying termination in connection with the merger, see the section entitled “Non-Binding, Advisory Vote on Merger-Related Compensation for the Company’s Named Executive Officers—Golden Parachute Compensation” beginning on page 128 of this proxy statement. The estimated aggregate cash severance amount (two (2) times the sum of base salary and target bonus), pro-rated reference bonus payments and COBRA continuation payments that would be payable to the three (3) executive officers who are not named executive officers under the retention agreements if the merger were to be completed and they were to experience a qualifying termination on November 13, 2020 is $5,961,465, based on base salary and target bonus amounts in effect as of the date of this proxy statement.

Supplemental Plan

Following the merger, the Supplemental Plan provides for “double-trigger” vesting with respect to benefits upon a termination without cause or voluntary resignation for good reason lasting until such time as the participant has attained minimum age and service, or “single-trigger” vesting at the time of the merger if the participant has either attained age sixty-five (65), or age fifty-five (55) with ten (10) years of service. Two (2) executive officers who are not named executive officers participate, but are not yet vested in the Supplemental Plan.

The estimated value of the benefits under the Supplemental Plan that would vest upon a qualifying termination in connection with the merger for the two executive officers who are not named executive officers is $2,272,132 (based on the valuation of such executive officers’ benefits as of November 13, 2020). The payment of such benefits is not accelerated due to the single-trigger or double-trigger vesting.

Annual Incentive Payments for the Company’s 2020 Fiscal Year

Pursuant to the merger agreement, the Company may make payments pursuant to its short-term and other annual bonus, commission, and incentive plans for fiscal year 2020 based on actual performance as determined by the Company in the ordinary course of business consistent with past practice; provided that, for fiscal year 2020, payments of the Company’s short-term/annual bonus will be determined and paid as follows: (x)(i) with respect to the individual component of the short-term/annual bonus (the “Individual Portion”), the Company will determine actual performance in January 2021 in the ordinary course of business consistent with past practice; provided that such determination will be subject to prior consultation with Parent; provided further that, the Individual Portion payable to each management employee will be reduced by 50%; and (ii) the corporate, quantitative component (the “Quantitative Portion”) will be calculated on the basis of the final certified consolidated financial results in March 2021 based on actual performance relative to the financial goals and payout curves established and approved by the Company at the beginning of the fiscal year and relative to the payout formula established and approved by the Board with respect to executive officers on March 19, 2020; provided that, prior to the closing, the Board may make such adjustments to performance as it determines reasonable in light of the effect of COVID-19 on the Company or any COVID-19 measure, subject to prior

 

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consultation with Parent; and (y) the sum of the Individual Portion and the Quantitative Portion will be paid together as promptly as practicable after the certification of the financial results and, in any event, no later than March 31, 2021.

Non-Employee Director Compensation

In accordance with the merger agreement, with respect to compensation of the Company’s non-employee directors, annual equity awards in respect of fiscal year 2020 were granted in the ordinary course of business consistent with past practice solely in the form of Company RSUs, and cash fees in respect of fiscal year 2020 will be paid in full prior to the closing. Additionally, if the closing does not occur prior to May 1, 2021, annual equity awards in respect of fiscal year 2021 may be granted in the ordinary course of business consistent with past practice solely in the form of Company RSUs, and cash fees in respect of fiscal year 2021 will be paid in full prior to the closing.

Other Compensation Matters

The Company may continue to implement strategies to mitigate the impact of Sections 280G and 4999 of the Code with respect to payments and other benefits that may be payable to employees (including executive officers) in connection with the transaction (including, without limitation, by entering into restrictive covenant agreements); provided that any action taken to mitigate the impact of Sections 280G and 4999 of the Code that would accelerate any payments to such employees (other than actions substantially similar to mitigation actions taken prior to the date of the merger agreement) will be subject to the prior consultation of Parent; provided further that in no event will the Company be permitted to offer or provide any tax gross-ups.

To mitigate the potential impact of Sections 280G and 4999 on the Company and its executive officers (including certain of the named executive officers), on December 13, 2019, the Board and/or the Compensation Committee, as applicable, approved the following actions: (i) payment in December 2019 of a portion of the 2019 annual cash incentive awards that would otherwise have been payable in the first quarter of fiscal year 2020 to Messrs. Bogliolo ($793,800), Erceg ($266,560) and Galtie ($250,880) and Mses. Harlan ($135,240) and Vitale ($47,942), and to three (3) other executive officers who are not named executive officers in the aggregate amount of $438,680; (ii) acceleration of the vesting of certain Company RSUs and Company options scheduled to vest before January 31, 2021 (so that such Company RSUs and Company options vested as of December 17, 2019 and were settled or eligible for exercise, respectively, thereafter) for Messrs. Bogliolo (in the amounts of 4,450 Company RSUs and 220,213 Company options), Erceg (in the amount of 97,170 Company options) and Galtie (in the amounts of 3,062 Company RSUs and 70,319 Company options) and Ms. Harlan (in the amounts of 3,762 Company RSUs and 36,782 Company options), and for three (3) other executive officers who are not named executive officers in the amounts of 10,711 Company RSUs and 48,745 Company options in the aggregate; (iii) acceleration of the vesting of a portion of the Company PSUs awarded in January 2017 and projected to vest and be earned in March 2020 (so that such Company PSUs vested as of December 17, 2019 and were settled thereafter) for Messrs. Erceg (in the amount of 10,779 Company PSUs) and Galtie (in the amount of 4,945 Company PSUs) and Ms. Harlan (in the amount of 4,375 Company PSUs), and for one (1) other executive officer who is not a named executive officer in the amount of 4,870 Company PSUs; and (iv) payment in cash to certain of the executive officers who are not named executive officers in December 2019 of all or a portion of the annual equity awards that would have otherwise been granted in the ordinary course in January 2020, subject to clawback and repayment if the executive officer resigns without good reason or is terminated for cause prior to the closing, or if the merger agreement is terminated without the closing of the merger, to two (2) executive officers who are not named executive officers in the aggregate amount of $1,343,672. In exchange for the treatment described above, each named executive officer entered into new restrictive covenant agreements that include non-competition and non-solicitation restrictions for a period of one year post-employment (18 months for the CEO).

 

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Further Actions

The parties have agreed that the Company may grant cash retention bonuses to Company employees on terms determined by the Company acting in good faith following consultation with Parent; provided that any such award to certain persons, including all executive officers, is subject to the prior consent of Parent (not to be unreasonably withheld). On December 13, 2019, the Board approved the payment of retention awards to certain of the named executive officers. The retention awards that were paid to named executive officers are as follows: Messrs. Bogliolo ($2,700,000) and Galtie ($800,000) and Mses. Harlan ($2,530,000) and Vitale ($900,000), and to three (3) executive officers who are not named executive officers in the aggregate amount of $2,650,000. Registrant paid such retention awards prior to December 31, 2019, subject to the execution of the restrictive covenant agreement described above and a special bonus agreement, which provides that the recipient will be required to repay the amount if the recipient resigns without good reason (or pursuant to a claim of good reason where the claim is based solely upon the occurrence or anticipated occurrence of the merger) or is terminated for cause prior to January 31, 2021. The Company determined to pay these retention awards to its executive officers and certain other persons in December 2019 subject to the recoupment provisions in order to mitigate the potential impact of Sections 280G and 4999 with respect to such awards.

New Management Arrangements

As of the date of this proxy statement, except as set forth above, there are no other new employment, equity contribution or other agreements between any Company executive officer or director, on the one hand, and the Company or Parent, on the other hand. Prior to the effective time, Parent, or with Parent’s permission, the Company, may enter into employment or other arrangements with executive officers or other arrangements with the executive officers and/or provide for payments (or the right to future payments) in connection with the merger. The Company is permitted to enter into perpetual mutual non-disparagement agreements with each of its directors and executive officers.

Indemnification and Insurance

Pursuant to the terms of the merger agreement, the Company’s directors and officers will be entitled to certain ongoing indemnification and coverage under directors’ and officers’ liability insurance policies. See the section entitled “The Merger Agreement—Indemnification; Directors’ and Officers’ Insurance” beginning on page 125 for a description of such ongoing indemnification and coverage obligations.

Material U.S. Federal Income Tax Consequences of the Merger

The following is a general discussion of the material U.S. federal income tax consequences of the merger to U.S. holders (as defined below) of common stock whose shares are exchanged for cash pursuant to the merger. This discussion does not address U.S. federal income tax consequences with respect to holders other than U.S. holders. This discussion is based on the provisions of the Internal Revenue Code of 1986, as amended (the “Code”), applicable U.S. Treasury Regulations promulgated thereunder, judicial opinions and administrative rulings and published positions of the Internal Revenue Service (the “IRS”), each as of the date hereof. These authorities are subject to change or differing interpretations, possibly on a retroactive basis, and any such change or interpretation could affect the accuracy of the statements and conclusions set forth in this discussion. This discussion is for general information purposes only and does not purport to be a complete analysis of all potential tax consequences. This discussion does not address any tax consequences arising under Medicare contribution tax on net investment income, nor does it address any tax consequences arising under state, local or foreign tax laws or U.S. federal tax laws other than those pertaining to the U.S. federal income tax. This discussion is not binding on the IRS or the courts and, therefore, could be subject to challenge, which could be sustained. No ruling is intended to be sought from the IRS with respect to the merger.

For purposes of this discussion, the term “U.S. holder” means a beneficial owner of common stock that is for U.S. federal income tax purposes:

 

   

a citizen or individual resident of the United States;

 

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a corporation, or other entity classified as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the United States, any state thereof, or the District of Columbia;

 

   

a trust if (1) a court within the United States is able to exercise primary supervision over the trust’s administration, and one or more U.S. persons are authorized to control all substantial decisions of the trust or (2) such trust has a valid election in effect under applicable U.S. Treasury Regulations to be treated as a U.S. person; or

 

   

an estate the income of which is subject to U.S. federal income tax regardless of its source.

This discussion applies only to U.S. holders of shares of common stock who hold such shares as capital assets within the meaning of Section 1221 of the Code (generally, property held for investment). Further, this discussion does not purport to consider all aspects of U.S. federal income taxation that may be relevant to a U.S. holder in light of its particular circumstances, or that may apply to U.S. holders subject to special treatment under U.S. federal income tax laws (including, for example, insurance companies, dealers or brokers in securities or foreign currencies, traders in securities who elect the mark-to-market method of accounting, holders subject to the alternative minimum tax, U.S. holders that have a functional currency other than the U.S. dollar, tax-exempt organizations, governmental agencies or instrumentalities, tax-qualified retirement plans, banks and other financial institutions, mutual funds, certain former citizens or former long-term residents of the United States, partnerships (or other entities or arrangements treated as partnerships for U.S. federal income tax purposes), S corporations, or other pass-through entities or investors in such partnerships, S corporations or other pass-through entities, real estate investment trusts, regulated investment companies, U.S. holders who hold shares of common stock as part of a hedge, straddle, constructive sale, conversion or other integrated transaction, U.S. holders who will hold (actually or constructively) an equity interest in Parent immediately after the merger, and U.S. holders who acquired their shares of common stock through the exercise of employee stock options or other compensation arrangements). This discussion also does not address the U.S. federal income tax consequences in respect of dissenting shares.

If a partnership (including for this purpose any entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds shares of common stock, the tax treatment of a partner in such partnership will generally depend on the status of the partner and the activities of the partnership. If you are, for U.S. federal income tax purposes, a partner in a partnership holding shares of common stock, you should consult your tax advisor.

This summary of material U.S. federal income tax consequences is for general information purposes only and is not tax advice. Holders of common stock are urged to consult their own tax advisors to determine the particular tax consequences to them of the merger, including the applicability and effect of the alternative minimum tax, the Medicare contribution tax on net investment income and any other U.S. federal, or state, local, foreign or other tax laws.

The receipt of cash by U.S. holders in exchange for shares of common stock pursuant to the merger will be a taxable transaction for U.S. federal income tax purposes. In general, for U.S. federal income tax purposes, a U.S. holder who receives cash in exchange for shares of common stock pursuant to the merger will recognize gain or loss in an amount equal to the difference, if any, between (1) the amount of cash received and (2) the U.S. holder’s adjusted tax basis in its shares of common stock.

Any such gain or loss will be long-term capital gain or loss if a U.S. holder’s holding period in the shares of common stock surrendered in the merger is greater than one year as of the date of the merger. Long-term capital gains of certain non-corporate holders, including individuals, are generally subject to U.S. federal income tax at preferential rates. The deductibility of capital losses is subject to limitations. If a U.S. holder acquired different blocks of common stock at different times or different prices, such U.S. holder must determine its adjusted tax basis and holding period separately with respect to each block of common stock.

 

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Information Reporting and Backup Withholding

Payments made in exchange for shares of common stock pursuant to the merger may be subject, under certain circumstances, to information reporting and backup withholding at the statutory rate. To avoid backup withholding, a non-corporate U.S. holder that does not otherwise establish an exemption should complete and return to the applicable withholding agent a properly completed and executed IRS Form W-9, certifying under penalties of perjury that such U.S. holder is a “United States person” (within the meaning of the Code), that the taxpayer identification number provided is correct and that such U.S. holder is not subject to backup withholding. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be refunded or credited against a holder’s U.S. federal income tax liability, if any, provided that such holder furnishes the required information to the IRS in a timely manner. U.S. holders are urged to consult their tax advisors as to the qualifications for exemption from backup withholding and the procedure for obtaining the exemption.]

Regulatory Approvals

All regulatory authorizations, consents, orders, approvals or waivers required for the merger under the merger agreement have been obtained. Pursuant to the original merger agreement, on January 3, 2020, Parent and the Company filed notification of the merger with the FTC and the DOJ under the HSR Act, and on February 3, 2020, the waiting period under the HSR Act in connection with the merger expired (the “original HSR clearance”). Further, on March 26, 2020, CFIUS informed the parties that it had concluded its review of the merger and determined that there are no unresolved national security concerns with respect to the transaction. Since then, regulatory authorizations, consents, orders, approvals or waivers for the merger pursuant to the original merger agreement have been granted by applicable competition authorities in the European Union (European Commission), Canada (Competition Bureau), China (State Administration for Market Supervision), Japan (Japan Fair Trade Commission), Mexico (Comisión Federal de Competencia Económica), Russia (Federal Antimonopoly Service), South Korea (Korea Fair Trade Commission), Australia (Foreign Investment Review Board and Australian Competition and Consumer Commission) and Taiwan (Fair Trade Commission) (the “existing competition clearances”).

The original HSR clearance will expire as of February 2, 2021. Pursuant to the merger agreement, if the SEC does not confirm orally or in writing that it has no further comments on this proxy statement or that it does not intend to review this proxy statement prior to December 15, 2020, Parent, Holding, Merger Sub and the Company will, by no later than December 18, 2020, file a notification of the merger with the FTC and DOJ under the HSR Act, and will request early termination of the waiting period under the HSR Act. With such filing by December 18, 2020, the waiting period under the HSR Act is expected to expire by the middle of January 2021, such that the merger would have the antitrust clearance under the HSR Act, even after the original HSR clearance expires.

With respect to the existing competition clearances, if at any time it becomes reasonably apparent to the Company that, as a result of the timing of the potential closing date, it will not be reasonably likely that the closing date will occur prior to the expiration date of any such existing competition clearance, each of the Company and Parent, as applicable, are required to prepare and file, with respect to the transactions contemplated by the merger agreement, any notifications required or advisable under applicable antitrust laws, such complete filings to be made by no later than the business day after the applicable existing competition clearance expires. The merger agreement does not provide for any further action with respect to CFIUS.

Upon the terms and subject to the conditions set forth in the merger agreement, the Company and Parent have agreed to cooperate with each other and use (and cause their respective controlled affiliates to use) their respective reasonable best efforts to take or cause to be taken all actions, and do or cause to be done all things, necessary or advisable on their respective parts under the merger agreement and applicable laws to promptly consummate and make effective the merger and the other transactions contemplated by the merger agreement as

 

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promptly as practicable, including (i) maintaining in effect the existing competition clearances (including not taking any action that could reasonably be expected to cause any existing competition clearance to be withdrawn, rescinded or rendered invalid), (ii) preparing and filing, in consultation with the other, as promptly as practicable with any governmental entity, documentation to effect all necessary notices, reports, consents, registrations, approvals, permits, authorizations, expirations of waiting periods and other filings, (iii) obtaining as promptly as practicable all consents, registrations, approvals, permits and authorizations necessary or advisable to be obtained from any governmental entity in order to consummate the merger and the other transactions contemplated by the merger agreement and (iv) not taking any action that could, or could reasonably be expected to, cause any governmental entity to prevent, delay or impair consummation of the merger.

Further, if Parent or any of its affiliates (or any person acting on behalf of Parent or at Parent’s direction) receives any request for information from any governmental entity relating to the merger or the Company or is notified by the Company or any governmental entity of any request or requirement of any governmental entity for Parent to provide any information, document or filing to such governmental entity relating to the merger or the Company, Parent will provide, and will cause its affiliates to provide, a complete response to such request as promptly as reasonably practicable and in any event within five (5) business days of receiving such request for information. Parent must (i) notify the Company within twenty-four (24) hours of receipt of any communication or request for information from a governmental entity relating to the merger or the Company and (ii) consult with the Company with respect to all aspects of its response thereto prior to providing any substantive response to any governmental entity with respect thereto.

With respect to obtaining clearance under any applicable antitrust laws, Parent and the Company’s reasonable best efforts will also include: (i) taking or committing to take actions that may limit or impact any of the parties’ or their respective subsidiaries’ freedom of action regarding, or its ability to retain, operations, divisions, businesses, products lines, contracts, customers or assets; (ii) entering into any orders, settlements, undertakings, contracts, consent decrees, stipulations or other agreements to effect the above or in order to vacate, lift, reverse, overturn, settle or otherwise resolve any order that prevents, prohibits, restricts or delays the consummation of the merger and the other transactions contemplated by the merger agreement that may be issued by any court or other governmental entity; and (iii) creating, terminating or divesting relationships, contractual rights or obligations of the Company, Parent or their respective subsidiaries in connection with obtaining all, or eliminating any requirement to obtain any, waiting period expirations or terminations, consents, clearances, waivers, exemptions, licenses, orders, registrations, approvals, permits, and authorizations for the transactions contemplated by the merger agreement under the HSR Act or any other antitrust law or from any governmental entity so as to enable the closing to occur as promptly as reasonably practicable.

There can be no certainty that the regulatory approvals or waivers required to consummate the merger will be obtained or maintained during the period of time contemplated by the merger agreement or that any such approvals would not be conditioned upon actions that are not required to be taken by the Company or Parent under the merger agreement, or that a regulatory challenge to the merger will not be made. For a more detailed description of the parties’ obligations with respect to regulatory approvals or waivers related to the merger, see the section entitled “The Merger Agreement—Filings; Other Actions; Notification” beginning on page 117 of this proxy statement.

 

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THE MERGER AGREEMENT

This section describes the material terms of the merger agreement. The description of the merger agreement in this section and elsewhere in this proxy statement is qualified in its entirety by reference to the complete text of the merger agreement, a copy of which is attached as Annex A and is incorporated by reference into this proxy statement. This summary does not purport to be complete and may not contain all of the information about the merger agreement that is important to you. We encourage you to read the merger agreement carefully and in its entirety, as the rights and obligations of the parties are governed by the express terms of the merger agreement and not by this summary or any other information contained in this proxy statement.

Explanatory Note Regarding the Merger Agreement

The merger agreement and this summary are included in this proxy statement to provide you with information regarding its material terms. Factual disclosures about the Company contained in this proxy statement or in the Company’s public reports filed with the SEC may supplement, update or modify the factual disclosures about the Company contained in the merger agreement. The representations, warranties and covenants made in the merger agreement by the Company, Parent, Holding and Merger Sub were made solely to the parties to, and solely for the purposes of, the merger agreement and as of specific dates and were qualified by and subject to important limitations agreed to by the Company, Parent, Holding and Merger Sub in connection with negotiating the terms of the merger agreement. In particular, in your review of the representations and warranties contained in the merger agreement and described in this summary, it is important to bear in mind that the representations and warranties were negotiated with the principal purposes of establishing the circumstances in which a party to the merger agreement may have the right not to consummate the merger if the representations and warranties of the other party prove to be untrue due to a change in circumstance or otherwise, and allocating risk between the parties to the merger agreement, rather than establishing matters as facts. The representations and warranties may also be subject to a contractual standard of materiality different from those generally applicable to stockholders and reports and documents filed with the SEC and in some cases were qualified by matters set forth in our confidential disclosure letter delivered to Parent, Holding and Merger Sub in connection with the merger agreement (the “Company disclosure letter”) and the confidential disclosure letter Parent, Holding and Merger Sub delivered to us in connection with the merger agreement (the “Parent disclosure letter”), which disclosures are not reflected in the merger agreement. Moreover, information concerning the subject matter of the representations and warranties may have changed since the date of the merger agreement. Investors should not rely on the representations, warranties and covenants or any description thereof as characterizations of the actual state of facts of the Company, Parent, Holding, Merger Sub or any of their respective subsidiaries or affiliates.

Effects of the Merger; Directors and Officers; Certificate of Incorporation; By-laws

Upon the terms and subject to the conditions set forth in the merger agreement, and in accordance with the applicable provisions of the DGCL, at the effective time, Merger Sub will merge with and into the Company, whereupon the separate corporate existence of Merger Sub will cease and the Company will continue as the surviving corporation in the merger and an indirect wholly owned subsidiary of Parent.

Immediately prior to the effective time, the Company will deliver to Parent the resignation of each member of the Board. The directors of Merger Sub and the officers of the Company immediately prior to the effective time will, from and after the effective time, be the initial directors and officers, respectively, of the surviving corporation, in each case, until their respective successors have been duly elected or appointed and qualified or until the earlier of their death, resignation, incapacity or removal, as the case may be.

At the effective time, by virtue of the merger, the certificate of incorporation of the Company will be amended and restated in its entirety to read as the certificate of incorporation of Merger Sub in effect immediately prior to the effective time (except (i) the Company’s name must not be amended, (ii) the provisions

 

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of the certificate of incorporation of Merger Sub relating to the incorporator of Merger Sub must be omitted, and (iii) any provisions required to be included in the certificate of incorporation of the surviving corporation pursuant to the merger agreement provisions governing indemnification and directors’ and officers’ insurance must not be amended, altered or repealed), and as so amended will be the certificate of incorporation of the surviving corporation until thereafter duly amended, restated or amended and restated as provided therein or by applicable law.

At the effective time, the by-laws of the Company will be amended and restated in their entirety to read as the by-laws of Merger Sub in effect immediately prior to the effective time (except (i) the name of the Company must remain “Tiffany & Co.,” and (ii) any provisions required to be included in the by-laws of the surviving corporation pursuant to the merger agreement provisions governing indemnification and directors’ and officers’ insurance must not be amended, altered or repealed), and as so amended will be the by-laws of the surviving corporation until thereafter duly amended, restated or amended and restated as provided therein or by applicable law.

Following the completion of the merger, our common stock will be delisted from the NYSE and will be deregistered under the Exchange Act and the Company will cease to be publicly traded.

Closing and Effective Time

Subject to the provisions of the merger agreement, the closing will take place at 12:00 p.m. (Eastern Time) on the day that is no later than the fifth (5th) business day following the date on which the last of the conditions to the closing (described in the section entitled “The Merger Agreement—Conditions to the Merger” beginning on page 122) has been satisfied or waived (to the extent permitted by applicable law) by the party entitled to the benefit of the applicable condition (other than those conditions that by their nature can only be satisfied by action taken at or immediately prior to the closing, but subject to the satisfaction or waiver (to the extent permitted by applicable law) of those conditions) or at such other date and time as the Company and Parent may agree in writing.

All regulatory authorizations, consents, orders, approvals or waivers required for the merger under the merger agreement have been obtained. Assuming the maintenance or, in the event any existing approval or waiver expires and the Company files for such approval or waiver again, receipt of such regulatory approvals or waivers, and the satisfaction or waiver (to the extent permitted by applicable law) of other closing conditions, including obtaining of the requisite company vote, we anticipate that the merger will be completed early in the calendar year 2021.

Upon the terms and subject to the conditions set forth in the merger agreement, as soon as practicable on the closing date, the parties will (i) cause the certificate of merger to be duly executed and properly filed with the Secretary of State of the State of Delaware as provided under the DGCL and (ii) make any and all other filings, recordings or publications required to be made by the parties under the DGCL in connection with the merger.

The merger will become effective upon the filing and acceptance of the certificate of merger with the Secretary of State of the State of Delaware (or at such later time as the Company and Parent may agree in writing and specify in the certificate of merger in accordance with the relevant provisions of the DGCL).

Notwithstanding anything to the contrary set forth in the merger agreement, the closing may not take place prior to January 7, 2021.

Treatment of Common Stock and Equity Awards

Common Stock. At the effective time, each eligible share will be automatically canceled and will cease to exist, and will be converted into the right to receive, upon the terms and subject to the conditions set forth in the merger agreement, $131.50 in cash, without interest, less any required withholding taxes.

 

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Company Options. At the effective time, each Company option that is outstanding immediately prior to the effective time, whether vested or unvested, will be canceled and converted into the right to receive an amount in cash, without interest, equal to the product of (i) the excess, if any, of (A) $131.50 over (B) the per share exercise price for such Company option, multiplied by (ii) the total number of shares underlying such Company option, less any required withholding taxes.

Company PSUs. At the effective time, each Company PSU that is outstanding immediately prior to the effective time will be canceled and converted into the right to receive an amount in cash, without interest, equal to the sum of (A) any accrued but unpaid cash in respect of dividend equivalent rights representing fractional shares with respect to such Company PSU, plus (B) the product of (i) the total number of shares subject to such Company PSU (including, for the avoidance of doubt, any dividend equivalent units credited in respect of Company PSUs) immediately prior to the effective time, multiplied by (ii) $131.50, less any required withholding taxes; provided that if the consummation of the merger occurs on or following February 1,2021 and prior to May 1, 2021, 25% of the Company PSUs granted in respect of the Company’s fiscal year 2021 will receive the foregoing treatment and the remainder of such awards will be forfeited.

Company RSUs. At the effective time, each Company RSU that is outstanding immediately prior to the effective time will be canceled and converted into the right to receive an amount in cash, without interest, equal to the sum of (A) any accrued but unpaid cash in respect of dividend equivalent rights representing fractional shares with respect to such Company RSU, plus (B) the product of (i) the total number of shares underlying such Company RSU (including, for the avoidance of doubt, any dividend equivalent units credited in respect of Company RSUs), multiplied by (ii) $131.50, less any required withholding taxes; provided that if the consummation of the merger occurs on or following February 1, 2021 and prior to May 1, 2021, 25% of the Company RSUs granted in respect of the Company’s fiscal year 2021 will receive the foregoing treatment and the remainder of such awards will be forfeited.

Surrender and Payment Procedures

Prior to the effective time, Parent will designate a bank or trust company reasonably acceptable to the Company, to serve as paying agent in connection with the merger. Parent will deposit, or cause to be deposited, with the paying agent a cash amount in immediately available funds sufficient to provide all funds necessary for the paying agent to pay the aggregate per share merger consideration in accordance with the merger agreement.

As soon as reasonably practicable after the effective time, and in any event within five (5) business days of the closing date, Parent will cause the paying agent to mail or otherwise provide each stockholder of record of eligible shares that are (A) represented by stock certificates or (B) book-entry shares notice advising such stockholders of the effectiveness of the merger, which notice will include appropriate transmittal materials (including a letter of transmittal) specifying that delivery must be effected, and risk of loss and title to the stock certificates or such book-entry shares must pass, only upon delivery of the stock certificates (or affidavits of loss in lieu of the stock certificates, as provided in the merger agreement) or the surrender of such book-entry shares to the paying agent (which will be deemed to have been effected upon the delivery of a customary “agent’s message” with respect to such book-entry shares or such other reasonable evidence, if any, of such surrender as the paying agent may reasonably request) and instructions describing how such stockholder of record may surrender such certificates (or affidavits of loss in lieu of the stock certificates, as provided in the merger agreement) or such book-entry shares to the paying agent in exchange for the portion of the aggregate per share merger consideration to which such stockholder is entitled to receive as a result of the merger pursuant to the merger agreement.

You should not return your stock certificates with the enclosed proxy card, and you should not forward your stock certificates to the paying agent without a letter of transmittal. Holders of book-entry shares will not be required to deliver a certificate or an executed letter of transmittal to the paying agent to receive the per share merger consideration that such holder is entitled to receive as a result of the merger pursuant to the merger agreement.

 

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Upon surrender to the paying agent of eligible shares in accordance with the terms of the merger agreement, the holder of such eligible shares shall be entitled to receive in exchange therefore, and Parent will cause the paying agent to pay and deliver to each such stockholder an amount in cash in immediately available funds (after giving effect to any required tax withholdings as provided in the merger agreement) equal to the product obtained by multiplying (1) the number of such eligible shares surrendered by (2) the per share merger consideration Interest will not be paid or accrued in respect of the per share merger consideration. From the effective time until the surrender or transfer of certificates or book-entry shares, as the case may be, each such certificate or book-entry share will represent only the right to receive in exchange therefor a cash amount (after giving effect to any required tax withholdings) equal to the per share merger consideration.

From and after the effective time, there will be no further transfers of shares of our common stock that were issued and outstanding immediately prior to the effective time. If, after the effective time, any certificate or acceptable evidence of a book-entry share formerly representing any eligible share is presented to the surviving corporation, Parent or the paying agent for transfer or any other reason, it will be canceled and exchanged for the aggregate per share merger consideration to which the stockholder of the certificate is entitled to upon the terms and subject to the conditions set forth in the merger agreement.

In the event of a transfer of ownership of any eligible shares represented by a certificate that has not been registered in the transfer records of the Company, or if a holder of shares would like payment of the applicable per share merger consideration to be made to a person other than the person in whose name the surrendered certificate is registered, a check for any cash to be exchanged upon due surrender of the certificate may be issued to such transferee or other person if the certificates formerly representing such eligible shares are properly endorsed and are otherwise in proper form for surrender and are presented to the paying agent, accompanied by all documents reasonably required to evidence and effect such transfer and to evidence that any applicable transfer taxes have been paid or are not applicable, in each case, in form and substance, reasonably satisfactory to Parent and the paying agent. Payment of the applicable portion of the aggregate per share merger consideration with respect to book-entry shares will only be made to the person in whose name such book-entry shares are registered in the transfer records of the Company.

If any cash deposited with the paying agent remains unclaimed for twelve (12) months from and after the closing date, such cash will be delivered to Parent (or such other person caused by Parent to deposit such cash, as the case may be) or the surviving corporation, as determined by Parent. Thereafter, holders of eligible shares who have not exchanged their shares in accordance with the merger agreement will be entitled to look only to the surviving corporation for payment of the aggregate per share merger consideration to which such stockholders are entitled pursuant to the merger agreement as a general creditor thereof for such payment (after giving effect to any required tax withholdings).

If you have lost a certificate, or if it has been stolen or destroyed, then before you will be entitled to receive the per share merger consideration (after giving effect to any required tax withholdings) in a form of a check, you will be required to provide an affidavit of the loss, theft or destruction, in a form reasonably acceptable to Parent, and, if required by Parent or the paying agent, post a bond in a customary amount and upon such terms as may be reasonably required by Parent or the paying agent as an indemnity against any claim that may be made against Parent or the surviving corporation with respect to such certificate. These procedures will be described in the letter of transmittal and related instructions that you will receive, which you should read carefully and in their entirety.

Parent, the surviving corporation and the paying agent will be entitled to deduct and withhold, or cause to be deducted and withheld, from the per share merger consideration such amounts as are required to be deducted and withheld with respect to the making of such payment under any tax law. Any sum that is withheld will be remitted to the appropriate taxing authority, and will be treated for all purposes of the merger agreement as having been paid to the holder of shares with regard to whom it is deducted and withheld.

 

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The per share merger consideration paid upon the surrender of certificates or transfer of book-entry shares in accordance with the merger agreement will be deemed to have been paid in full satisfaction of all rights pertaining to the eligible shares formerly represented by the certificates or book-entry shares so surrendered or transferred.

Representations and Warranties

Representations and Warranties of the Company

We made customary representations and warranties in the merger agreement with respect to the Company and its subsidiaries that are subject, in many cases, to specified exceptions and qualifications contained in the merger agreement, in the Company disclosure letter delivered in connection with the merger agreement or in certain reports filed with the SEC. These representations and warranties were generally made only as of the date of the original merger agreement, except in the case of certain representations and warranties specified in the merger agreement to apply as of the date of the merger agreement and/or as of the closing (as described under the section entitled “The Merger Agreement—Conditions to the Merger” beginning on page 122), and relate to, among other things:

 

   

our and our subsidiaries’ due organization, existence, good standing, qualification and corporate power and authority to carry on our and their businesses;

 

   

the capitalization of the Company and its subsidiaries;

 

   

our corporate power and authority to execute the merger agreement, including as it relates to the performance of our obligations to consummate the merger and the other transactions contemplated by the merger agreement, subject, in the case of the consummation of the merger, to obtaining of the requisite company vote, and the enforceability of the merger agreement against the Company;

 

   

resolutions by the Board (i) approving and declaring advisable the merger agreement, the merger and the other transactions contemplated by the merger agreement, (ii) declaring that it is in the best interests of the Company that the Company enter into the merger agreement and consummate the merger and the other transactions contemplated by the merger agreement on the terms and subject to the conditions set forth in the merger agreement, (iii) directing that the adoption of the merger agreement be submitted to a vote at the special meeting to be held as required by the merger agreement provision governing the special meeting and (iv) recommending that the stockholders of shares of common stock adopt the merger agreement, which resolutions, except to the extent expressly permitted by the merger agreement provision governing the special meeting, have not been rescinded, modified or withdrawn in any way;

 

   

no further corporate action being required by the Board in order for the Company to approve the merger agreement or the transactions contemplated by the merger agreement, including the merger;

 

   

required filings and authorizations, consents or approvals of governmental authorities and other third parties in connection with our execution, delivery and performance under the merger agreement or the consummation of the merger and the other transactions contemplated by the merger agreement;

 

   

no violation of, or default under, the organizational documents of the Company or any of its subsidiaries, no required consent or other action by any person, no default or loss of any benefit under any contract, no creation or imposition of any encumbrance and no conflict with or violation of any law, each in connection with our execution, delivery and performance of the merger agreement and the consummation of the transactions contemplated by the merger agreement;

 

   

the Company’s and its subsidiaries’ compliance with applicable laws, including applicable listing and corporate governance rules and regulations of the NYSE, the Sarbanes-Oxley Act, the U.S. Foreign Corrupt Practices Act of 1977, as amended (15 U.S.C. §§ 78dd1, et seq.), and all rules and regulations promulgated thereunder, other anti-bribery laws and export and sanctions regulations, and the

 

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possession by the Company and its subsidiaries of all licenses or other authorizations or approvals from governmental authorities necessary for the lawful conduct of the business of the Company and its subsidiaries;

 

   

our SEC filings since February 1, 2017 and the financial statements included therein and our disclosure controls and procedures and internal controls over financial reporting;

 

   

the absence of undisclosed liabilities that would reasonably be expected to have a material adverse effect on the Company;

 

   

the absence of certain legal proceedings, investigations and governmental orders against the Company or any of its subsidiaries;

 

   

our conduct of business in the ordinary course from July 31, 2019, through the date of the merger agreement;

 

   

the absence since July 31, 2019, of certain changes, including any event, change, development, circumstance, fact or effect materially adverse to the financial condition, assets, liabilities, business operations or results of operations of the Company and its subsidiaries (taken as a whole) that individually or in the aggregate, has had, or would be reasonably expected to have, a material adverse effect;

 

   

that, since January 1, 2019, the Company has not made, declared or paid any dividend or any other distribution, except for certain listed exceptions;

 

   

matters relating to material contracts of the Company and its subsidiaries;

 

   

matters relating to employee benefit plans of the Company and its subsidiaries;

 

   

labor matters relating to the Company and its subsidiaries;

 

   

environmental matters relating to the Company and its subsidiaries;

 

   

tax matters relating to the Company and its subsidiaries;

 

   

the owned real property and leased real property of the Company and its subsidiaries;

 

   

intellectual property matters relating to the Company and its subsidiaries;

 

   

matters relating to the practices of the Company and its subsidiaries regarding information technology, data privacy and cybersecurity;

 

   

matters relating to the insurance policies of the Company and its subsidiaries;

 

   

the inapplicability of anti-takeover laws enacted under U.S. state or federal law to the merger agreement or the transactions contemplated thereby, and the absence of any stockholder rights plan, “poison pill,” anti-takeover plan or other similar agreement or plan to which the Company is a party or is otherwise bound;

 

   

the absence of any undisclosed broker’s or finder’s fees;

 

   

the opinions of Centerview and Goldman Sachs received in connection with the merger;

 

   

the absence of transactions between the Company or any of its subsidiaries, on the one hand, and related parties, on the other hand; and

 

   

the absence of any other express or implied representation or warranty by the Company or any other person with respect to the Company or any of its affiliates.

Material Adverse Effect

Many of our representations and warranties are qualified by, among other things, exceptions relating to the absence of a “material adverse effect,” which means any event, occurrence, fact, condition, change, development,

 

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circumstance or effect, or the cause of thereof, that, individually or in the aggregate with all other effects, (a) has had or would be reasonably expected to have a material adverse effect on the business, condition (financial or otherwise), properties, assets, liabilities (contingent or otherwise), business operations or results of operations of the Company and its subsidiaries, taken as a whole or (b) would or would reasonably be expected to prevent, materially delay or materially impair the ability of the Company to consummate the merger or to perform any of its obligations under the merger agreement by the outside date; provided, however, in the case of clause (a) no effect arising out of or resulting from any of the following will be deemed either alone or in combination to constitute a material adverse effect:

 

  (i)

changes or conditions generally affecting the industries in which the Company and any of its subsidiaries operate;

  (ii)

general economic or political conditions (including U.S.-China relations), commodity pricing or securities, credit, financial or other capital markets conditions, in each case in the United States or any foreign jurisdiction in which the Company or any of its subsidiaries operate;

 

  (iii)

any failure, in and of itself, by the Company to meet any internal or published projections, forecasts, estimates or predictions in respect of revenues, earnings or other financial or operating metrics for any period (it being understood that the facts or occurrences giving rise to or contributing to such failure may be deemed to constitute, or be taken into account in determining whether there has been, or is reasonably expected to be, a material adverse effect, to the extent permitted by this definition);

 

  (iv)

consequences resulting from the execution and delivery of the merger agreement and/or the original merger agreement or the public announcement or pendency of the transactions contemplated thereby, including the impact thereof on the relationships, contractual or otherwise, of the Company or any of its subsidiaries with employees, labor unions, customers, suppliers, designers, landlords or partners;

 

  (v)

any change, in and of itself, in the market price or trading volume of the Company’s securities or in its credit ratings (it being understood that the facts or occurrences giving rise to or contributing to such change may be deemed to constitute, or be taken into account in determining whether there has been, or is reasonably expected to be, a material adverse effect, to the extent permitted by this definition);

 

  (vi)

any change in law applicable to the Company’s business or GAAP (or authoritative interpretation thereof);

 

  (vii)

geopolitical conditions, the outbreak or escalation of hostilities (including the Hong Kong protests and the “Yellow Vest” movement), any acts of war (whether or not declared), sabotage (including cyberattacks) or terrorism, or any escalation or worsening of any such acts of hostilities, war, sabotage or terrorism threatened or underway from the date of the original merger agreement through the date of the merger agreement;

 

  (viii)

any hurricane, tornado, flood, earthquake or other natural disaster;

 

  (ix)

any actions required to be taken or not to be taken by the Company or any of its subsidiaries pursuant to the merger agreement or the original merger agreement or, with Parent’s prior written consent, whether granted under the merger agreement or pursuant to the original merger agreement (subject to certain exceptions);

 

  (x)

any effect described in any of the Company’s SEC filings, and the financial statements included therein, filed prior to the date of the merger agreement, any written communications delivered by the Company to Parent pursuant to the original merger agreement or discussed in Parent’s filings with the Delaware Court of Chancery in connection with the merger litigation; or

 

  (xi)

any outbreak of a virus, infectious disease, other contagion or public health event (including COVID-19 and any COVID-19 measures);

except, in the case of clauses (i), (ii), (vi), (vii) and (viii), any such effect will be taken into account in determining whether a material adverse effect has occurred if it has a materially disproportionate adverse effect

 

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on the Company and its subsidiaries, taken as a whole, relative to others in the industries and geographical regions in which affected businesses of the Company and its subsidiaries operate in respect of the business conducted in such industries and applicable geographical regions.

“COVID-19 measures” means:

(a)    any applicable quarantine, “shelter in place,” “stay at home,” workforce reduction, social distancing, shut down, closure, sequester or any other applicable law, order or recommendations of a governmental entity, or policy or recommendation of any landlord, mall, airport or department store; or

(b)    any commercially reasonable measures adopted by the Company or any of its subsidiaries:

(i) for the protection of the health and safety of the Company’s employees, customers, vendors, service providers or any other persons who physically interact with representatives of the Company or visit any location over which the Company exercises any control;

(ii) to preserve the assets utilized in connection with the business of the Company and its subsidiaries; or

(iii) otherwise substantially consistent with actions taken by Parent or any of its subsidiaries or others in the industries and geographic regions in which affected businesses of the Company and its subsidiaries operate,

in each case in connection with or in response to the COVID-19 pandemic or any other global or regional health event, including, but not limited to, the Coronavirus Aid, Relief, and Economic Security Act (CARES).

Representations and Warranties of Parent

The merger agreement also contains customary representations and warranties made by Parent, Holding and Merger Sub that are subject, in some cases, to specified exceptions and qualifications contained in the merger agreement or in the Parent disclosure letter delivered in connection with the merger agreement. The representations and warranties of Parent, Holding and Merger Sub relate to, among other things:

 

   

their due organization, existence, good standing and authority to carry on their businesses;

 

   

the existing competition clearances remaining in effect as of the date of the merger agreement;

 

   

the capitalization of Merger Sub;

 

   

their corporate power and authority related to the merger agreement, including their power to consummate the merger agreement, perform their obligations under the merger agreement and consummate the transactions contemplated by the merger agreement, and the enforceability of the merger agreement against them;

 

   

required filings and authorizations and consents and approvals of governmental authorities or other third parties in connection with the execution, delivery and performance by Parent, Holding and Merger Sub of the merger agreement and the consummation by Parent, Holding and Merger Sub of the merger and other transactions contemplated by the merger agreement;

 

   

no violation of, or default under, the organizational documents of, Parent or any of its subsidiaries, no required consent or other action by any person, no default or loss of any benefit under any contract, no creation or imposition of any encumbrance and no conflict with or violation of any law, each in connection with our execution, delivery and performance of the merger agreement and the consummation of the transactions contemplated by the merger agreement;

 

   

the absence of any pre-signing legal or contractual requirements to provide notice to, or enter into any consultation or bargaining procedure with, any labor union, labor organization or works council, which represents any employee, required in connection with the execution by Parent, Holding or Merger Sub of the merger agreement or the transactions contemplated by the merger agreement;

 

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the absence of certain legal proceedings and governmental orders against Parent or any of its subsidiaries, except as would not, individually or in the aggregate, prevent, materially delay or materially impair the ability of Parent, Holding or Merger Sub to consummate the transactions contemplated by the merger agreement;

 

   

that in the past three (3) years, none of Parent, Holding, Merger Sub or any of its subsidiaries was an “interested stockholder” as defined in Section 203 of the DGCL;

 

   

that Parent and its controlled affiliates will have sufficient cash, available lines of credit or other sources of funds at the closing to consummate the transactions contemplated by the merger agreement, and that Parent and its controlled affiliates have the financial resources and capabilities to fully perform all of Parent’s, Holding’s and Merger Sub’s obligations under the merger agreement;

 

   

the absence of any undisclosed broker’s or finder’s fees;

 

   

the absence of any other express or implied representation or warranty by Parent, Holding, Merger Sub or any other person with respect to Parent, Holding, Merger Sub or any of their respective affiliates; and

 

   

that none of Parent, Holding, Merger Sub or any of their respective affiliates or representatives is relying on, or has relied on, any representation or warranty of the Company that is not expressly set forth in the merger agreement.

The representations and warranties in the merger agreement of each of the Company, Parent, Holding and Merger Sub will not survive the consummation of the merger or the termination of the merger agreement pursuant to its terms.

Conduct of Our Business Pending the Merger

Under the merger agreement, until the effective time or earlier termination of the merger agreement in accordance with its terms, except (i) as specifically contemplated by the merger agreement (including exceptions set forth in the Company disclosure letter), (ii) as required by a governmental entity or applicable law, (iii) in compliance with certain of the Company’s material contracts, (iv) as consented to in writing by Parent (such consent (x) not to be unreasonably conditioned, withheld or delayed and (y) to be provided as described below), (v) as previously approved in writing by Parent pursuant to the original merger agreement, or (vi) for COVID-19 measures, the Company has agreed that it will, and that it will cause each of its subsidiaries to, conduct its business in all material respects in the ordinary course of business and, in each case, to the extent consistent with the ordinary course of business, use commercially reasonable efforts to preserve its and its subsidiaries’ business organizations substantially intact, maintain its and its subsidiaries’ existing relations and goodwill with governmental entities, counterparties, employees and others having significant business dealings with them, keep available the services of its and its subsidiaries’ officers and key employees, preserve and maintain the assets utilized in connection with the business of the Company and its subsidiaries, maintain in effect all governmental authorizations and maintain all material insurance policies with reputable insurers.

We have further agreed that, until the effective time or earlier termination of the merger agreement in accordance with its terms, (A) except as (i) specifically contemplated by the merger agreement (including exceptions set forth in the Company disclosure letter), (ii) required by a governmental entity, applicable law or certain of the Company’s material contracts, (iii) approved in writing by Parent (such consent (x) not to be unreasonably conditioned, withheld or delayed and (y) to be provided as described below), or (iv) previously approved in writing by Parent pursuant to the original merger agreement, and (B) except pursuant to COVID-19 measures, the Company will not, and will not permit its subsidiaries to, among other things:

 

   

adopt or propose any change in organizational documents;

 

   

acquire or agree to acquire (A) by merging or consolidating with, or by purchasing all or a substantial portion of the assets of, or by purchasing all or a substantial equity or voting interest in, or by any other

 

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manner, any business or person or division thereof or (B) any other assets, the acquisition of which would not constitute capital expenditures, having a value in excess of $5,000,000 individually or of $25,000,000 in the aggregate outside the ordinary course of business;

 

   

adopt or enter into a plan of complete or partial liquidation, dissolution, restructuring, recapitalization or other reorganization;

 

   

issue, deliver, sell, pledge, dispose of, grant, transfer, lease, license, guarantee, encumber, or otherwise enter into any contract or understanding with respect to the voting of, (A) any shares of capital stock, Company equity awards or other equity interests of the Company (including, for the avoidance of doubt, shares of our common stock) or of any of its subsidiaries (other than (i) such issuance of shares of capital stock by a wholly owned subsidiary of the Company to the Company or another wholly owned subsidiary of the Company, (ii) such issuance of shares of capital stock in respect of the exercise, vesting and settlement, as applicable, of Company equity awards outstanding as of the date of the merger agreement in accordance with their terms and, as applicable, the terms of the Company equity plans in effect on the date of the merger agreement or (iii) such issuance of dividend equivalent units in connection with the Company’s declaration and payment of quarterly dividends (or the issuance of shares of capital stock into which such units convert)) or (B) securities convertible into or exchangeable into or exercisable for any such shares of capital stock, or any options, warrants or other rights of any kind to acquire any such shares of capital stock or such convertible or exchangeable securities, in each case other than in respect of outstanding Company equity awards;

 

   

incur or commit any capital expenditures, or any obligations or liabilities in connection therewith, in excess of (A) $3,000,000 in respect of any particular location or project, in each case, other than as may be necessary in connection with any emergency repair, maintenance or replacement or for the protection of human health and safety and other than in connection with the renovation of the Company’s flagship retail location on Fifth Avenue in New York, New York (the “flagship renovation”), or (B) in respect of the flagship renovation within the budget set forth in the Company disclosure letter;

 

   

make any loans, advances, guarantees or capital contributions to, or investments in, any person, except (A) to or from the Company and any of its wholly owned subsidiaries and (B) for loans or advances made to directors, officers and other employees of the Company and its subsidiaries for business-related expenses in the ordinary course of business consistent with past practice or pursuant to certain existing indemnification and advancement rights of such persons;

 

   

declare, set aside, establish a record date for, accrue, make or pay any dividend or other distribution (whether payable in cash, stock, property or otherwise) in respect of, any capital stock of the Company or any of its subsidiaries or other equity or voting interests (including with respect to the Company, for the avoidance of doubt, our shares of common stock), except for (A) dividends paid by any wholly owned subsidiary of the Company to the Company or to any other wholly owned subsidiary of the Company and (B) the Company’s regular quarterly dividends not to exceed $0.58 per share of common stock which the Company may, in its sole discretion, declare and pay once in each fiscal quarter prior to the closing commencing with the fourth quarter of the Company’s 2020 fiscal year;

 

   

reclassify, split, combine, subdivide or redeem, purchase or otherwise acquire (or offer to do any of the foregoing), directly or indirectly, any of its capital stock or securities convertible or exchangeable into or exercisable for any shares of its capital stock or other equity or voting interests or any options, restricted shares, warrants, calls or rights to acquire any such shares or other securities, including Company equity awards, except pursuant to the forfeiture provisions of such Company equity awards or the cashless exercise or tax withholding provisions of such Company equity awards, in each case, if and only to the extent permitted by the terms of such Company equity awards so in effect on the date of the merger agreement or otherwise change the capital structure of the Company or any of its subsidiaries, other than cashless exercise or withholding tax obligations upon exercise, vesting and

 

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settlement, as applicable, of Company equity awards outstanding as of the date of the merger agreement in accordance with their terms and, as applicable, certain equity plans as in effect on the date of the merger agreement;

 

   

directly or indirectly repurchase, prepay, incur or assume any indebtedness for borrowed money, guarantee any indebtedness for borrowed money or enter into a “keep well” or similar agreement in respect of indebtedness for borrowed money (including the issuance of any debt securities, warrants or other rights to acquire any debt security), except for (A) indebtedness for borrowed money incurred in the ordinary course of business not to exceed $10,000,000 individually or $40,000,000 in the aggregate, (B) drawdowns or prepayments under certain credit agreements or other facilities or agreements made available to Parent prior to the execution of the merger agreement or borrowings under the Company’s existing commercial paper program and letters of credit in the ordinary course of business or (C) refinancings or replacements of any such indebtedness for borrowed money or agreements in respect of indebtedness for borrowed money in the ordinary course of business;

 

   

other than with respect to certain material contracts of the Company related to indebtedness, enter into, terminate or materially amend, modify, supplement or waive any material right to enforce, relinquish, release, transfer or assign any material rights or claims under certain of the Company’s material contracts or any contract that would have been required to be disclosed pursuant to the merger agreement, other than in the ordinary course of business;

 

   

other than with respect to the merger litigation and certain stockholder litigation related to the merger agreement or the transactions contemplated by the merger agreement, pay, discharge, satisfy, settle or compromise any proceeding (or agree to do any of the foregoing) for an amount in excess of (x) $10,000,000 individually in the case of any proceeding relating to an audit or $3,000,000 individually in the case of any other proceeding or (y) $25,000,000 in the aggregate, or in a manner that would have certain other material effects;

 

   

adopt or implement any stockholder rights plan, “poison pill,” anti-takeover plan or other similar agreement or plan;

 

   

grant any material refunds, credits, rebates or other allowances to any end user, customer, retailer or distributor, in each case other than in the ordinary course of business;

 

   

write down any of its material assets except as required by GAAP or the Company’s accounting policies applied in the ordinary course or with respect to normal obsolescence or make any changes with respect to accounting policies or procedures, except as required by changes in law or GAAP;

 

   

make, change or revoke any material tax election, change an annual tax accounting period, adopt or change any material tax accounting method, file any material amended tax return, file any income or other material tax returns that have been prepared in a manner that is inconsistent with past practice, enter into any closing agreement with respect to any material amount of taxes, settle any claim or assessment in respect of a material amount of taxes, surrender any right to claim a refund of a material amount of taxes, agree to an extension or waiver of the statute of limitations (other than in the ordinary course of business) with respect to the assessment or determination of any material taxes or settle any material tax claim;

 

   

transfer, sell, lease, sublease, license, pledge, mortgage, assign, divest, cancel or otherwise dispose of, or permit or suffer to exist the creation of any material encumbrances (other than permitted encumbrances under the merger agreement) upon, including pursuant to a sale-leaseback transaction or an asset securitization transaction, any material assets (not including any intellectual property rights), including capital stock of any of its subsidiaries, except in the ordinary course of business;

 

   

sell, transfer, license, grant, cancel, abandon, allow to lapse or otherwise dispose of any material intellectual property rights owned by the Company or any of its subsidiaries, or otherwise take any action or fail to take any action which action or failure to act has resulted or would reasonably be expected to result in the non de minimis loss or reduction in value of any material intellectual property

 

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rights or key trademarks, except (A) non-exclusive licenses in the ordinary course of business consistent with past practice; (B) licenses granted in connection with distribution agreements entered into in the ordinary course of business; (C) licenses granted in connection with talent agreements and the development of in-store displays, creative visual merchandising, marketing and advertising assets, and related branded content entered into in the ordinary course of business; (D) licenses granted in connection with the production of co-branded or third-party products in the ordinary course of business; and (E) lapse or abandonment of intellectual property rights that are of de minimis value to the business of the Company and its subsidiaries as currently conducted;

 

   

except as required by the terms of any Company benefit plan or collective bargaining agreement in effect as of the date of the merger agreement, (A) grant any equity or equity-based awards or increase the compensation or benefits provided to any current or former director, officer, employee or service provider of the Company and its subsidiaries other than base salary or wage (and corresponding bonus) increases for non-executive officer employees in the ordinary course of business consistent with past practice, (B) grant or provide any change in control, severance, termination retention or similar payments or benefits to any current or former director, officer, employee or service provider of the Company and its subsidiaries (including any obligation to gross-up, indemnify or otherwise reimburse any such individual for any tax incurred by any such individual, including under Section 409A or 4999 of the Code), (C) accelerate the time of payment or vesting of, or the lapsing of restrictions with respect to, or fund or otherwise secure the payment of, any compensation or benefits (including any equity or equity-based awards) to any current or former director, officer, employee or natural person service provider of the Company and its subsidiaries, (D) establish, adopt, enter into, terminate or amend any Company benefit plan or establish, adopt or enter into any plan, agreement, program, policy or other arrangement that would be a Company benefit plan if it were in existence as of the date of the merger agreement, other than in connection with routine, immaterial or ministerial amendments to health and welfare plans that do not materially increase benefits or result in a material increase in administrative costs, (E) hire or engage, or make an offer to hire or engage, any employee at the level of Vice President or above (provided that such restriction shall only apply to employees located in the European Union at the level of Senior Vice President and above), or individual independent contractor whose annual fee arrangement exceeds $350,000 or (F) terminate the employment or engagement of any current employee at the level of Vice President or above, or individual independent contractor (excluding individual independent contractors arrangements for a limited period of time or that expire in accordance with their terms) whose annual fee arrangement exceeds $350,000 other than for cause;

 

   

except as required by the terms of any collective bargaining agreement, (A) modify, extend or enter into any collective bargaining agreement, or (B) recognize or certify any labor union, labor organization, works council or group of employees of the Company or any of its subsidiaries as the bargaining representative for any employees of the Company or any of its subsidiaries;

 

   

except as required by the terms of any Company benefit plan or collective bargaining agreement in effect as of the date of the merger agreement, waive the restrictive covenant obligations of any employee of the Company or any of its subsidiaries;

 

   

enter into any lease or sublease of material real property (whether as a lessor, sublessor, lessee or sublessee) other than in the ordinary course of business, (B) modify or amend in any material respect, or exercise any right to renew, any lease or sublease of material real property other than in the ordinary course of business or (C) acquire any fee simple or ownership interest in material real property;

 

   

form any subsidiary of the Company or any of its subsidiaries;

 

   

enter into a new line of business or abandon or discontinue any existing line of business, other than launches (including sales of Company-branded products and services and brand-based promotional activities) and wind-downs of products in the ordinary course of business; or

 

   

agree, authorize or commit to do any of the foregoing;

 

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provided that, if the merger has not been consummated within six (6) business days after the date on which the requisite company vote has been obtained as a result of the material breach of the merger agreement by Parent or Merger Sub (it being understood that closing can under no circumstances take place prior to January 7, 2021), the Company will have no further obligation to comply with the obligations in respect of the conduct of its business pending the merger described above (and, in such event, the Company’s compliance with such obligations after the later of (i) January 7, 2021 and (ii) the date of the requisite company vote shall not be taken into account for purposes of assessing whether any of the conditions set forth in the section entitled “The Merger Agreement—Conditions to the Merger” beginning on page 122 has been satisfied).

For purposes of the merger agreement and this proxy statement, “ordinary course of business” means, with respect to any person, the conduct by a person of the relevant business in the ordinary course, which in the case of the Company or any of its subsidiaries shall be deemed to include, without limitation, the manner in which the Company and its subsidiaries have been operating at any time since the date of the original merger agreement through the date of the merger agreement and any COVID-19 measures taken by the Company and its subsidiaries following the date of the merger agreement.

Committee Structure: Conferring Matters; Approval Matters

Prior to the closing, a committee of representatives of the Company and Parent (the “committee”) will meet each week at 10:00 a.m. New York City Time on Thursdays (a “committee meeting”), or on such other date and time as the key committee members (as defined herein) unanimously agree, to (i) discuss any actions of the Company or its subsidiaries that Parent believes are in breach of the Company’s obligations described above in the section entitled “The Merger Agreement—Conduct of Our Business Pending the Merger” beginning on page 107) (the “purported breach matters”), (ii) discuss and have Parent decide upon any matters for which the Company has requested Parent’s approval (the “approval matters”) and (iii) discuss any other topics relating to the Company, in particular the work progress concerning the flagship renovation, and the ongoing operation of its business which the key committee members unanimously agree should be discussed at the committee meeting.

The committee will be composed of Alessandro Bogliolo and Antonio Belloni (the “key committee members”) with each key committee member being permitted, but not required, to select one (1) such additional representative subject to the reasonable approval of the other key committee member. If a key committee member cannot attend a committee meeting, the applicable party may nominate another reasonably senior representative to attend such meeting on their behalf.

Prior to 11:00 a.m. New York City Time each Monday prior to the closing, the Company will provide notice of any approval matters which it wishes to be the subject of a committee meeting and an update on the progress of the flagship renovation, and Parent will provide notice of any purported breach matters which it wishes to be the subject of a committee meeting. By 12:00 p.m. New York City Time each Wednesday, Parent may make written requests for additional information regarding the approval matters to be discussed at such meeting and the Company may make written requests for additional information regarding the basis of the purported breach matters to be discussed at such meeting.

Prior to the closing, if the Company believes in good faith that an approval matter requires attention before the next committee meeting (an “urgent approval matter”), the Company may provide notice in writing of such urgent approval matter at any time. On or before 5:00 p.m. New York City Time on the second (2nd) business day following receipt of such urgent approval matter, Parent may make written requests for such additional information as it reasonably requires to consider such urgent approval matter. If Parent makes such a request for information, Parent must provide its decision as to the urgent approval matter within forty-eight (48) hours of the receipt of the requested information or confirmation in writing from the Company that the requested information does not exist. If Parent does not make such a request within such timeframe, Parent must provide its decision as to the urgent approval matter by 5:00 p.m. New York City Time on or before the third (3rd) business day following the receipt of the urgent approval matter.

 

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Cure Rights of the Company

Notwithstanding anything to the contrary set forth in the merger agreement, a purported breach matter may only be taken into account for purposes of assessing whether the condition to the merger with respect to the Company’s performance of its obligations in the merger agreement in all material respects has been satisfied if such purported breach matter was:

 

  (i)

validly notified to the Company and discussed at a committee meeting; and

 

  (ii)

(A) is curable unilaterally by the Company and has not been cured by the Company within fourteen (14) days of the committee meeting at which the purported breach matter was so discussed;

(B) is not curable unilaterally by the Company and the Company had knowledge (as defined in the merger agreement) prior to the taking of the actions that directly caused the purported breach matter that such actions would be taken, and such purported breach matter has not been cured by the Company within fourteen (14) days of the committee meeting at which the purported breach matter was so discussed; or

(C) is not curable unilaterally by the Company and the Company did not have knowledge prior to the taking of the actions that directly caused the purported breach matter that such actions would be taken, and the Company has not used its good faith, reasonable best efforts to cure such alleged non-compliance within fourteen (14) days of the committee meeting at which the purported breach matter was so discussed.

Neither any failure of the Company to perform any of its obligations with respect to the committee meetings, nor any discussion of, or response to a request for information in relation to, any purported breach matter, may be taken into account for purposes of assessing whether the condition to the merger with respect to the Company’s performance of its obligations in the merger agreement in all material respects has been satisfied.

No Solicitation of Acquisition Proposals; Board Recommendation Changes

No Solicitation

Until the effective time or earlier termination of the merger agreement in accordance with its terms, and subject to certain exceptions, the Company has agreed that we will, and will cause our subsidiaries, directors, executive officers and controlled affiliates, and will instruct our other representatives to:

 

   

immediately cease any discussion or negotiations with a third party with respect to an acquisition proposal or a proposal that would reasonably be expected to lead to an acquisition proposal;

 

   

terminate access to any physical or electronic data room relating to the Company for any such acquisition proposal; and

 

   

request the prompt return or destruction of any confidential information provided to any third party in connection with an acquisition proposal made in the twelve (12) months prior to the date of the merger agreement.

The Company and our subsidiaries, executive officers and directors also agreed to use our reasonable best efforts to enforce any confidentiality provisions or provisions of similar effect to which the Company or any of its subsidiaries is a party or a beneficiary in connection with an acquisition proposal.

In addition to the foregoing, until the effective time or earlier termination of the merger agreement in accordance with its terms, and subject to certain exceptions, the Company has agreed that it will not, and will cause its subsidiaries, and each of our respective directors, executive officers or controlled affiliates, and will instruct any other representatives and other employees not to, directly or indirectly:

 

   

initiate, solicit, cause, propose or knowingly encourage, assist or facilitate any inquiry, proposal or offer with respect to, or the making, submission or announcement of any acquisition proposal or any inquiry, proposal or request for information that would reasonably be expected to lead to, or result in, an acquisition proposal;

 

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engage in, conduct, continue, respond to or otherwise participate in any discussions or negotiations with respect to any acquisition proposal or any inquiry, proposal, offer or request for information that would reasonably be expected to lead to, or result in, an acquisition proposal;

 

   

disclose or furnish any non-public information or data concerning the Company or its subsidiaries to any person in connection with any acquisition proposal or any inquiry, proposal, offer or request for information that would reasonably be expected to lead to, or result in, an acquisition proposal;

 

   

afford access (other than customer access to retail locations in the ordinary course of business and except pursuant to Section 220 of the DGCL) to the business, properties, assets, books or records of the Company or any of its subsidiaries to any person in connection with any acquisition proposal or any inquiry, proposal, offer or request for information that would reasonably be expected to lead to, or result in, an acquisition proposal;

 

   

recommend, authorize, approve, adopt, endorse, declare advisable (or make any public statement recommending, authorizing, approving, adopting, endorsing or declaring advisable) or enter into any alternative acquisition agreement;

 

   

approve any transaction, or any person becoming an “interested stockholder,” under Section 203 of the DGCL or approve any transaction, or any person becoming a “Substantial Stockholder”, under Article IX of the Company Charter (in each case, other than with respect to the merger agreement, the transactions contemplated thereby or Parent or its affiliates);

 

   

otherwise knowingly facilitate any effort or attempt to make an acquisition proposal; or

 

   

resolve, agree, authorize or commit to do any of the foregoing.

“acquisition proposal” means any (a) proposal, offer, inquiry or indication of interest (whether in writing or otherwise) relating to a merger, joint venture, partnership, consolidation, dissolution, liquidation, tender offer, recapitalization, reorganization, spin-off, share exchange, asset purchase, extraordinary dividend, business combination or similar transaction involving the Company or any of its subsidiaries or (b) direct or indirect acquisition (whether by tender offer, share purchase, share exchange or other manner) in a single transaction or a series of related transactions by any person or group (as defined under Section 13 of the Exchange Act), or any proposal, offer, inquiry or indication of interest with respect to any such direct or indirect acquisition, which, in each case of (a) or (b), if consummated would result in any person or group (as defined under Section 13 of the Exchange Act) becoming the beneficial owner of, directly or indirectly, in one or a series of related transactions, fifteen percent (15%) or more (i) measured by either voting power or value, of the shares of our common stock and other equity and voting interests in the Company (or any class thereof) or (ii) of the revenue, net income, EBITDA or assets of the Company and its subsidiaries (taken as a whole), in each case, other than the transactions contemplated by the merger agreement.

Non-Solicitation Exceptions

If, prior to the time, but not after, the requisite company vote is obtained, the Company receives an unsolicited, bona fide written acquisition proposal from a person and only if the Company did not violate the non-solicitation of acquisition proposals provisions with respect to such person, the Company may (acting upon the recommendation of the Board) in accordance with the terms of the merger agreement:

 

   

provide information and data concerning the Company and its subsidiaries and access to the Company and its subsidiaries’ properties, books and records in response to a request to the person who made such acquisition proposal; provided that substantially concurrently (but in any event within twenty-four (24) hours after the provision of such information or data), the Company must make available to Parent any such information or data the Company provides to any such person that was not previously made available to Parent and that, prior to furnishing any such information, the Company must receive from

 

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the person making such acquisition proposal an executed confidentiality agreement with terms that are at least as restrictive on the other party as the terms of Parent’s confidentiality agreement with the Company are on Parent; and

 

   

engage or otherwise participate in any discussions or negotiations with any such person regarding such acquisition proposal;

if, and only if, prior to taking any of the foregoing actions, (i) the Board determines in good faith (after consultation with its legal advisor) that (A) based on the information then available and after consultation with a financial advisor of nationally recognized reputation that such acquisition proposal either constitutes a superior proposal or could reasonably be expected to result in a superior proposal and (B) based on the information then available, including the terms and conditions of such acquisition proposal and those of the merger agreement, failure to take such action would be inconsistent with the directors’ fiduciary duties under applicable law; and (ii) prior to engaging or otherwise participating in any such discussions or negotiations with or furnishing any information to such person, the Company gives Parent written notice as described below.

“superior proposal” means an unsolicited, bona fide written acquisition proposal (with all references to fifteen percent (15%) in the definition of acquisition proposal deemed to reference eighty and 1/10th percent (80.1%)) that the Board has determined in good faith (after consultation with a financial advisor (of nationally recognized reputation) and outside legal counsel), taking into account all financial, legal, regulatory and other aspects of such acquisition proposal and the merger agreement, (a) to be reasonably likely to be consummated in accordance with its terms and (b) would result in a transaction more favorable to the stockholders of the Company (solely in their capacities as such) from a financial point of view than the transactions contemplated by the merger agreement (after taking into account any revisions to the terms of the merger agreement proposed by Parent pursuant to the merger agreement); provided that such acquisition proposal was not obtained or made as a direct or indirect result of a breach of the merger agreement.

Notification to Parent

The Company must promptly (and in any event within twenty-four (24) hours) notify Parent in writing of (i) any inquiries, proposals or offers with respect to an acquisition proposal or which could reasonably be expected to lead to an acquisition proposal received by, (ii) any non-public information or data concerning the Company or its subsidiaries requested in connection with any acquisition proposal from, or (iii) any discussions or negotiations relating to an acquisition proposal sought to be engaged in or continued with, it, its subsidiaries or any of its or any of the Company’s officers, directors or financial advisors, setting forth in such notice a summary of the material terms and conditions with respect to any such proposal or offer and a summary of the material content of any such inquiry, as applicable. The Company must then (1) keep Parent reasonably informed, on a prompt basis of the status and material terms and conditions of any such acquisition proposals or requests (including any related amendments, modifications or supplements, within twenty-four (24) hours of receipt) and the status of any such discussions or negotiations and (2) provide Parent (or its outside legal counsel) with unredacted copies of all writings or media containing any terms or conditions of any proposals or proposed transaction agreements relating to any acquisition proposal as promptly as practicable (and in any event, within twenty-four (24) hours of receipt or delivery). The Company agreed that it will not, and will cause its subsidiaries not to, enter into any confidentiality agreement subsequent to the date of the merger agreement that prohibits the Company from providing to Parent such material terms and conditions and other information.

Change of Recommendation or Termination of the Merger Agreement

Subject to certain exceptions, the Board may not effect a “change of recommendation,” which means any of the following actions:

 

   

withhold, withdraw, qualify, amend or modify (or publicly propose or resolve to withhold, withdraw, qualify, amend or modify) the Board’s recommendation to stockholders with respect to the merger in any manner adverse to Parent, Holding or Merger Sub;

 

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following the date any acquisition proposal or any material modification thereto is first made public or sent or given to stockholders of the Company, fail to issue a press release publicly reaffirming the Board’s recommendation to stockholders to adopt the merger agreement within five (5) business days (or, if earlier, prior to the special meeting) following Parent’s written request to do so (which request may only be made once with respect to any such acquisition proposal, except that Parent may make an additional request after any material change in the terms of such acquisition proposal);

 

   

following the commencement of any tender or exchange offer relating to the securities of the Company, fail to issue a press release publicly announcing within ten (10) business days of such commencement that the Company recommends rejection of such tender or exchange offer and reaffirming the Board’s recommendation with respect to the merger;

 

   

fail to include the Board’s recommendation to stockholders to adopt the merger agreement in the proxy statement or make or authorize the making of any public statement (oral or written) that has the substantive effect of a withdrawal, qualification or modification of such recommendation;

 

   

approve or recommend, or propose publicly to approve or recommend, any acquisition proposal or proposal reasonably expected to lead to an acquisition proposal or approve or recommend, or publicly declare advisable or publicly propose, to enter into, or enter into, any alternative acquisition agreement;

 

   

except as expressly permitted by, and after compliance with, the terms of the merger agreement, cause or permit the Company to enter into an alternative acquisition agreement; or

 

   

agree, authorize or commit to do any of the foregoing.

Nevertheless, the Board may:

 

   

effect a change of recommendation prior to the time the requisite company vote is obtained, if (1) a written acquisition proposal that the Board determines in good faith (after consultation with outside legal counsel) is bona fide and that did not arise from or in connection with a breach of the Company’s non-solicitation obligations is received by the Company and not withdrawn prior to the change of recommendation and, the Board determines, after consultation with outside legal counsel and a financial advisor of nationally recognized reputation, that such acquisition proposal constitutes a superior proposal or (2) an intervening event has occurred, and, in either case, the Board has determined in good faith, after consultation with outside legal counsel and a financial advisor of nationally recognized reputation, that failure to effect a change of recommendation would reasonably be likely to be inconsistent with the directors’ fiduciary duties under applicable law; or

 

   

take action to terminate the merger agreement pursuant to, and in accordance with, the termination provision relating to the entrance into an alternative acquisition agreement with respect to a written acquisition proposal that the Board determines in good faith (after consultation with outside legal counsel) is bona fide and that did not arise from or in connection with a breach of the Company’s non-solicitation obligations and that the Board determines in good faith, after consultation with outside legal counsel and a financial advisor of nationally recognized reputation, that (1) such acquisition proposal constitutes a superior proposal and (2) failure to effect a change of recommendation would reasonably be likely to be inconsistent with the directors’ fiduciary duties under applicable law;

in either case, provided, however, that such change of recommendation or action to terminate the merger agreement may not be made (i) unless the Company shall have complied in all material respects with its non-solicitation and change of recommendation obligations; and (ii) unless and until the Company has given Parent written notice of such action four (4) business days in advance, setting forth in writing that the Board intends to consider whether to take such action, the reasons with respect thereto and (I) in the case of a superior proposal, the material terms and conditions of such superior proposal and (II) in the case of an intervening event, a reasonable description of such intervening event. After giving such initial notice, the Company must, and will instruct its legal and financial advisors to, negotiate in good faith with Parent and its representatives through such

 

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four (4) business day period (to the extent Parent wishes to negotiate) and make such revisions to the terms of the merger agreement such that the failure to effect a change of recommendation or to take such action to terminate the merger agreement would no longer be reasonable be likely to be inconsistent with its fiduciary duties. At the end of such four (4) business day period, prior to taking action to effect a change of recommendation or taking action to terminate the merger agreement, the Board must have taken into account any changes to the terms of the merger agreement proposed by Parent in writing and any other information offered by Parent in writing in response to such initial notice, and have determined in good faith (after consultation with outside legal counsel) that (A) in the case of a superior proposal, the superior proposal continues to constitute a superior proposal, and (B) in the case of an intervening event, the failure to effect a change of recommendation in response to such intervening event would be inconsistent with the directors’ fiduciary duties under applicable law.

“intervening event” means any event, occurrence, fact, condition, change, development, circumstance or effect, or cause thereof, occurring or arising after the date of the merger agreement that is material to the Company and its subsidiaries, taken as a whole, and (a) was not known to, or reasonably foreseeable by, the Board as of or prior to the execution of the merger agreement (or if known or reasonably foreseeable, the material consequences of which were not known or reasonably foreseeable by the Board), which effect, or any material consequence thereof, becomes known to, or reasonably foreseeable by, the Board prior to the requisite company vote being obtained and (b) does not in any way involve or relate to (i) an acquisition proposal, (ii) any changes in the market price or trading volume of the Company or Parent or the major stock indexes in the U.S. market, (iii) any changes in the Company’s credit ratings, (iv) the Company or Parent meeting, failing to meet or exceeding published or unpublished revenue or market consensus earnings projections, in each case in and of itself or (v) any changes or conditions generally affecting the economies or the industries in which the Company and its subsidiaries operate, except to the extent such effect has a materially disproportionate effect on the Company and its subsidiaries, taken as a whole, relative to others in such industries in respect of the business conducted in such industries (it being understood that with respect to each of the foregoing effects listed in (i) through (iv) above, the effect giving rise or contributing to such change or event may be taken into account when determining whether an intervening event has occurred to the extent not otherwise excluded from this definition).

The Special Meeting

The Company is required to take all action necessary, in accordance with applicable law and its organizational documents, to duly call, give notice of, convene and hold a special meeting of the Company’s stockholders as promptly as practicable (but in no event later than thirty-five (35) days) after the SEC confirms that it has no further comments on the proxy statement or that it does not intend to review the proxy statement, to secure the requisite company vote in respect of the approval of the merger and the adoption of the merger agreement, and to cause such vote to be taken. The Company may not postpone, recess or adjourn the special meeting unless:

 

   

at the time the special meeting is originally scheduled, there are insufficient shares of our common stock represented (either in person or by proxy) in order to establish a quorum or to obtain the requisite company vote, in which case, the Company may postpone or adjourn the special meeting by no more than ten (10) days in connection with any one (1) adjournment, postponement or recess and no more than a total of twenty (20) days from the original date;

 

   

provided that, the Company must, and must instruct its proxy solicitor to, use reasonable best efforts to, solicit as promptly as practicable the presence, in person or by proxy, of a quorum, but must only be obligated to do so in the absence of the change of recommendation and until there are a sufficient number of shares of our common stock present or represented to obtain such a quorum, and in no event more than ten (10) days after the date originally scheduled for the special meeting;

 

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provided, further, that, the Company must, at Parent’s instruction, postpone or adjourn the special meeting if there are not sufficient votes in person or by proxy to approve the merger proposal to allow reasonable time (but in no event more than twenty (20) days) for the solicitation of proxies for the purpose of obtaining of the requisite company vote;

 

   

the Board has determined in good faith (after consultation with outside legal counsel) that it is necessary under applicable law to comply with the requirements made by the SEC or other applicable law with respect to the proxy statement or that failure to take such action would be inconsistent with the Company’s directors’ fiduciary duties under applicable law, in which case, the Company may adjourn or postpone the special meeting by no more than ten (10) business days or such other amount of time reasonably agreed by the Company and Parent to be necessary to comply with applicable law; or

 

   

it has Parent’s prior consent to do so.

Moreover, the Company must establish the earliest reasonable record date for the special meeting, subject to compliance with applicable rules and law, which may not be changed without Parent’s prior written consent.

The Company has agreed that the Board will recommend adoption of the merger agreement to the Company’s stockholders, subject to the Board’s rights to effect a change of recommendation as discussed above under the section entitled “The Merger Agreement—No Solicitation of Acquisition Proposals; Board Recommendation Changes—Change of Recommendation or Termination of the Merger Agreement” beginning on page 114. Any change of recommendation by the Board does not affect the Company’s obligation under the merger agreement to hold the special meeting and submit the merger agreement to the Company’s stockholders for adoption described herein.

In addition, under the merger agreement, Parent agreed that, at the special meeting, any adjournment thereof or any other meeting of the stockholders of the Company in connection with the merger, Parent will vote, and cause to be voted, any shares of common stock owned by it or any of its affiliates, as of the record date of such special meeting, in favor of the adoption of the merger agreement, the approval of the merger, and the approval of any actions required in furtherance thereof and against any proposal that could, or could reasonably be expected to prevent, delay or impair consummation of the merger.

Filings; Other Actions; Notification

Upon the terms and subject to the conditions set forth in the merger agreement, the Company and Parent have agreed to cooperate and use (and cause their respective controlled affiliates to use) their respective reasonable best efforts to take or cause to be taken all actions, and do or cause to be done all things, necessary or advisable on their respective parts under the merger agreement and applicable laws to consummate and make effective the merger and the other transactions contemplated by the merger agreement as promptly as practicable, including:

 

   

maintaining in effect the existing competition clearances (including not taking any action that could reasonably be expected to cause any existing competition clearance to be withdrawn, rescinded or rendered invalid);

 

   

preparing and filing, in consultation with the other, as promptly as practicable with any governmental entity, documentation to effect all necessary notices, reports, consents, registrations, approvals, permits, authorizations, expirations of waiting periods and other filings including (i) those required pursuant to the HSR Act, and (ii) those required by other non-U.S. governmental authorities with jurisdiction concerning antitrust and competition matters; and

 

   

obtaining as promptly as practicable all consents, registrations, approvals, permits and authorizations necessary or advisable to be obtained from any governmental entity in order to consummate the merger and the other transactions contemplated by the merger agreement; and

 

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not taking any action that could, or could reasonably be expected to, cause any governmental entity to prevent, delay or impair consummation of the merger.

In furtherance of the above, pursuant to the merger agreement, if the SEC does not confirm orally or in writing that it has no further comments on this proxy statement or that it does not intend to review this proxy statement prior to December 15, 2020, Parent, Holding, Merger Sub and the Company will, no later than December 18, 2020, file notification of the merger with the FTC and DOJ under the HSR Act, and will request early termination of the waiting period under the HSR Act. Further, if at any time it becomes reasonably apparent to the Company that, as a result of the timing of the potential closing date, it will not be reasonably likely that the closing date will occur prior to the expiration date of any such existing competition clearance, each of the Company and Parent, as applicable, are required to prepare and file, with respect to the transactions contemplated by the merger agreement, any notifications required or advisable under applicable antitrust laws, such complete filings to be made by no later than the business day after the applicable existing competition clearances expires.

If Parent or any of its affiliates (or any person acting on behalf of Parent or at Parent’s direction) receives any request for information from any governmental entity relating to the merger or the Company or is notified by the Company or any governmental entity of any request or requirement of any governmental entity for Parent to provide any information, document or filing to such governmental entity relating to the merger or the Company, Parent will provide, and will cause its affiliates to provide, a complete response to such request as promptly as reasonably practicable and in any event within five (5) business days of receiving such request for information.

With respect to obtaining clearance under any applicable antitrust laws, “reasonable best efforts” will include: (i) taking or committing to take actions that may limit or impact Parent’s or any of its subsidiaries’ (including the Company’s or any of its subsidiaries’) freedom of action with respect to, or its ability to retain, any of Parent’s or any of its subsidiaries’ (including the Company’s or any of its subsidiaries’) operations, divisions, businesses, products lines, contracts, customers or assets; (ii) entering into any orders, settlements, undertakings, contracts, consent decrees, stipulations or other agreements to effectuate any of the foregoing or in order to vacate, lift, reverse, overturn, settle or otherwise resolve any order that prevents, prohibits, restricts or delays the completion of the merger and the other transactions contemplated by the merger agreement, in any case, that may be issued by any court or other governmental entity; and (iii) creating, terminating or divesting relationships, contractual rights or obligations of the Company, Parent or their respective subsidiaries, in each case in connection with obtaining all, or eliminating any requirement to obtain any, waiting period expirations or terminations, consents, clearances, waivers, exemptions, licenses, orders, registrations, approvals, permits, and authorizations for the transactions contemplated by the merger agreement under the HSR Act or any other antitrust law or from any governmental entity so as to enable the closing to occur as promptly as reasonably practicable.

The Company and Parent have agreed to keep each other apprised of the status of governmental and third-party approval matters relating to the completion of the merger and the other transactions contemplated by the merger agreement, subject to applicable laws. In particular, the Company and Parent have agreed:

 

   

to promptly furnish the other with copies of all material notices or other material communications received by Parent or the Company from any third party and/or governmental entity with respect to the transactions contemplated by the merger agreement;

 

   

that each has the right to review in advance and, to the extent practicable, to consult with the other on and consider in good faith the views of the other in connection with, all of the information relating to itself, any of its controlled affiliates or any of their respective representatives that appears in any presentation, filing, or written materials submitted to any governmental entity in connection with the transactions contemplated by the merger agreement;

 

   

not to permit their respective representatives to participate in any discussions or meetings with any governmental entity in respect of the transactions contemplated by the merger agreement unless the

 

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Company or Parent consults with the other in advance and, to the extent permitted by such governmental entity, gives the other the opportunity to attend and participate; and

 

   

Parent must (i) notify the Company within twenty-four (24) hours of receipt of any communication or request for information from a governmental entity relating to the merger or the Company and (ii) consult with the Company with respect to all aspects of its response thereto prior to providing any substantive response to any governmental entity with respect thereto.

Subject to the foregoing, Parent will have the final authority to direct and implement (or direct the implementation by the Company of) the regulatory strategy; provided, however, that Parent must comply with the merger agreement in connection with, and consider the Company’s views in good faith prior to making any decisions regarding, such strategy, and Parent must make available its representatives to discuss such strategy in good faith promptly upon the Company’s request.

Financing of the Merger

Financing

The merger is not subject to a financing condition.

Parent, Holding and Merger Sub have represented in the merger agreement that Parent and its controlled affiliates will have sufficient cash, available lines of credit or other sources of funds at the effective time necessary to consummate the transactions contemplated by the merger agreement. Parent, Holding and Merger Sub have further represented in the merger agreement that Parent and its controlled affiliates have the financial resources and capabilities to fully perform all of Parent’s, Holding’s and Merger Sub’s obligations under the merger agreement.

Parent has agreed to notify the Company if Parent or any of its subsidiaries has entered into any commitment letter or other agreement pursuant to which any person (or persons) has committed to provide debt financing for the purposes of financing the transactions contemplated by the merger agreement, and to identify to the Company the applicable person (or persons) that has committed to provide such debt financing.

On November 25, 2019, Parent notified the Company that Parent has entered into the facilities agreement, with, among others, Citigroup Global Markets Limited, as coordinator, and Citibank Group plc, UK Branch, as agent, which provides for a $8,500,000,000 bridge loan facility, a $5,750,000,000 364-day revolving credit facility and a €2,500,000,000 revolving credit facility. On February 11, 2020 and April 7, 2020, Parent completed eight bond issuances totaling €10,700,000,000 (the “bonds”), following which the $8,500,000,000 bridge loan facility was terminated. Amongst other sources, proceeds of the 364-day revolving credit facility, the revolving credit facility and the bonds may be used for the payment of the merger consideration and fees and expenses in connection therewith. If the closing of the merger has not occurred on or prior to May 24, 2021, each of the 364-day revolving credit facility and the revolving credit facility shall be canceled and any outstanding amounts thereunder repaid within five (5) business days thereof.

Financing Cooperation

Prior to the closing date, the Company has agreed to, and has agreed to cause its subsidiaries to, use commercially reasonable efforts to cause its and their respective affiliates and representatives to use commercially reasonable efforts to provide all customary cooperation that is reasonably requested by Parent in connection with any debt financing obtained by Parent or any of its subsidiaries for the purpose of financing the transactions contemplated by the merger agreement. If reasonably requested by Parent, the Company must, and must cause its subsidiaries to, and must use commercially reasonable efforts to cause its and their respective affiliates and representatives to, use commercially reasonably efforts to reasonably cooperate with Parent, Holding and Merger Sub, with respect to certain senior unsecured notes and the related indentures or note

 

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purchase agreements of the Company and its subsidiaries, as the case may be, (i) if any of them determines to commence (A) one or more offers to purchase any or all of the outstanding series of such senior unsecured notes for cash or (B) one or more offers to exchange any or all of such outstanding senior unsecured notes for securities issued by Parent or any of its subsidiaries and (ii) to conduct consent solicitations to obtain consent from the requisite holders thereof to certain amendments to, or waivers with respect to, such indentures; provided that (1) such offers and consent solicitations must be consummated no earlier than closing, and (2) such offers and consent solicitations must be made on customary terms and conditions (including the price to be paid and conditionality) as are reasonably proposed by Parent or any of its subsidiaries, are reasonably acceptable to the Company and are permitted or required by the terms of such senior unsecured notes, the applicable indentures and applicable laws, including SEC rules and regulations. Any such transaction described in clause (i) above must be funded using consideration provided by Parent or any of its subsidiaries; and Parent will be responsible for all other liabilities incurred by the Company or any of its subsidiaries in connection therewith.

Subject to the receipt of the requisite consents, in connection with any consent solicitations, the Company must execute supplemental indentures, amendments or waivers to the applicable indentures in accordance with the terms thereof amending the terms and provisions of such indentures in a form as reasonably requested by Parent and reasonably acceptable to the Company, which supplemental indentures, amendments or waivers must become effective no earlier than the closing. In connection with the financing cooperation provided for in the merger agreement, at the expense of Parent and its subsidiaries, the Company must, and must cause its subsidiaries to, and must use commercially reasonable efforts to cause its and their respective affiliates and representatives to, upon the reasonable request of Parent or any of its subsidiaries, use commercially reasonably efforts to provide reasonable assistance and cooperation (i) with Parent’s and its respective agents’ due diligence, (ii) to aid in the preparation by Parent of customary documentation used to complete any offers or consent solicitations and (iii) by requesting, and using commercially reasonable efforts to cause, (A) to the extent historical financial statements of the Company are or would be required to be included by Parent in a relevant registration statement of Parent for any offers or consent solicitations under the rules and regulations of the SEC, the Company’s independent accountants to provide customary consents for use of their reports to the extent customary and necessary in connection with such offers or consent solicitations and (B) the Company’s representatives to furnish any customary or necessary certificates, or comfort letters in connection with the indentures and the offers or consent solicitations. The dealer manager, solicitation agent, information agent, depositary or other agent retained in connection with any offers or consent solicitations will be selected by Parent or its subsidiaries and be reasonably acceptable to the Company and their fees and out-of-pocket expenses will be paid directly by Parent. The merger is not conditioned on the occurrence or success, or the making or obtaining, as applicable, of any offers or consent solicitations.

Parent must (i) promptly upon request by the Company, reimburse (or cause to be reimbursed) the Company and its subsidiaries for all reasonable out-of-pocket fees and expenses (including reasonable out-of-pocket auditor’s and attorneys’ fees and expenses) of the Company and its subsidiaries and all reasonable out-of-pocket fees and expenses of their representatives incurred in connection with any requested financing cooperation under the merger agreement or the original merger agreement and (ii) indemnify (or cause to be indemnified), defend and hold harmless the Company, its subsidiaries, its affiliates and its and their respective representatives against any claim, loss, damage, injury, liability, judgment, award, penalty, fine, tax, cost (including the cost of investigation), expense (including reasonable out-of-pocket fees and expenses of counsel) or settlement payment, of any kind, incurred by, imposed on, sustained by, suffered by or asserted against any of them, directly or indirectly relating to, arising out of or resulting from the financing, or the performance by the Company, its subsidiaries, its affiliates and its and their respective representatives of any obligations with respect to any financing cooperation under the merger agreement or the original merger agreement.

Notwithstanding anything to the contrary in the provisions related to financing cooperation and paying down the Company’s indebtedness in the merger agreement, such provisions: (i) will not require the Company to take any action to the extent it would: (A) unreasonably disrupt or interfere with the conduct of the Company’s or its subsidiaries’ business, (B) require the Company or any of its subsidiaries to incur any fees, expenses or other

 

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liability prior to the effective time for which it is not entitled to be reimbursed or indemnified pursuant to the terms of the merger agreement (other than customary authorization letters required in connection with financing the transactions contemplated by the merger agreement), (C) subject any director, officer or employee of the Company or any of its subsidiaries to personal liability, (D) require the Company to breach, waive or amend any terms of the merger agreement, (E) require the Company to provide any information that is prohibited or restricted from being provided by applicable law or is subject to attorney-client privilege or protection, (F) require cooperation to the extent that it would reasonably be expected to conflict with or violate any applicable law or result in a breach of, or a default under, any contract (including a breach of any confidentiality obligation), (G) require the directors of the Company or any subsidiary of the Company to authorize or adopt any resolutions approving the agreements, documents, instruments, actions or transactions contemplated in connection with the above-described financing or indebtedness cooperation covenants, (H) require the Company, any of its subsidiaries or any of its or their respective representatives to make any representation to Parent, any of its affiliates or any other person, in connection with the above-described financing or indebtedness cooperation covenants (other than customary authorization letters required in connection with financing the transactions contemplated by the merger agreement), (I) require the Company to furnish any financial statements, audit reports or financial information other than as required under the merger agreement and other than to the extent such statements, reports or information are readily available to the Company, any of its subsidiaries or any of their respective representatives or (J) require the Company, any of its subsidiaries, or any of its or their respective affiliates or representatives to be the issuer of any securities or issue any offering document prior to the closing date or furnish any legal opinions. The Company and its subsidiaries also will not be required to execute or perform any agreement, document or instrument, including any definitive financing agreement, with respect to the above-described financing or indebtedness cooperation covenants or provide any indemnity the effectiveness of which is not conditioned upon closing occurring.

Employee Benefits Matters

The parties have agreed that during the period commencing at the effective time and ending one (1) year after the effective time, Parent will provide, or will cause to be provided, to each employee of the Company and its subsidiaries at the effective time who continues to remain employed with the Company or its subsidiaries (collectively, the “continuing employees”):

 

   

an annual base salary or wage rate that is no less favorable than that provided to each such continuing employee immediately prior to the effective time;

 

   

target cash short-term incentive and commission opportunities that are substantially comparable in the aggregate to those provided to each such continuing employee immediately prior to the effective time;