Exhibit 10.1
EXECUTION COPY
AMENDED AND
RESTATED
EMPLOYMENT
AGREEMENT
AMENDED AND RESTATED EMPLOYMENT
AGREEMENT (the “Agreement”) made effective as of the
14 th
day of October 2009, by and between
Polo Ralph Lauren Corporation, a Delaware corporation (the
“Corporation”), and Roger N. Farah (the
“Executive”).
WHEREAS, the Executive is serving as
President and Chief Operating Officer of the Corporation pursuant
to an Amended and Restated Employment Agreement made as of
July 23, 2002, as amended (the “2002 Employment
Agreement”); and
WHEREAS, the Corporation and the
Executive wish to amend and restate such 2002 Employment Agreement
effective as of the date hereof;
NOW, THEREFORE, intending to be
bound the parties hereby agree as follows with effect from the date
first above written.
1. Employment/Prior Agreement
. The Corporation hereby agrees to employ the Executive, and the
Executive hereby agrees to serve the Corporation, on the terms and
conditions set forth herein. From and after the date hereof, the
terms of this Agreement shall, except as provided herein, supersede
in all respects the terms of any prior arrangement or agreement, if
any, dealing with the matters herein, including the 2002 Employment
Agreement.
2. Term . The employment of
the Executive by the Corporation as provided in Section 1
pursuant to this Agreement will be effective on the date hereof.
The term of the Executive’s employment under this Agreement
shall continue until the close of business on March 30, 2013,
subject to earlier termination in accordance with the terms of this
Agreement (the “Term”). The Term shall be automatically
extended so as to end on the last day of each subsequent fiscal
year thereafter unless either party notifies the other in writing
of its intention not to extend the Term at least 180 days prior to
the commencement of the next scheduled extension (a
“NonExtension Notice”).
3. Position and Duties . The
Executive shall serve as President and Chief Operating Officer. The
Executive shall report to Ralph Lauren (as Chairman of the Board of
Directors of the Corporation (the “Board”) and Chief
Executive Officer) and the Board, and shall have responsibilities
and duties for the oversight of the Corporation’s operations
and such other responsibilities and duties, that are (a) not
inconsistent with the usual duties of a president and chief
operating officer of an enterprise such as the Corporation, as may
be assigned to Executive from time to time, and (b) no less
comprehensive than have been the duties and responsibilities of the
Executive during the period of his employment with the Corporation
prior to the date hereof. The Executive shall devote all of
Executive’s working time and efforts to the business and
affairs
of the Corporation; provided, however, that the
Executive may serve on such boards of directors as he may be asked
to serve on from time to time, with the Corporation’s
approval. It is further understood and agreed that nothing herein
shall prevent the Executive from managing his personal investments
so long as such activities do not interfere in more than an
insignificant manner with the Executive’s performance of his
duties hereunder and do not conflict with the provisions of
Section 8.
4. Compensation and Related
Matters .
(a) Salary and Incentive
Bonus .
(i) Salary . During the Term,
Executive’s annual salary shall be at the rate of $900,000.
Such salary shall be paid in substantially equal installments on a
basis consistent with the Corporation’s payroll practices and
shall be subject to annual increases, if any, as may be determined
in the sole discretion of the Corporation. Executive’s salary
as in effect from time to time is hereinafter referred to as the
“Salary”.
(ii) Incentive Bonus .
Executive shall participate in the Corporation’s Executive
Officer Annual Incentive Plan (the “EOAIP”), and any
substitute therefor, and be eligible to earn an annual cash bonus
for each fiscal year during the Term of this Agreement (the
“Annual Incentive Bonus”). With respect to each fiscal
year during the Term commencing with the Corporation’s 2010
fiscal year ( i.e. , commencing March 29, 2009),
Executive’s Annual Incentive Bonus opportunity shall range,
subject to achieving pre-established performance goals, from $3
million upon obtaining threshold performance targets established by
the Compensation Committee (the “Compensation
Committee”) of the Board (i .e. , the EOAIP bonus
schedule threshold) to a maximum of $9 million upon obtaining
maximum performance targets established by the Compensation
Committee (i .e. , the EOAIP bonus schedule maximum) based
upon the extent to which performance goals established by the
Compensation Committee are achieved. At target performance (
i.e. , the EOAIP bonus schedule target), Executive’s
Annual Incentive Bonus shall be $6 million (the “Target
Annual Incentive Bonus”). The Annual Incentive Bonus, if any,
payable to the Executive in respect of each fiscal year will be
paid at the same time that annual bonuses are paid to other
executives under the EOAIP. Notwithstanding any provision of this
Agreement to the contrary, the Executive’s entitlement to
payment of an Annual Incentive Bonus during any period when the
compensation payable to the Executive pursuant to this Agreement is
subject to the deduction limitations of section 162(m) of the
Internal Revenue Code of 1986, as amended (the “Code”),
shall be subject to shareholder approval of a plan or arrangement
evidencing such Annual Incentive Bonus opportunity that complies
with the requirements of section 162(m) of the Code.
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(iii) Deferred Compensation .
Executive shall receive an aggregate of $250,000 per year for the
fiscal years ending in 2010 through 2013 (the “Deferred
Compensation”) in the form of deferred bonus compensation,
which shall be credited to a deferred compensation account on the
books of the Corporation in equal monthly installments in a manner
substantially consistent with the Corporation’s deferred
compensation agreements with other senior executives. Executive
shall at all times be fully vested in the Deferred Compensation
credited to such account. Notwithstanding any provision of the
Deferred Compensation Agreement, dated September 19, 2002,
between the Corporation and Executive to the contrary,
Executive’s Deferred Compensation shall be distributed as
follows: (i) the balance credited to the deferred compensation
account as of December 31, 2008, less the vested balance
credited to such account as of December 31, 2004, will be paid
to Executive on or prior to October 31, 2009;
(ii) Deferred Compensation and any earnings credited in
calendar 2009 will be paid to Executive (subject to
Section 6(h) of this Agreement) on (A) the 45th day
following the termination of Executive’s employment if
Executive’s employment terminates before October 31,
2010 and (B) the earlier of January 1, 2017 or the
45 th
day following the termination of
Executive’s employment if Executive’s employment
terminates on or after October 31, 2010; and
(iii) Deferred Compensation and any earnings credited after
calendar 2009 will be paid to Executive on the 45th day following
the termination of Executive’s employment (subject to
Section 6(h) of this Agreement). The vested balance credited
to the deferred compensation account as of December 31, 2004
will be paid to Executive as soon as practicable following the
termination of Executive’s employment.
(b) Expenses . During the
term of the Executive’s employment hereunder, the Executive
shall be entitled to receive prompt reimbursement for all
reasonable and customary expenses incurred by the Executive in
performing services hereunder, including all expenses of travel and
living expenses while away from home on business or at the request
of and in the service of the Corporation; provided that such
expenses are incurred and accounted for in accordance with the
policies and procedures established by the Corporation.
(c) Other Benefits . During
the term of the Executive’s employment hereunder, the
Executive shall be entitled to participate in or receive benefits
under any medical, pension, profit sharing or other employee
benefit plan or arrangement generally made available by the
Corporation now or in the future to its executives and key
management employees (or to their family members), subject to and
on a basis consistent with the terms, conditions and overall
administration of such plans and arrangements. Moreover, during
such term, the Executive shall be entitled to a monthly car
allowance of $1,500. Nothing paid to the Executive under any plan
or arrangement presently in effect or made available in the future
shall be deemed to be in lieu of the Salary, Annual Incentive
Bonuses or Deferred Compensation, payable to the Executive pursuant
to paragraph (a) of this Section.
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(d) Vacations . The Executive
shall be entitled to reasonable vacations consistent with the
Corporation’s past practice.
(e) Long Term Incentive
Awards . With respect to each of the
three-consecutive-fiscal-year periods beginning, respectively, in
fiscal year 2010 (the “First Performance Period”),
fiscal year 2011 (the “Second Performance Period”) and
fiscal year 2012 (the “Third Performance Period”) (each
such period shall hereinafter be referred to as a
“Performance Period”), it is expected that the
Executive shall receive a long-term incentive award (each such
award shall hereinafter be referred to as a “LTI
Award”) with a value of $7 million, although the
determination of the value of the actual LTI Award made to the
Executive shall be in the sole discretion, exercised in good faith,
of the Compensation Committee. Fifty percent (50%) of the
value of any such LTI Award shall consist of restricted performance
share units (“RPSUs”), valued as of the date of grant.
Fifty percent (50%) of the value of any such LTI Award shall
consist of options to purchase shares of Class A Common Stock
of the Corporation (“LTI Options”), which options shall
be valued, as of the date of grant, using the Black-Scholes
option-pricing model. The LTI Award for the First Performance
Period shall be granted within ten days of the date that this
Agreement is executed by the Corporation and the Executive. The LTI
Awards for the Second and Third Performance Periods shall be
granted at the same time as long-term incentive awards are granted
to the Corporation’s other senior executives for such
Performance Periods, but in no event shall the LTI Awards for the
Second and Third Performance Periods be granted later than
August 31, 2010 and August 31, 2011, respectively.
Subject to the terms of this Agreement, with respect to the RPSUs
granted for the First and Second Performance Periods, the Executive
shall become 100 percent vested in such RPSUs as of the last day of
the respective Performance Period if he remains continuously
employed with the Corporation through the end of the applicable
Performance Period and the performance goals determined by the
Compensation Committee are achieved; with respect to the RPSUs
granted for the Third Performance Period, the Executive shall
become fully vested in such RPSUs as of March 30, 2013 if he
remains continuously employed with the Corporation through such
date, with payment with respect to such RPSUs to be made within ten
(10) days after the end of the Corporation’s 2014 fiscal
year. Subject to the terms of this Agreement, one-third of the
grant of LTI Options with respect to the First Performance Period
shall vest and become exercisable on each of the first three
anniversaries of the date of grant, provided the Executive remains
continuously employed with the Corporation to the applicable
vesting date. With respect to the grant of LTI Options for the
Second Performance Period, subject to the terms of this Agreement,
(A) one-third of such grant of LTI Options shall vest and
become exercisable on each of the first two anniversaries of the
date of grant, provided the Executive remains continuously employed
with the Corporation through such date; and (B) the remaining
one-third of such grant of LTI Options shall vest and become
exercisable on March 30, 2013, provided the Executive remains
continuously employed with the Corporation through such date. With
respect to the grant of LTI Options for the Third Performance
Period, subject to the terms of this Agreement, (1) one-third
of such grant of LTI Options shall vest and become exercisable on
the first anniversary of the date of grant, provided the Executive
remains continuously employed with the Corporation through such
date; (2) an additional one-third of such grant of LTI Options
shall vest and become
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exercisable on March 30, 2013,
provided the Executive remains continuously employed with the
Corporation through such date; and (3) the remaining one-third
of such grant of LTI Options (the “Third Tranche”)
shall vest on March 30, 2013 (provided the Executive remains
continuously employed with the Corporation through such date), but
shall not become exercisable until the last day of the
Corporation’s 2014 fiscal year. Except as otherwise provided
in this Agreement, LTI Options shall remain exercisable until the
seventh anniversary of the date of grant. Subject to the terms of
this Agreement, both components of the LTI Award (RPSUs and LTI
Options) shall be granted pursuant to and shall be subject to the
terms of the Polo Ralph Lauren Corporation 1997 Long-Term Stock
Incentive Plan, as amended and restated as of August 12, 2004
and amended as of June 30, 2006 and May 21, 2009, or any
successor thereto (the “Incentive Plan”). The LTI Award
for the First Performance Period shall also be subject to the terms
of the Fiscal 2010 - Overview of Stock Options and the Fiscal 2010
- Overview of Cliff Restricted Performance Share Unit Awards to the
extent such Fiscal-2010 Overviews are not inconsistent with the
Incentive Plan and the provisions of this Agreement. The LTI Awards
for the Second and Third Performance Periods shall be subject to
terms and conditions no less favorable than the terms and
conditions governing long-term incentive awards which are granted
to other executives and key management employees of the
Corporation, provided such terms are not inconsistent with the
Incentive Plan and the provisions of this Agreement. It is
understood that the Compensation Committee reserves the right, in
its good faith discretion, to change (i) the Performance
Period with respect to LTI Awards and/or (ii) the valuation
methodology applicable to LTI Options, provided in any case that
the Executive’s LTI Awards are treated in the same manner as
similar awards granted to the Corporation’s other senior
executives. Except as specifically set forth in this
Section 4(e), the Executive shall not be granted any other
long-term incentive awards from the Corporation during the
Term.
(f) Air Travel . For purposes
of security and efficiency, the Executive and his family members,
to and only to the extent such family members are traveling with
the Executive, shall use the Corporation’s aircraft or other
private aircraft for any travel. To the extent the Executive and
his family are unable to use the Corporation’s aircraft or
other private aircraft for any travel, the Executive and his family
may use commercial aircraft. For any expense incurred as a result
of the Executive’s use of private aircraft (other than the
Corporation’s aircraft) or commercial aircraft, the Executive
shall be reimbursed by the Corporation (with no tax gross up). For
any such expense, the Executive shall be entitled to reimbursement
at the lesser of market rates or Executive’s out-of-pocket
cost.
5. Termination .
(a) Termination by
Corporation . The Executive’s employment hereunder may be
terminated at any time with or without Cause.
(b) Termination by the
Executive . The Executive may terminate his employment
hereunder with or without Good Reason. For purposes of this
Agreement, “Good Reason” shall mean (A) a material
diminution in or adverse alteration to the Executive’s title
or duties as set forth in Section 3 herein, (B) a
reduction in the Executive’s Salary or Annual Incentive Bonus
opportunity or Deferred Compensation from those
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provided herein or the
Corporation’s electing to eliminate the EOAIP without
substituting therefor a plan which provides for a reasonably
comparable Annual Incentive Bonus opportunity or the
Executive’s ceasing to be entitled to the payment of an
Annual Incentive Bonus as a result of the failure of the
Corporation’s shareholders to approve a plan or arrangement
evidencing such Annual Incentive Bonus in a manner that complies
with the requirements of section 162(m) of the Code, (C) the
relocation of the Executive’s principal office outside of the
area which comprises a fifty (50) mile radius from New York
City, (D) a failure of the Corporation to comply with any
material provision of this Agreement, or (E) the Corporation
requires Executive to report to other than Ralph Lauren and the
Board; provided that the events described in clauses (A), (B), (C),
(D) and (E) above shall not constitute Good Reason
(1) until the Executive provides notice to the Corporation of
the existence of such diminution, change, reduction, relocation,
failure or requirement within ninety (90) days of its
occurrence and (2) unless such diminution, change, reduction,
failure or requirement (as applicable) has not been cured within
thirty (30) days after written notice of such noncompliance
has been given by the Executive to the Corporation.
(c) Any termination of the
Executive’s employment by the Corporation or by the Executive
(other than termination pursuant to Section 6(d)(i) hereof)
shall be communicated by written Notice of Termination to the other
party hereto in accordance with Section 10 hereof. A
“Notice of Termination” shall mean a notice which shall
indicate the specific termination provision in this Agreement
relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the
Executive’s employment under the provision so
indicated.
6. Compensation Upon
Termination . The provisions of this Section 6 shall
exclusively govern the Executive’s rights upon termination of
employment with the Corporation and its affiliates. Upon
termination of the Executive’s employment for any reason, the
Executive agrees to resign, as of the date of such termination of
employment, from the Board and any committees of the Corporation or
its affiliates on which he serves.
(a) If the Corporation shall
terminate the Executive’s employment for any reason other
than an Enumerated Reason as set forth in Section 6(d) hereof
or if the Executive resigns for Good Reason pursuant to
Section 5(b) hereof, subject to the provisions of
Section 8 hereof, the Executive shall be entitled to the
following:
(i) an amount equal to (1) the
product of (x) the greater of two (2) or the number of
full and partial years from the date of termination through
March 30, 2013 (up to a maximum of three (3)), and
(y) the sum of (I) the Executive’s Salary at the
rate in effect on such date (unless employment is terminated by the
Executive for Good Reason pursuant to Section 5(b) hereof as a
result of a Salary reduction, in which case, at the rate in effect
prior to such reduction), plus (II) the amount of the Target Annual
Incentive Bonus described herein; plus (2) a pro rata portion
of any Annual Incentive Bonus that the Executive would have been
entitled to receive pursuant to Section 4(a)(ii) hereof for
the fiscal year in which the Executive’s employment is
terminated based on the actual performance of the Corporation for
such fiscal year, such pro rata portion to be based upon
a
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fraction, the numerator of which is
the number of days from the first day of the fiscal year in which
such termination occurs until the date of termination and the
denominator of which is 365 (a “Pro Rata Annual Incentive
Bonus”).
Subject to Section 6(h) below,
any amounts paid pursuant to subsection (i)(1) above shall be paid
in equal monthly installments commencing on the first day of the
month immediately following the date of termination over a period
of twenty-four (24) months thereafter or such greater number
of months (not in excess of thirty-six (36)) through March
2013 (such period hereinafter referred to as the “Severance
Period”), each of which shall be a separate payment; provided
that any amount otherwise payable prior to the Executive’s
execution of a release pursuant to Section 6(f) shall be paid
no later than ten (10) days following the execution of a
release in accordance with Section 6(f). Subject to
Section 6(h) below, the Pro Rata Annual Incentive Bonus
described in subsection (i)(2) above shall be paid in a lump sum
when such Annual Incentive Bonus would have otherwise been payable
to the Executive pursuant to Section 4(a)(ii) had the
Executive’s employment not terminated.
(ii) The Executive shall immediately
be 100% vested in all then outstanding LTI Awards, each LTI Option
shall become fully exercisable, and (A) any then outstanding
RPSUs granted with respect to the First and Second Performance
Periods shall remain outstanding through the end of the applicable
Performance Period (with the Executive entitled to a payment in
respect of each such RPSU in accordance with the terms and
conditions otherwise applicable to such award, including the
achievement of specified performance goals), (B) any then
outstanding RPSUs granted with respect to the Third Performance
Period shall remain outstanding through the end of the
Corporation’s 2014 fiscal year, with payment with respect to
such RPSU to be made within ten (10) days following the end of
such fiscal year, and (C) any then outstanding LTI Options
shall be exercisable by him until the earlier to occur of
(I) the first anniversary of the date of such termination of
employment and (II) the expiration of the original LTI Option
term.
(iii) Continued participation in the
Corporation’s health benefit plans during the Severance
Period; provided that if the Executive is provided with coverage by
a
