EMPLOYMENT AGREEMENT
THIS AGREEMENT, effective as of November 8, 2005 (the "Effective
Date"), but subject to the approval of the Committee (as defined
below), is made
by and between Coach, Inc., a Maryland corporation (the "Company")
and Michael
F. Devine III (the "Executive").
RECITALS:
A. It is the desire of the Company to assure itself of the services
of
the Executive by engaging the Executive as its Senior Vice
President and Chief
Financial Officer.
B. The Executive desires to commit himself to serve the Company on
the
terms herein provided.
NOW, THEREFORE, in consideration of the foregoing and of the
respective covenants and agreements set forth below, the parties
hereto agree as
follows:
1. Certain Definitions
(a) "Affiliate" shall mean with respect to any Person, any other
Person directly or indirectly, through one or more intermediaries,
controlling, controlled by, or under common control with, such
Person. For
purposes of this Section 1(a), "control" shall have the meaning
given such
term under Rule 405 of the Securities Act of 1933, as amended.
(b) "Annual Base Salary" shall have the meaning set forth in
Section 5(a).
(c) "Board" shall mean the Board of Directors of the Company.
(d) "Bonus" shall have the meaning set forth in Section 5(b).
(e) The Company shall have "Cause" to terminate the Executive's
employment upon (i) the Executive's failure to attempt in good
faith to
substantially perform the duties as Senior Vice President and Chief
Financial Officer (other than any such failure resulting from the
Executive's physical or mental incapacity) which is not remedied
within 30
days after receipt of written notice from the Company specifying
such
failure; (ii) the Executive's failure to attempt in good faith to
carry
out, or comply with, in any material respect any lawful and
reasonable
directive of the Company's Chief Executive Officer or President and
Chief
Operating Officer which is not remedied within 30 days after
receipt of
written notice from the Company specifying such failure; (iii) the
Executive's commission at any time of any act or omission that
results in,
or may reasonably be expected to result in, a conviction, plea of
no
contest, or imposition of unadjudicated probation for any felony
(or any
other crime involving fraud, embezzlement, material misconduct or
misappropriation having a material adverse impact on the Company);
(iv) the
Executive's unlawful use (including being under the influence) or
possession of illegal drugs on the Company's premises or while
performing
the Executive's duties and responsibilities; or (v) the Executive's
willful
commission at
any time of any act of fraud, embezzlement, misappropriation,
misconduct,
or breach of fiduciary duty against the Company (or any predecessor
thereto
or successor thereof) having a material adverse impact on the
Company.
(f) "Change in Control" shall occur when:
(i) A Person (which term, when used in this Section 1(f),
shall not include the Company, any underwriter temporarily holding
securities pursuant to an offering of such securities, any trustee
or
other fiduciary holding securities under an employee benefit plan
of
the Company, or any Company owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions
as
their ownership of Voting Stock of the Company) is or becomes,
without
the prior consent of a majority of the Continuing Directors, the
beneficial owner (as defined in Rule 13d-3 promulgated under the
Securities Exchange Act of 1934, as amended), directly or
indirectly,
of Voting Stock representing, without the prior written consent of
a
majority of the Continuing Directors twenty percent (20%) (or, even
with such prior consent, thirty-five percent (35%)) or more of the
combined voting power of the Company's then outstanding securities;
or
(ii) The Company consummates a reorganization, merger or
consolidation of the Company (which prior to the date of such
consummation has been approved by the Company's stockholders) or
the
Company sells, or otherwise disposes of, all or substantially all
of
the Company's property and assets (other than a reorganization,
merger, consolidation or sale which would result in all or
substantially all of the beneficial owners of the Voting Stock of
the
Company outstanding immediately prior thereto continuing to
beneficially own, directly or indirectly (either by remaining
outstanding or by being converted into voting securities of the
resulting entity), more than fifty percent (50%) of the combined
voting power of the voting securities of the Company or such entity
resulting from the transaction (including, without limitation, an
entity which as a result of such transaction owns the Company or
all
or substantially all of the Company's property or assets, directly
or
indirectly) outstanding immediately after such transaction in
substantially the same proportions relative to each other as their
ownership immediately prior to such transaction), or the Company's
stockholders approve a liquidation or dissolution of the Company;
or
(iii) The individuals who are Continuing Directors of the
Company (as defined below) cease for any reason to constitute at
least
a majority of the Board.
(g) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(h) "Committee" shall mean the Human Resources and Corporate
Governance Committee of the Board.
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(i) "Common Stock" shall mean the $.01 par value common stock of
the Company.
(j) "Company" shall, except as otherwise provided in Section 9,
have the meaning set forth in the preamble hereto.
(k) "Competitive Business" shall mean any entity that, as of the
date of the Executive's termination of employment, the Committee
has
designated in its sole discretion as an entity that competes with
any of
the businesses of the Company; provided, that (i) not more than 20
entities
(which term "entities" shall include any subsidiaries, parent
entities and
other Affiliates thereof) shall be designated as Competitive
Businesses at
one time and (ii) such entities are the same 20 entities used for
any list
of competitive entities for any other arrangement with an executive
of the
Company; and, provided further, that subject to compliance with
clauses (i)
and (ii) of this definition, the Committee may change its
designation of
Competitive Businesses at any time that is not less than 90 days
prior to
the Executive's termination of employment upon written notice
thereof to
the Executive (and any such change within the 90 day period
immediately
preceding the Executive's termination of employment shall not be
effective). The list of Competitive Businesses in effect as of the
Effective Date is attached hereto as Exhibit A (which the parties
acknowledge and agree may be changed by the Committee in accordance
with
the terms of the immediately preceding sentence).
(l) "Continuing Director" means (i) any member of the Board
(other than an employee of the Company) as of the Effective Date or
(ii)
any person who subsequently becomes a member of the Board (other
than an
employee of the Company) whose election or nomination for election
to the
Board is recommended by a majority of the Continuing Directors.
(m) "Contract Year" shall mean (i) the period beginning on
November 8, 2005 and ending on June 30, 2006 and (ii) each
twelve-month
period beginning on July 1, 2006 or any anniversary thereof.
(n) "Date of Termination" shall mean (i) if the Executive's
employment is terminated by his death, the date of his death and
(ii) if
the Executive's employment is terminated pursuant to Section
6(a)(ii) -
(vi), the date specified in the Notice of Termination (or if no
such date
is specified, the last day of the Executive's active employment
with the
Company).
(o) "Disability" shall mean any mental or physical illness,
condition, disability or incapacity which:
(i) Prevents the Executive from discharging substantially
all of his essential job responsibilities and employment duties;
(ii) Shall be attested to in writing by a physician or a
group of physicians selected by the Executive and acceptable to the
Company; and
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(iii) Has prevented the Executive from so discharging his
duties for any 180 days in any 365 day period.
A Disability shall be deemed to have occurred on the 180th day in
any such
365 day period.
(p) "Executive" shall have the meaning set forth in the preamble
hereto.
(q) "Extension Term" shall have the meaning set forth in Section
2.
(r) "Financial Gain" with respect to any specified period of time
shall mean the sum of all (i) Retention Option Gains realized by
the
Executive during such period and (ii) Retention RSU Gains realized
by the
Executive during such period.
(s) The Executive shall have "Good Reason" to resign his
employment upon the occurrence of any of the following: (i) failure
of the
Company to continue the Executive in the position of Senior Vice
President
and Chief Financial Officer (or any other position not less senior
to such
position); (ii) a material diminution in the nature or scope of the
Executive's responsibilities, duties or authority; (iii) relocation
of the
Company's executive offices more than 50 miles outside of New York,
New
York or relocation of Executive away from the executive offices;
(iv)
failure of the Company to timely make any material payment or
provide any
material benefit under this Agreement, or the Company's material
reduction
of any compensation, equity or benefits that the Executive is
eligible to
receive under this Agreement; or (v) the Company's material breach
of this
Agreement; provided, however, that notwithstanding the foregoing
the
Executive may not resign his employment for Good Reason unless: (x)
the
Executive provides the Company with at least 30 days prior written
notice
of his intent to resign for Good Reason (which notice is provided
not later
than the 60th day following the occurrence of the event
constituting Good
Reason) and (y) the Company does not remedy the alleged
violation(s) within
such 30-day period; and, provided, further, that Executive may
resign his
employment for Good Reason if in connection with any Change in
Control the
surviving entity does not assume this Agreement (or, with the
written
consent of the Executive, substitute a substantially identical
agreement)
with respect to the Executive in writing delivered to the Executive
prior
to, or as soon as reasonably practicable following, the occurrence
of such
Change in Control.
(t) "Initial Term" shall have the meaning set forth in Section 2.
(u) "Intellectual Property" shall have the meaning set forth in
Section 9(f).
(v) "Maximum Bonus" shall have the meaning set forth in Section
5(b).
(w) "Notice of Termination" shall have the meaning set forth in
Section 6(b).
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(x) "Option" shall mean an option to purchase Common Stock
pursuant to any of the Stock Incentive Plans (or any other equity
based
compensation plan or agreement that may be adopted or entered into
by the
Company from time to time).
(y) "Person" shall mean an individual, partnership, corporation,
business trust, limited liability company, joint stock company,
trust,
unincorporated association, joint venture, governmental authority
or other
entity of whatever nature.
(z) "Pro-Rata Bonus" shall have the meaning set forth in Section
7(d).
(aa) "Release" shall have the meaning set forth in Section 7(b).
(bb) "Retention Option Gain" with respect to any specified period
of time shall mean the product of (i) the number of shares of
Common Stock
purchased upon the exercise of any Retention Options during such
period and
(ii) the excess of (A) the fair market value per share of Common
Stock as
of the date of such exercise over (B) the exercise price per share
of
Common Stock subject to such Retention Options.
(cc) "Retention Options" shall have the meaning set forth in
Section 5(c).
(dd) "Retention RSU Gain" with respect to any specified period of
time shall mean the product of (i) the number of shares of Common
Stock
subject to Retention RSUs that first become vested during such
period and
(ii) the fair market value per share of Common Stock as of the date
such
Retention RSUs first become vested.
(ee) "Retention RSUs" shall have the meaning set forth in Section
5(d).
(ff) "Section 409A" shall mean Section 409A of the Code and the
Department of Treasury Regulations and other interpretive guidance
issued
thereunder, including without limitation any such regulations or
other
guidance that may be issued after the Effective Date.
(gg) "Severance Amount" shall have the meaning set forth in
Section 7(b)(i).
(hh) "Severance Commencement Date" shall mean the six-month
anniversary of the Date of Termination.
(ii) "Stock Incentive Plans" shall mean the Company's 2000 Stock
Incentive Plan and the Company's 2004 Stock Incentive Plan, each as
amended
from time to time.
(jj) "Target Bonus" shall have the meaning set forth in Section
5(b).
(kk) "Term" shall have the meaning set forth in Section 2.
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(ll) "Voting Stock" means all capital stock of the Company which
by its terms may be voted on all matters submitted to stockholders
of the
Company generally.
2. Employment. The Company shall employ the Executive and the
Executive shall continue in the employ of the Company, for the
period set forth
in this Section 2, in the positions set forth in the first sentence
of Section 3
and upon the other terms and conditions herein provided. The
initial term of
employment under this Agreement (the "Initial Term") shall be for
the period
beginning on the Effective Date and ending on June 30, 2010, unless
earlier
terminated as provided in Section 6. The Initial Term shall
automatically be
extended for successive one-year periods (each, an "Extension
Term") unless
either party hereto gives written notice of non-extension to the
other no later
than 180 days prior to the scheduled expiration of the Initial Term
or the then
applicable Extension Term (the Initial Term and any Extension Term
shall be
collectively referred to hereunder as the "Term").
3. Position and Duties. The Executive shall serve as Senior Vice
President and Chief Financial Officer, reporting directly to the
Company's
President and Chief Operating Officer, with such responsibilities,
duties and
authority as are customary for such role. The Executive shall
devote all
necessary business time and attention, and employ his reasonable
best efforts,
toward the fulfillment and execution of all assigned duties, and
the
satisfaction of defined annual and/or longer-term performance
criteria.
Notwithstanding the foregoing, the Executive may manage his
personal
investments, be involved in charitable and professional activities
(including
serving on charitable and professional boards), and, with the
consent of the
Board, serve on for profit boards of directors and advisory
committees so long
as such service does not materially interfere with Executive's
obligations
hereunder or violate Section 9 hereof.
4. Place of Performance. In connection with his employment during
the
Term, the Executive shall be based at the Company's offices in New
York, New
York, except for necessary travel on the Company's business.
5. Compensation and Related Matters
(a) Annual Base Salary. Commencing September 1, 2005, the
Executive shall receive a base salary at a rate of $500,000 per
annum (the
"Annual Base Salary"), paid in accordance with the Company's
general
payroll practices for executives, but no less frequently than
monthly. No
less frequently than annually during the Term, the Board and the
Committee
shall review the rate of Annual Base Salary payable to the
Executive, and
may, in their discretion, increase the rate of Annual Base Salary
payable
hereunder; provided, however, that any increased rate shall
thereafter be
the rate of "Annual Base Salary" hereunder.
(b) Bonus. Except as otherwise provided for herein, with respect
to each Contract Year on which the Executive is employed hereunder
on the
last day, the Executive shall be eligible to receive a bonus (the
"Bonus"),
as determined pursuant to the Coach, Inc. Performance-Based Annual
Incentive Plan or another "qualified performance-based
compensation" bonus
plan that has been approved by the stockholders of the Company in
accordance with the provisions for such approval under Code Section
6
162(m) and the regulations promulgated thereunder (collectively,
the "Bonus
Plan"), and on the basis of the Executive's or the Company's
attainment of
objective financial or other operating criteria established by the
Committee in its sole discretion and in accordance with Code
Section 162(m)
and the regulations promulgated thereunder. With respect to each
Contract
Year (i) the Executive shall be eligible to receive a maximum Bonus
(the
"Maximum Bonus") in an amount equal to at least 75% of his Annual
Base
Salary and (ii) the Executive's target-level Bonus (the "Target
Bonus")
shall be equal to 75% of the amount of the Maximum Bonus. In
addition, the
Executive shall be eligible to participate in any other bonus plan
or
program that may be established by the Committee and that covers
the
Executive (even if such plan or program does not provide for
qualified
performance-based bonuses within the meaning of Code Section
162(m)).
Notwithstanding anything to the contrary in the Bonus Plan, the
parties
acknowledge and agree that with respect to each Contract Year, the
Company
shall pay the Bonus to the Executive within the period required by
Section
409A such that it qualifies as a "short-term deferral" pursuant to
Section
1.409A-1(b)(4) of the Department of Treasury Regulations.
(c) Stock Options
(i) During the Term, the Executive shall be eligible to be
granted Options at such time(s) and in such amount(s) as may be
determined by the Committee in its sole discretion; provided, that
the
Executive shall be granted such Options in accordance with the
Company's customary past practice unless the Committee determines
in
its good faith discretion that the amount or timing of such Option
grants shall be revised based upon the Executive's performance.
(ii) In addition to any Options granted in accordance with
subsection (i), as of the Effective Date the Executive shall be
granted a non-qualified stock option (the "Retention Options") to
purchase 136,435 shares of Common Stock pursuant to either or both
of
the Stock Incentive Plans, which Retention Option shall be
evidenced
by one or more written Retention Stock Option Agreements to be
entered
into by and between the Company and Executive as of the date
hereof,
each in substantially the form attached hereto as Exhibit B. The
Retention Options shall have an exercise price equal to the fair
market value per share of Common Stock as of the Effective Date and
shall have a term of 10 years. The Retention Options shall become
exercisable in three cumulative installments as follows: (A) the
first
installment shall consist of 20% of the shares of Common Stock
covered
by the Retention Options and shall become vested and exercisable on
June 30, 2008, (B) the second installment shall consist of 20% of
the
shares of Common Stock covered by the Retention Options and shall
become vested and exercisable on June 30, 2009 and (C) the third
installment shall consist of 60% of the shares of Common Stock
covered
by the Retention Options and shall become exercisable on June 30,
2010; provided, that, except as otherwise provided in Section 7 or
in
the Retention Stock Option Agreement, no portion of the Retention
Options not then exercisable shall become exercisable following the
Executive's termination of employment for any reason. In the event
of
the Executive's termination of employment for any reason other
7
than for Cause, the Retention Options to the extent then
exercisable
shall remain exercisable until the earlier of (x) the date provided
in
the Retention Stock Option Agreement or (y) the tenth anniversary
of
the Effective Date. The Company and the Executive acknowledge and
agree that the Retention Options shall not provide for the grant of
any "Restoration Options" as defined in the Company's 2000 Stock
Incentive Plan.
(d) Restricted Stock Units
(i) During the Term, the Executive shall be eligible to be
awarded Restricted Stock Units ("RSUs") and other equity
compensation
awards pursuant to the Stock Incentive Plans (or any other equity
based compensation plan that may be adopted by the Company from
time
to time), at such time(s) and in such amount(s) as may be
determined
by the Committee in its sole discretion.
(ii) In addition to any RSUs awarded in accordance with
subsection (i), as of the Effective Date the Executive shall be
awarded 38,101 RSUs (the "Retention RSUs") pursuant to either or
both
of the Stock Incentive Plans, which Retention RSUs shall be
evidenced
by one or more written Retention RSU Agreements to be entered into
by
and between the Company and Executive as of the date hereof, each
in
substantially the form attached hereto as Exhibit C. The Retention
RSUs shall become vested with respect to 20% of the Retention RSUs
on
each of June 30, 2008 and June 30, 2009 and with respect to 60% of
the
Retention RSUs on June 30, 2010; provided, that, except as
otherwise
provided in Section 7 or in the Retention RSU Agreement, no
Retention
RSUs not then vested shall become vested following the Executive's
termination of employment.
(e) Benefits. The Executive shall be entitled to receive such
benefits and to participate in such employee group benefit plans,
including
life, health and disability insurance policies, as are generally
provided
by the Company to its senior executives in accordance with the
plans,
practices and programs of the Company.
(f) Expenses. The Company shall reimburse the Executive for all
reasonable and necessary expenses incurred by the Executive in
connection
with the performance of the Executive's duties as an employee of
the
Company. Such reimbursement is subject to the submission to the
Company by
the Executive of appropriate documentation and/or vouchers in
accordance
with the customary procedures of the Company for expense
reimbursement, as
such procedures may be revised by the Company from time to time.
(g) Vacations. The Executive shall be entitled to paid vacation
in accordance with the Company's vacation policy as in effect from
time to
time. However, in no event shall the Executive be entitled to less
than
four weeks vacation per Contract Year. The Executive shall also be
entitled
to paid holidays and personal days in accordance with the Company's
practice with respect to same as in effect from time to
8
time (but in no event shall the Executive be entitled to fewer than
two
personal days per Contract Year).
(h) Transportation Allowance. During the Term, the Company shall
provide the Executive with a transportation allowance in accordance
with
the Company's applicable policies and procedures.
6. Termination. The Executive's employment hereunder may be
terminated
by the Company, on the one hand, or the Executive, on the other
hand, as
applicable, without any breach of this Agreement only under the
following
circumstances:
(a) Terminations
(i) Death. The Executive's employment hereunder shall
terminate upon his death.
(ii) Disability. In the event of the Executive's Disability,
the Company may give the Executive written notice of its intention
to
terminate the Executive's employment. In such event, the
Executive's
employment with the Company shall terminate effective on the 14th
day
after delivery of such notice, provided that within the 14 days
after
such delivery, the Executive shall not have returned to full-time
performance of his duties.
(iii) Cause. The Company may terminate the Executive's
employment hereunder for Cause; provided, however, that,
notwithstanding the foregoing, if (A) the Company terminates the
Executive's employment for Cause pursuant to Section 1(e)(iii) and
(B)
the Executive (i) is not indicted for, or otherwise charged by any
court or other governmental or regulatory authority with, any
felony
or any other crime involving fraud, embezzlement, material
misconduct
or misappropriation having a material adverse impact on the Company
(which felony or other crime was the reason for such termination)
within 18 months following the date of his termination of
employment,
or (ii) is not convicted of, does not plea no contest to, and does
not
receive unadjudicated probation for, any felony (or any other crime
involving fraud, embezzlement, material misconduct or
misappropriation
having a material adverse impact on the Company) (which felony or
other crime was the reason for such termination), then the
Executive's
termination of employment will be deemed to be without Cause and
the
Executive shall retroactively be eligible for severance payments to
the extent provided by Section 7(b).
(iv) Good Reason. The Executive may terminate his employment
for Good Reason.
(v) Without Cause. The Company may terminate the Executive's
employment hereunder without Cause. A notice by the Company of
non-extension of the Term shall be treated as a termination without
Cause as of the last day of the Term.
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(vi) Resignation without Good Reason. The Executive may
resign his employment without Good Reason upon 180 days written
notice
to the Company.
(b) Notice of Termination. Any termination of the Executive's
employment by the Company or by the Executive under this Section 6
(other
than termination pursuant to paragraph (a)(i)) shall be
communicated by a
written notice to the other party hereto indicating the specific
termination provision in this Agreement relied upon, setting forth
in
reasonable detail any facts and circumstances claimed to provide a
basis
for termination of the Executive's employment under the provision
so
indicated, and specifying a Date of Termination which, except in
the case
of termination for Cause or Disability, shall be at least thirty
days (or
such longer period provided by Section 6(a)(vi)) following the date
of such
notice (a "Notice of Termination"); provided, the Company may pay
out such
notice period instead of employing the Executive.
7. Severance Payments and Benefits
(a) Termination for any Reason. In the event the Executive's
employment with the Company is terminated for any reason, the
Company shall
pay the Executive (or his beneficiary in the event of his death)
any unpaid
Annual Base Salary that has accrued as of the Date of Termination,
any
unreimbursed expenses due to the Executive and an amount for any
accrued
but unused vacation days within 60 days following the Date of
Termination,
or such earlier time as may be required by applicable law. Any
earned but
unpaid Bonus for any fiscal year of the Company completed prior to
the date
of such termination shall be paid within 60 days following the date
such
Bonus is determined pursuant to the Bonus Plan or such earlier time
as may
be required to comply with Section 409A and thereby avoid the
application
of penalty taxes under such section. The Executive shall also be
entitled
to accrued, vested benefits under the Company's benefit plans and
programs
as provided therein. The Executive shall be entitled to the cash
severance
payments described below only as set forth herein and the
provisions of
this Section 7 shall supersede in their entirety any severance
payment
provisions in any severance plan, policy, program or arrangement
maintained
by the Company.
(b) Terminations without Cause or for Good Reason. Except as
otherwise provided by Section 7(c) with respect to certain
terminations of
employment in connection with a Change in Control, if the
Executive's
employment shall terminate without Cause (pursuant to Section
6(a)(v)), or
for Good Reason (pursuant to Section 6(a)(iv)), the Company shall
(subject
to the Executive's entering into a Separation and Release Agreement
with
the Company in substantially the form attached hereto as Exhibit D
(the
"Release")):
(i) Pay to the Executive an amount (the "Severance Amount")
equal to the sum of his then current (A) Annual Base Salary and (B)
Target Bonus for the year of termination; one half of which amount
shall be paid in a cash lump-sum on the six month anniversary of
the
Date of Termination, with the other one-half of the Severance
Amount
payable to the Executive in accordance with the Company's customary
payroll practices in equal monthly installments during
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the period beginning on the six-month anniversary of the Date of
Termination and ending on the 12-month anniversary thereof; and
provided, further, that no amount shall be payable pursuant to this
Section 7(b)(i) on or following the date the Executive first (i)
violates any of the covenants set forth in Section 9(a) or 9(b), or
(ii) materially violates any of the covenants set forth in Section
9(c), 9(e) or 9(f);
(ii) Continue to provide the Executive with all health and
welfare benefits and perquisites which he was participating in or
receiving as of the Date of Termination until the earlier of (A)
the
first anniversary of the Date of Termination or (B) the date the
Executive first (i) violates any of the covenants set forth in
Section
9(a) or 9(b), or (ii) materially violates any of the covenants set
forth in Section 9(c), 9(e) or 9(f). If such benefits cannot be
provided under the Company's programs, such benefits and
perquisites
will be provided on an individual basis to the Executive such that
his
after-tax costs will be no greater than the costs for such benefits
and perquisites under the Company's programs. Notwithstanding the
foregoing, the parties acknowledge and agree that no payment or
benefit shall be made pursuant to this Section 7(b)(ii) to the
extent
that such payment or benefit would, pursuant to Section
1.409A-1(b)(9)(iv) of the Department of Treasury Regulations,
constitute a deferral of compensation subject to Section 409A (and
to
the extent permissible any such payment or benefit shall be
modified
to comply with Section 1.409A-1(b)(9)(iv) of the Department of
Treasury Regulations); ==
(iii) Notwithstanding any provision to the contrary in any
Option or RSU agreement, cause all (A) Retention RSUs and Retention
Options not vested or exercisable as of the Date of Termination to
remain or become vested and remain exercisable in accordance with
the
terms and conditions of the applicable Retention Option or
Retention
RSU agreement and (B) Options and RSUs (other than the Retention
Options and the Retention RSUs) then held by the Executive to
continue
to become vested and exercisable in accordance with their terms as
if
the Executive had remained employed by the Company until the first
anniversary of the Date of Termination (and all Options and RSUs
(other than the Retention Options and the Retention RSUs) that do
not
become vested and exercisable on or prior to the first anniversary
of
the Date of Termination shall thereupon be forfeited).
Notwithstanding
the foregoing, the parties acknowledge and agree that no payment or
benefit shall be made pursuant to this Section 7(b)(iii) to the
extent
that such payment or benefit would, pursuant to Section
1.409A-1(b)(5)(v) of the Department of Treasury Regulations,
constitute a modification, extension or renewal of a stock right
subject to Section 409A (and to the extent permissible any such
payment or benefit shall be modified to comply with Section
1.409A-1(b)(5)(v) of the Department of Treasury Regulations); =
(iv) Pay to the Executive a Pro-Rata Bonus, as defined in
Section 7(d), when bonuses are paid for the year of termination
based
on actual results and the relative portion of the fiscal year
during
which the Executive was employed.
11
(c) Certain Terminations in connection with a Change in Control.
If the Executive's employment shall terminate without Cause
(pursuant to
Section 6(a)(v)) or for Good Reason (pursuant to Section 6(a)(iv))
within
six months prior to a Change in Control or during the 12 month
period
immediately following such Change in Control, the Company shall
(subject to
the receipt of the Release):
(i) Pay to the Executive an amount equal to the Severance
Amount; one half of which amount shall be paid in a cash lump-sum
on
the six month anniversary of the Date of Termination, with the
other
one-half of the Severance Amount payable to the Executive in
accordance with the Company's customary payroll practices in equal
monthly installments during the period beginning on the six-month
anniversary of the Date of Termination and ending on the 12-month
anniversary thereof; and provided, further, that no amount shall be
payable pursuant to this Section 7(b)(i) on or following the date
the
Executive first (i) violates any of the covenants set forth in
Section
9(a) or 9(b), or (ii) materially violates any of the covenants set
forth in Section 9(c), 9(e) or 9(f);
(ii) Continue to provide the Executive with all health and
welfare benefits and perquisites which he was participating in or
receiving as of the Date of Termination until the earlier of (A)
the
first anniversary of the Date of Termination or (B) the date the
Executive first (i) violates any of the covenants set forth in
Section
9(a) or 9(b), or (ii) materially violates any of the covenants set
forth in Section 9(c), 9(e) or 9(f). If such benefits cannot be
provided under the Company's programs, such benefits and
perquisites
will be provided on an individual basis to the Executive such that
his
after-tax costs will be no greater than the costs for such benefits
and perquisites under the Company's programs. Notwithstanding the
foregoing, the parties acknowledge and agree that no payment or
benefit shall be made pursuant to this Section 7(c)(ii) to the
extent
that such payment or benefit would, pursuant to Section
1.409A-1(b)(9)(iv) of the Department of Treasury Regulations,
constitute a deferral of compensation subject to Section 409A (and
to
the extent permissible any such payment or benefit shall be
modified
to comply with Section 1.409A-1(b)(9)(iv) of the Department of
Treasury Regulations);
(iii) Notwithstanding any provision to the contrary in any
Option or RSU agreement, cause all Options (including without
limitation the Retention Options), RSUs (including without
limitation
the Retention RSUs) and other equity based compensation awards then
held by the Executive to become fully vested and exercisable with
respect to all shares subject thereto effective immediately prior
to
the Date of Termination and all Options shall remain exercisable
for
the remainder of the 10 year term. Notwithstanding the foregoing,
the
parties acknowledge and agree that no payment or benefit shall be
made
pursuant to this Section 7(c)(iii) to the extent that such payment
or
benefit would, pursuant to Section 1.409A-1(b)(5)(v) of the
Department
of Treasury Regulations, constitute a modification, extension or
renewal of a stock right subject to Section 409A (and to the extent
permissible any such payment or benefit shall be
12
modified to comply with Section 1.409A-1(b)(5)(v) of the Department
of
Treasury Regulations); and
(iv) Pay to the Executive a Pro-Rata Bonus, as defined in
Section 7(d), within 10 days following the date of such
termination.
(d) Termination by Reason of Disability or Death. If the
Executive's employment shall terminate by reason of his Disability
(pursuant to Section 6(a)(ii)) or death (pursuant to Section
6(a)(i)), then
(i) the Company shall pay to the Executive (or Executive's estate)
a
pro-rated amount of the Executive's Target Bonus for the Contract
Year in
which the Date of Termination occurs (the "Pro-Rata Bonus"); (ii)
all
Retention Options and Retention RSUs not vested or exercisable as
of the
Date of Termination shall thereupon be forfeited; provided, that in
the
alternative the Committee may, in its sole discretion, cause all or
any
portion of any Retention Options or Retention RSUs then held by the
Executive to become vested and exercisable effective as of the Date
of
Termination; and (iii) all Options and RSUs (other than Retention
Options
and the Retention RSUs) then held by the Executive shall be or
become
vested and shall remain exercisable in accordance with the terms of
the
applicable Option or RSU agreement.
(e) Termination for Cause or without Good Reason. If the
Executive's employment shall terminate by reason of his voluntary
resignation without Good Reason (pursuant to Section 6(a)(vi)) or
by the
Company for Cause (pursuant to Section 6(a)(iii)), then (i)
notwithstanding
any provision to the contrary in any Option or RSU agreement, all
Retention
RSUs and Retention Options not vested or exercisable as of the Date
of
Termination shall thereupon be forfeited and (ii) all Options and
RSUs
(other than the Retention Options and the Retention RSUs) or other
equity
based compensation awards not vested or exercisable as of the Date
of
Termination shall thereupon be forfeited and, except as set forth
in
Section 7(a), the Company shall have no further obligations to the
Executive.
(f) Survival. The expiration or termination of the Term shall not
impair the rights or obligations of any party hereto which shall
have
accrued hereunder prior to or in connection with such expiration or
termination.
(g) No Mitigation. The Executive shall have no obligation to
mitigate any payments due hereunder. Any amounts earned by the
Executive
from other employment shall not offset amounts due hereunder,
except as
provided in this Section 7.
8. Parachute Payments.
(a) If it is determined by a nationally recognized United States
public accounting firm selected by the Company and approved in
writing by
the Executive (which approval shall not be unreasonably withheld)
(the
"Auditors") that any payment or benefit made or provided to the
Executive
in connection with this Agreement or otherwise (including without
limitation any Option or RSU vesting) (collectively, a "Payment"),
would be
subject to the excise tax imposed by Section 4999 of the Code (the
"Parachute Tax"), then the Company shall pay to the Executive,
prior to the
time the
13
Parachute Tax is payable with respect to such Payment, an
additional
payment (a "Gross-Up Payment") in an amount such that, after
payment by the
Executive of all taxes (including any Parachute Tax) imposed upon
the
Gross-Up Payment, the Executive retains an amount of the Gross-Up
Payment
equal to the Parachute Tax imposed upon the Payment. The amount of
any
Gross-Up Payment shall be determined by the Auditors, subject to
adjustment, as necessary, as a result of any Internal Revenue
Service
position. For purposes of making the calculations required by this
Agreement, the Auditors may make reasonable assumptions and
approximations
concerning applicable taxes and may rely on reasonable, good faith
interpretations concerning the application of Sections 280G and
4999 of the
Code, provided that the Auditors' determinations must be made with
substantial authority (within the meaning of Section 6662 of the
Code).
(b) The federal tax returns filed by the Executive (and any
filing made by a consolidated tax group which includes the Company)
shall
be prepared and filed on a basis consistent with the determination
of the
Auditors with respect to the Parachute Tax payable by the
Executive. The
Executive shall make proper payment of the amount of any Parachute
Tax, and
at the request of the Company, provide to the Company true and
correct
copies (with any amendments) of his federal income tax return as
filed with
the Internal Revenue Service, and such other documents reasonably
requested
by the Company, evidencing such payment. If, after the Company's
payment to
the Executive of the Gross-Up Payment, the Auditors determine in
good faith
that the amount of the Gross-Up Payment should be reduced or
increased, or
such determination is made by the Internal Revenue Service, then
within ten
business days of such determination, the Executive shall pay to the
Company
the amount of any such reduction, or the Company shall pay to the
Executive
the amount of any such increase; provided, however, that in no
event shall
the Executive have any such refund obligation if it is determined
by the
Company that to do so would be a violation of the Sarbanes-Oxley
Act of
2002, as it may be amended from time to time; and provided,
further, that
if the Executive has prior thereto paid such amounts to the
Internal
Revenue Service, such refund shall be due only to the extent that a
refund
of such amount is received by the Executive; and provided, further,
that
(i) the fees and expenses of the Auditors (and any other legal and
accounting fees) incurred for services rendered in connection with
the
Auditor's determination of the Parachute Tax or any challenge by
the
Internal Revenue Service or other taxing authority relating to such
determination shall be paid by the Company and (ii) the Company
shall
indemnify and hold the Executive harmless on an after-tax basis for
any
interest and penalties imposed upon the Executive to the extent
that such
interest and penalties are related to the Auditor's determination
of the
Parachute Tax or the Gross-Up Payment. Notwithstanding anything to
the
contrary herein, the Executive's rights under this Section 8 shall
survive
the termination of his employment for any reason and the
termination or
expiration of this Agreement for any reason.
9. Certain Restrictive Covenants
(a) The Executive shall not, at any time during the Term or
during the 12-month period following the Date of Termination (the
"Restricted Period") directly or indirectly engage in, have any
equity
interest in, or manage or operate any (i) Competitive Business, or
(ii) new
luxury accessories business that competes directly with
14
the existing or planned product lines of the Company; provided,
however,
that the Executive shall be permitted to acquire a passive stock or
equity
interest in such a business provided the stock or other equity
interest
acquired is not more than five percent (5%) of the outstanding
interest in
such business; and, provided, further, that this Section 9(a) shall
not
apply in the event that, prior to June 30, 2008 (A) the Executive's
employment is terminated by reason of his voluntary resignation
without
Good Reason (pursuant to Section 6(a)(vi)), (B) the Executive's
employment
is terminated by the Company without Cause (pursuant to Section
6(a)(v)) or
(C) the Executive's employment is terminated by the Executive for
Good
Reason (pursuant to Section 6(a)(iv)) and, in connection with such
termination, the Executive agrees in writing to waive his right to
receive
all payments and benefits that he would otherwi
