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 Tucci (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
President, North
American Retail Division.
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 President,
North American Retail Division (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 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 President, North American Retail Division (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
President, North American Retail Division, reporting directly to
the Company's
Chief Executive 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 $650,000 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 125% 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 252,658 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 73,271 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.
9
(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.
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(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
ben
