TRANSITION EMPLOYMENT AGREEMENT
This
Transition Employment Agreement (hereafter this “Agreement”),
dated
as of July 4, 2008, is hereby entered into by and between Xxxxx Xxxxx (the
“Executive”),
and
Coach, Inc., a Maryland corporation (together with its subsidiaries and
affiliates, the “Company”).
WHEREAS,
the Executive has been an employee of the Company prior to the execution of
this
agreement but has informed the Company of his intention to leave his full-time
employment with the Company;
WHEREAS,
the Company wishes to engage the Executive on a part-time basis and to ensure
that the Executive adheres to certain restrictive covenants in his employee
stock option agreements and to extend the scope and duration of these covenants
in exchange for additional consideration to the Executive;
THEREFORE,
in exchange for the good and valuable consideration set forth herein, the
adequacy of which is specifically acknowledged, the Executive and Company hereby
agree as follows:
1.
Transition
of Employment.
(a)
The
Executive shall resign his full-time employment with the Company, effective
July
4, 2008 (the “Transition
Date”).
Effective as of the end of business on the Transition Date, Executive’s status
shall convert to that of a part-time employee, and he shall no longer serve
as
an Executive Officer of the Company. Notwithstanding anything contained herein
to the contrary, after the Transition Date, the Executive shall remain a
Director of the Board of Directors of Coach (the “Board”).
The Executive, however, will not be deemed an Outside Director and shall not
receive additional compensation for such service to the Board. From the
Transition Date until August 31, 2009 (the “Term”),
the Executive’s employment with the Company shall be governed by this Agreement.
The Executive’s job duties shall consist of consulting on an as-needed basis to
Xxx Xxxxxxxxx, Coach’s Chairman and Chief Executive Officer, or such other
corporate officer(s) as Mr. Frankfort shall designate. As consideration for
the
services the Executive performs during the Term, the Executive shall receive
a
salary for these services of $14,819 per month.
The
Executive is a party to an Employment Agreement, dated June 1, 2003 and amended
by Letter Agreement, dated August 22, 2005 (collectively, the “Employment
Agreement”).
All terms not otherwise defined herein shall have the meaning set forth in
the
Employment Agreement. Upon the Transition Date, the Employment Agreement shall
be deemed null and void except as provided for in this Agreement. Additionally,
upon the Transition Date, Executive’s Extension Options shall be cancelled. As
consideration for the services the Executive performs during the Term, the
Executive shall remain eligible to receive continued vesting of all other stock
options and restricted stock units during the period of his part-time
employment, except for the Extension Options. Executive agrees that during
the
Term he shall not defer any compensation pursuant to Coach’s retirement or
supplemental retirement plans for purposes of accruing additional benefits.
This
Agreement shall not effect the retirement benefits previously earned by the
Executive (which includes, but is not limited to, all company matching and
profit-sharing contributions with respect to fiscal year 2008 under Coach’s
Savings and Profit Sharing Plan and Supplemental Retirement Plan, whether paid
prior to or after the Transition Date). For the avoidance of doubt, the parties
acknowledge and agree that, notwithstanding any provision of this Agreement,
the
Executive’s rights pursuant to Section 13 of the Employment Agreement shall
survive in accordance with the terms thereof. Other than bonuses earned for
fiscal year 2008, Executive shall not receive any bonus (including the
make-whole special retirement bonus) for his part-time employment. Executive’s
part-time employment shall terminate on the completion of the Term, or
immediately upon Executive’s violation of any of the covenants set forth in this
Agreement or by written agreement between Executive and Coach (either a
“Termination
Date”).
(b)
During
the Term, as an active employee, the Executive shall continue to participate
in
the Company’s group medical, dental, vision, long-term disability and executive
life insurance plans. For the avoidance of doubt, any payments due during the
Term with respect to the Executive’s coverage under the executive life insurance
plan, including the December 2008 payment, shall be paid by the Company.
Following the Termination Date, Executive shall continue to participate in
the
Company’s group medical plan through the date he becomes eligible for Medicare.
The premium charged after the Transition Date shall be the same rate charged
to
other employees of the Company for similar coverage. After the Termination
Date,
participation in the medical plan will be on an after-tax basis and Executive
shall make payment by check to the Company at the higher of (i) the same rate
charged to other employees of the Company for similar coverage or (ii) the
same
rate charged other participants of any executive retiree medical plan then
maintained by the Company. Executive acknowledges that he has received and
read
the summary plan description for the plan. Notwithstanding the foregoing, should
the Company implement a Medicare supplement plan for retired employees or any
other post-termination medical plan for executives subsequent to the Termination
Date, Executive shall be considered eligible for such plan.
(c)
Notwithstanding
anything to the contrary in the Coach Supplemental Retirement Plan, the
Executive’s vested account balance under such plan shall be distributed to the
Executive on March 1, 2010.
(d)
Executive
shall retain his leased automobile during the period of his part-time
employment, and the Company shall continue to provide insurance coverage on
the
automobile. Following the Termination Date, Executive may purchase his leased
automobile or return it to the Company.
(e)
The
Company shall reimburse the Executive for his travel expenses incurred in
accordance with the Company’s Travel and Entertainment Policy and for other
reasonable and documented out-of-pocket expenses incurred in performing his
duties under this Agreement. Executive shall retain his Company-provided cell
phone, Blackberry and Portal access card for use during the term of his
part-time employment.
(f)
Notwithstanding
any other provision of this Section 1, all reimbursement of expenses pursuant
to
this Section 1 shall be made in accordance with the terms of Section
7(c).
2.
Stock
Options and Restricted Stock Units.
(a)
Subject
to the Executive’s compliance with Section 2(b) of this Agreement, Stock Options
(other than the Extension Options) held by the Executive (the “Options”)
and Restricted Stock Units (“RSUs”)
shall continue to vest during and subsequent to the period of the Executive’s
part-time employment. The Company acknowledges that the Executive has achieved
retirement status and all existing Options shall continue to vest according
to
their terms regardless of Executive’s status under this Agreement.
(b)
Executive
shall be permitted to exercise vested Options and/or sell the shares underlying
those Options. Notwithstanding anything contained in this Agreement to the
contrary, if Executive engages in any activity prohibited by Section 3 below
(collectively, “Prohibited
Conduct”)
during the Non-Compete Period (as defined below), then (i) Executive’s
unexercised stock options and RSUs shall be forfeited automatically on the
date
on which Executive first engaged in such Prohibited Conduct, and (ii) Executive
shall pay to the Company in cash any Financial Gain (as defined in the
applicable Option or RSU grant agreement) Executive realized from exercising
all
or a portion of Executive’s stock options or RSUs within the six (6) month
period immediately preceding such Prohibited Conduct.
(c)
The
Executive agrees that after the Transition Date and until the Termination Date,
he will not engage in any “stock swap” exercises of Coach stock options, and
that if he does so the Company shall be permitted to cancel any restoration
stock options he receives in such transactions.
(d)
In
the event of any conflict between (i) the Option Plan and/or any grant agreement
relating to any Option or (ii) and RSU grant agreement, on one hand, and this
Agreement, on the other hand, this Agreement shall control.
(e)
Provided
the Executive is not in material breach of this Agreement, he shall receive
(i)
the full benefit of RSUs vesting prior to the Termination Date and (ii) the
pro
rata benefit as of the Termination Date of any RSUs vesting after the
Termination Date, which shall be distributed on the date such RSUs would have
otherwise been issued to the Executive pursuant to the terms of the applicable
RSU grant agreement.
3.
Non-Compete;
Non-Solicitation; Confidentiality; etc.
In exchange for the payments and other benefits set forth in this Agreement,
which the Executive acknowledges is good, valuable and sufficient consideration
for the covenants set forth in this Section 3, the parties agree as
follows:
(a)
During
the period beginning on the Transition Date and ending on August 10, 2010 (the
“Non-Compete
Period”),
the Executive will comply with the provisions of Section 9(a) of the Employment
Agreement. The Executive acknowledges that compliance with this Paragraph 3(a)
is necessary to protect the business and good will of the Company and that
a
breach of any of these provisions will irreparably and continually damage the
Company, for which money damages may not be adequate.
(b)
During
the Non-Compete Period, the Executive will not (and will not permit any employee
in his chain of command employed at a level equivalent to a director level
employee of the Company or above) directly or indirectly, hire, recruit or
otherwise solicit or induce any employee, consultant, director, wholesale
customer, vendor, supplier, lessor or lessee of the Company to terminate its
employment or arrangement with the Company, or, for employees only, establish
any relationship with the Executive or employees in his chain of command for
any
business purpose.
(c)
Except
as required in the good faith opinion of the Executive in connection with the
performance of the Executive’s duties hereunder, the Executive shall maintain in
confidence and shall not directly, indirectly or otherwise, use, disseminate,
disclose or publish, or use for his benefit or the benefit of any person, firm,
corporation or other entity any confidential or proprietary information or
trade
secrets of or relating to the Company (or which the Company has a right to
use),
including, without limitation, confidential or proprietary information with
respect to the Company’s operations, processes, systems, access codes or
passwords, security protocols, databases, products, inventions, business
practices, finances, principals, vendors, suppliers, customers (including credit
card information or other customer private information), potential customers,
marketing methods, costs, prices, contractual relationships, regulatory status,
compensation paid to employees, other terms of employment or employee
confidential information, or deliver to any person, firm, corporation or other
entity any document, record, notebook, computer program or similar repository
of
or containing any such confidential or proprietary information or trade secrets.
The parties hereby stipulate and agree that as between them the foregoing
matters are important, material and confidential proprietary information and
trade secrets and affect the successful conduct of the businesses of the Company
(and any successor or assignee of the Company). For purposes of this Agreement,
confidential or proprietary information shall not include information which
is
or becomes generally available to the public other than by breach of this
Agreement.
(d)
The
Executive agrees that, upon the Termination Date, he will deliver to the Company
all correspondence, drawings, manuals, letters, notes, notebooks, reports,
programs, plans, proposals, financial documents, electronically stored data,
computer equipment or software, access codes or disks and instructional manuals
or any other documents concerning the Company’s customers, business plans,
sourcing and operations, marketing strategies, products or processes and/or
which contain proprietary information or trade secrets;
provided
that the Executive may retain his rolodex, address book and similar information
and any non-proprietary documents he received as a director.
(e)
Notwithstanding
Section 3(c), the Executive may respond to a lawful and valid subpoena or other
legal process or other government or regulatory inquiry but shall give the
Company prompt notice thereof (except to the extent legally prohibited), and
shall, as much in advance of the return date as is reasonably practicable,
make
available to the Company and its counsel copies of any documents sought which
are in the Executive’s possession or to which the Executive otherwise has
reasonable access. In addition, the Executive shall reasonably cooperate with
and assist the Company and its counsel at any time and in any manner reasonably
requested by the Company or its counsel (with due regard for the Executive’s
other commitments if he is not employed by the Company) in connection with
any
litigation or other legal process affecting the Company of which the Executive
has knowledge as a result of his employment with the Company (other than any
litigation with respect to this Agreement). In the event of such requested
cooperation, the Company shall reimburse the Executive’s reasonable out of
pocket expenses.
(f)
The
Executive agrees that if he does not return all Company property or reimburse
the Company for all personal expenses charged to the Company within
30 days
after the later of (i) the Termination Date and (ii) notification to the
Executive, then the Company may reconcile or set off the value of the property
or the amount of the personal charges against any Sale Proceeds to be paid
to
the Executive or other amount due hereunder, or against any amounts due to
the
Executive under any Company non-qualified plans except to the extent that an
offset of any such amounts due to the Executive under any Company non-qualified
plans would cause such amounts to not comply with Section 409A. For purposes
of
this paragraph, the value of any Company property shall be determined by the
Company in its sole discretion.
(g)
Each
of
the parties agrees that it will not disparage or denigrate to any person any
aspect of his or its past relationship with the other, nor the character of
the
other or the other’s agents, representatives, products, or operating methods,
whether past, present, or future, and whether or not based on or with reference
to their past relationship; provided,
however,
that
this paragraph shall have no application to any evidence or testimony requested
of either party hereto by any court or government agency. In the event any
government agency or any of the Company’s present or future labor unions,
adverse parties in actual or potential litigation, suppliers, service providers,
employees or customers initiate communications with the Executive that relate
to
the Company’s business, the Executive agrees that he will inform any such
persons, consistent with this paragraph, of his change in status and direct
such
persons to an appropriate officer or current full-time employee of the
Company.
4.
Release
of Claims by the Executive.
(a)
The
Executive agrees for the Executive, the Executive’s spouse and child or children
(if any), the Executive’s heirs, beneficiaries, devisees, executors,
administrators, attorneys, personal representatives, successors and assigns,
hereby forever to release, discharge, and covenant not to xxx the Company or
any
of its past, present, or future parent, affiliated, related, and/or subsidiary
entities, and all of their past and present directors, shareholders, officers,
general or limited partners, employees, agents, and attorneys, and agents and
representatives of such entities, and employee benefit plans in which the
Executive is or has been a participant by virtue of his employment with the
Company, from any and all claims, debts, demands, accounts, judgments, rights,
causes of action, equitable relief, damages, costs, charges, complaints,
obligations, promises, agreements, controversies, suits, expenses, compensation,
responsibility and liability of every kind and character whatsoever (including
attorneys’ fees and costs), whether in law or equity, known or unknown, asserted
or unasserted, suspected or unsuspected, which the Executive has or may have
had
against such entities based on any events or circumstances arising or occurring
on or prior to the Transition Date (or, with respect to claims of disparagement,
arising or occurring on or prior to the date this Agreement is executed),
arising directly or indirectly out of, relating to, or in any other way
involving in any manner whatsoever, (i) the Executive’s employment with the
Company or the termination thereof or (ii) the Executive’s status at any time as
a holder of any securities of the Company, and any and all claims arising under
federal, state, or local laws relating to employment, or securities, including
without limitation claims of wrongful discharge, breach of express or implied
contract, fraud, misrepresentation, defamation, or liability in tort, claims
of
any kind that may be brought in any court or administrative agency, any claims
arising under Title VII of the Civil Rights Act of 1964, the Age Discrimination
in Employment Act, the Americans with Disabilities Act, the Fair Labor Standards
Act, the Employee Retirement Income Security Act, the Family and Medical Leave
Act, the Securities Act of 1933, the Securities Exchange Act of 1934, and
similar state or local statutes, ordinances, and regulations, provided, however,
notwithstanding anything to the contrary set forth herein, that this General
Release shall not extend to (x) benefit claims under employee pension benefit
plans in which the Executive is a participant by virtue of his employment with
the Company or to benefit claims under employee welfare benefit plans for
occurrences (e.g., medical care, death, or onset of disability) arising after
the execution of this Agreement by the Executive, (y) any obligation assumed
under this Agreement by any party hereto and (z) any right to indemnification
to
which the Executive is entitled under Section 13 of the Employment Agreement
with respect to director and officer liability insurance coverage.
(b)
THE
EXECUTIVE UNDERSTANDS THAT THIS AGREEMENT INCLUDES A RELEASE OF CLAIMS ARISING
UNDER THE AGE DISCRIMINATION IN EMPLOYMENT ACT. THE EXECUTIVE UNDERSTANDS AND
WARRANTS THAT HE HAS BEEN GIVEN A PERIOD OF TWENTY-ONE (21) DAYS TO REVIEW
AND
CONSIDER THIS AGREEMENT. THE EXECUTIVE IS HEREBY ADVISED TO CONSULT WITH AN
ATTORNEY PRIOR TO EXECUTING THE AGREEMENT. BY HIS SIGNATURE BELOW, THE EXECUTIVE
WARRANTS THAT HE HAS HAD THE OPPORTUNITY TO DO SO AND TO BE FULLY AND FAIRLY
ADVISED BY THAT LEGAL COUNSEL AS TO THE TERMS OF THE AGREEMENT. THE EXECUTIVE
FURTHER WARRANTS THAT HE UNDERSTANDS THAT HE MAY USE AS MUCH OR ALL OF HIS
21-DAY PERIOD AS HE WISHES BEFORE SIGNING, AND WARRANTS THAT HE HAS DONE SO.
THE
EXECUTIVE FURTHER WARRANTS THAT HE UNDERSTANDS THAT HE HAS SEVEN (7) DAYS AFTER
SIGNING THIS AGREEMENT TO REVOKE THE AGREEMENT BY NOTICE IN WRITING TO GENERAL
COUNSEL, C/O COACH, 000 XXXX 00XX XXXXXX, XXX XXXX, XX 00000. THIS AGREEMENT
SHALL BE BINDING, EFFECTIVE, AND ENFORCEABLE UPON BOTH PARTIES UPON THE
EXPIRATION OF THIS SEVEN-DAY REVOCATION PERIOD WITHOUT THE COMPANY’S GENERAL
COUNSEL HAVING RECEIVED SUCH REVOCATION, BUT NOT BEFORE SUCH TIME.
5.
Condition
on Certain Obligations of the Company; Further Assurances.
(a)
The
Executive agrees that the Company is likely to suffer adverse financial and/or
employee relations consequences in the event any of the above confidentiality
or
non-disparagement provisions is breached and that the Executive’s agreement to
each is a material portion of the consideration received by the Company
hereunder. The Executive therefore agrees that in the event the Executive
commits such breach, the Company shall have all rights and remedies under law
or
equity including, without limitation, the right upon discovery of such breach
to
obtain an injunction against any further breaches. This paragraph is not
intended to limit any other remedies, in damages or otherwise, that may be
available to the Company for such breach. For the avoidance of doubt, this
paragraph does not apply to Executive’s obligations under Sections 3(a) and 3(b)
above, for which the Company does not claim a right to injunctive
relief.
(b)
The
Company and the Executive agree to execute and deliver such other documents,
certificates, agreements and other writings and to take such other actions
as
may be necessary or desirable in order to consummate or implement expeditiously
the terms of this Agreement.
6.
Taxes.
To the
extent any taxes may be due on the payments made to the Executive provided
in
this Agreement beyond any required to be withheld by the Company, the Executive
agrees to pay them himself and to indemnify and hold the Company and other
entities released by the Executive herein harmless for any tax claims or
penalties resulting from such payments. The Executive further agrees to provide
any and all information pertaining to the Executive upon request as reasonably
necessary for the Company and other entities released herein to comply with
applicable tax laws. The Executive shall make payments by check to the Company
for any taxes due on calendar year 2008 or 2009 imputed income (including,
but
not limited to, imputed income from life insurance and automobile lease premiums
paid by the Company).
7.
Section
409A.
(a)
General.
“Section
409A”
shall
mean Section 409A of the Internal Revenue Code of 1986, as amended, 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 date hereof. The parties acknowledge and agree
that, to the extent applicable, this Agreement shall be interpreted in
accordance with, and the parties agree to use their best efforts to achieve
timely compliance with, Section 409A. Notwithstanding any provision of this
Agreement to the contrary, in the event that the Company determines that any
amounts payable hereunder would otherwise be taxable to the Executive under
Section 409A, the Company may, provided it reasonably determines that any such
amendments are likely to be effective, adopt such limited amendments to this
Agreement and appropriate policies and procedures, including amendments and
policies with retroactive effect, that the Company reasonably determines are
necessary or appropriate to (i) exempt the compensation and benefits payable
hereunder from Section 409A and/or preserve the intended tax treatment of the
compensation and benefits provided hereunder or (ii) comply with the
requirements of Section 409A and thereby avoid the application of penalty taxes
under such Section.
(b)
Separation
from Service.
Notwithstanding any provision to the contrary in this Agreement, if the Company
determines that the Executive is a “specified employee” for purposes of Section
409A(a)(2)(B)(i) of the Code, which shall be determined as of the time of his
separation from service in accordance with the terms of Section 409A of the
Code
and applicable guidance thereunder (including without limitation Section
1.409A-1(i) of the Department of Treasury Regulations), to the extent the
Company determines that delayed commencement of any portion of the termination
benefits to which the Executive is entitled under this Agreement is required
in
order to avoid a prohibited distribution under Section 409A(a)(2)(B)(i) of
the
Code, such portion of the Executive’s termination benefits shall not be provided
to the Executive prior to the earlier of (i) the expiration of the six-month
period measured from the date of the Executive’s “separation from service” with
the Company (as such term is defined in the Department of Treasury Regulations
issued under Section 409A of the Code) or (ii) the date of the Executive’s
death. Upon the earlier of such dates, any payments deferred pursuant to this
Section 7(b) shall be paid in a lump sum to the Executive, and any remaining
payments due under the Agreement shall be paid as otherwise provided herein.
For
purposes of Section 409A, the Executive’s right to receive any installment
payments shall be treated as a right to receive a series of separate and
distinct payments. The parties acknowledge and agree that each payment made
before the fifteenth day of the third month after the later of the end of the
(x) calendar year, or (y) fiscal year, in which the Transition Date occurs
shall
be treated as a short term deferral for purposes of Section 409A to the extent
such payment is deemed not to be consideration for services during the Term.
(c)
Expense
Reimbursement.
The
reimbursement of any expense hereunder shall be made no later than December
31
of the year following the year in which the expense was incurred. The amount
of
expenses reimbursed in one year shall not affect the amount eligible for
reimbursement in any subsequent year.
8.
Severability.
Except
as otherwise specified below, should any portion of this Agreement be found
void
or unenforceable for any reason by a court of competent jurisdiction, the court
should attempt to limit or otherwise modify such provision so as to make it
enforceable, and if such portion cannot be modified to be enforceable, the
unenforceable portion shall be deemed severed from the remaining portions of
this Agreement, which shall otherwise remain in full force and effect. If any
portion of this Agreement is so found to be void or unenforceable for any reason
in regard to any one or more persons, entities, or subject matters, such portion
shall remain in full force and effect with respect to all other persons,
entities, and subject matters. This paragraph shall not operate, however, to
sever either party’s obligation to provide the binding release to all entities
intended to be released hereunder. In the event the Executive should in the
future contend that the Executive’s release of claims is for any reason void,
imperfect, or incomplete, the Executive may not pursue any claim against the
Company (or any other party intended to be released herein) to establish the
invalidity of the release or premised (in whole or in part) on the invalidity
of
the release before or without repaying to the Company the full amount of such
cash payments he has received, less the reasonable value of services actually
provided pursuant to this Agreement, and applicable statutes of limitations
shall be deemed to run in regard to the Executive’s claims without regard to the
parties’ entry into this Agreement.
9.
Entire
Agreement.
Except
as otherwise noted herein, this Agreement sets forth the entire agreement and
understanding of the parties hereto with respect to the matters covered hereby.
This Agreement supersedes and replaces any prior agreement with respect to
employment, compensation continuation and the matters contained in this
Agreement, which Executive may have had with the Company, including, without
limitation, the Employment Agreement.
10.
Applicable
Law.
This
Agreement shall be governed, construed, interpreted and enforced in accordance
with the substantive laws of the state of New York, without reference to the
principles of conflicts of law of New York or any other jurisdiction, and where
applicable, the laws of the United States.
11. Counterparts.
This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original, but all of which taken together shall constitute
one and the same instrument.
12. Successors
and Assigns. This Agreement is binding upon and will inure to the benefit of
the
parties hereto and each of their respective parents, subsidiaries and affiliated
companies, successors and assigns.
13. Executive’s
Understanding. Executive acknowledges by signing this Agreement that Executive
has read and understands this Agreement, that Executive has conferred with
or
had opportunity to confer with Executive’s attorney regarding the terms and
meaning of this Agreement, that Executive has had sufficient time to consider
the terms provided for in this Agreement, that no representatives or inducements
have been made to Executive except as set forth in this Agreement, and that
Executive has signed the same knowingly and voluntarily.
*
* * * *
[signature
page follows]
IN
WITNESS WHEREOF, and intending to be legally bound, the parties have executed
the foregoing on the dates shown below.
XXXXX
XXXXX:
________________________
________________________
Date
COACH,
INC.
By:
________________________
Xxx
Xxxxxxxxx
Chairman,
Chief Executive Officer
________________________
Date
