(Mark One) | ||
þ
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 |
|
For the Fiscal Year Ended April 2, 2005 | ||
or | ||
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware
|
13-2622036 | |
(State or other jurisdiction of
incorporation or organization) |
(IRS Employer
Identification No.) |
|
650 Madison Avenue, New York, New York | 10022 | |
(212) 318-7000 | (Zip Code) | |
(Address of principal executive offices) |
Title of Each Class | Name of Each Exchange on Which Registered | |
Class A Common Stock, $.01 par value | New York Stock Exchange |
Item 1. | Business |
| Apparel Products include extensive collections of mens, womens and childrens clothing; | |
| Home Coordinated products for the home include bedding and bath products, furniture, fabric and wallpaper, paints, broadloom, tabletop and giftware; | |
| Accessories Accessories encompass a broad range of products such as footwear, eyewear, jewelry and leather goods, including handbags and luggage; and | |
| Fragrance Fragrance and skin care products are sold under our Glamorous, Romance, Polo, Lauren, Safari, Blue Label, Black Label and Polo Sport brands, among others. |
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3
For the Year Ended | ||||||||
April 2, | April 3, | |||||||
2005 | 2004 | |||||||
(Unaudited) | (Unaudited) | |||||||
Net revenue
|
$ | 3,359,168 | $ | 2,858,458 | ||||
Net income
|
195,338 | 186,164 | ||||||
Net income per share Basic
|
$ | 1.92 | $ | 1.88 | ||||
Net income per share Diluted
|
$ | 1.88 | $ | 1.84 |
Fiscal Year Ended | ||||||||||||
April 2, | April 3, | March 29, | ||||||||||
Net Revenues by Segment | 2005 | 2004 | 2003 | |||||||||
(Dollars in thousands) | ||||||||||||
Wholesale sales
|
$ | 1,712,040 | $ | 1,210,397 | $ | 1,187,363 | ||||||
Retail sales
|
1,348,645 | 1,170,447 | 1,001,958 | |||||||||
Net sales
|
3,060,685 | 2,380,844 | 2,189,321 | |||||||||
Licensing revenue
|
244,730 | 268,810 | 250,019 | |||||||||
Net revenues
|
$ | 3,305,415 | $ | 2,649,654 | $ | 2,439,340 | ||||||
Fiscal Year Ended | ||||||||||||
April 2, | April 3, | March 29, | ||||||||||
Net Revenues by Geographic Area | 2005 | 2004 | 2003 | |||||||||
(Dollars in thousands) | ||||||||||||
United States and Canada
|
$ | 2,587,233 | $ | 2,073,401 | $ | 1,916,096 | ||||||
Europe
|
579,161 | 464,098 | 458,627 | |||||||||
Other regions
|
139,021 | 112,155 | 64,617 | |||||||||
Net revenues
|
$ | 3,305,415 | $ | 2,649,654 | $ | 2,439,340 | ||||||
4
Mens Black Label |
Customers and Service |
5
Approximate Number of | ||||||||||||
Doors as of April 2, 2005 | ||||||||||||
Polo | Collection | |||||||||||
Brands | Brands | Lauren | ||||||||||
Department Stores
|
3,578 | 163 | 877 | |||||||||
Licensed Stores
|
98 | | | |||||||||
Specialty Stores
|
4,036 | 166 | 82 | |||||||||
Golf and Pro Shops
|
2,210 | | |
| Federated Department Stores, Inc., which represented 18.0%, | |
| Dillard Department Stores, Inc., which represented 17.3%, and | |
| The May Department Stores Company, which represented 15.8%. |
6
Ralph Lauren (58 stores)
Ralph Lauren stores feature the full-breadth of the Ralph Lauren
apparel, accessory and home product assortments in an atmosphere
consistent with the distinctive attitude and luxury positioning
of the Ralph Lauren brand. We operate 42 Ralph Lauren stores in
the United States, 12 Ralph Lauren stores in Europe and 4 Ralph
Lauren stores in other regions.
Club Monaco (61 stores)
Club Monaco stores feature updated fashion apparel and
accessories for both men and women. The brands clean and
updated classic signature style forms the foundation of a modern
wardrobe.
Caban (8 stores)
Caban home concept stores offer a unique shopping experience by
mixing both fashion and interior design in a dynamic retail
environment. Caban stores feature a complete range of product in
bath, bedding, tabletop, home accessories, furniture and apparel.
Rugby (3 stores)
Rugby, the newest brand in the Ralph Lauren family, is a
vertical retail format featuring an aspirational lifestyle
collection of apparel and accessories for men and women. The
brand is characterized by a youthful, preppy attitude which
resonates throughout the line and the store experience.
Ralph Lauren Media
Our e-commerce site offers our customers access to the full
breadth of Ralph Lauren apparel, accessories, and home products
through the internet. Ralph Lauren Media is a 50% owned joint
venture.
| Polo Ralph Lauren outlet stores offer selections of our menswear, womenswear, childrens apparel, accessories, home furnishings and fragrances. Ranging in size from 3,000 to 20,000 square feet, with an average of approximately 9,100 square feet, these stores are principally located in major outlet centers in 35 states and Puerto Rico. | |
| Polo Jeans outlet stores carry all classifications within the Polo Jeans line, including denim, knit and woven tops, sweaters, outerwear, casual bottoms and accessories. Ranging in size from 3,000 to 5,000 square feet, with an average of 4,000 square feet, these stores are located in 11 states, principally in major outlet centers. | |
| Club Monaco outlet stores offer basic and fashion Club Monaco items. Ranging in size from 7,200 to 18,500 square feet, these stores are located in the United States and Canada. |
7
| European outlet stores offer selections of our menswear, womenswear, childrens apparel and accessories. Ranging in size from 2,500 to 13,200 square feet, with an average of approximately 5,400 square feet, these stores are located in 6 countries, principally in major outlet centers. | |
| Ralph Lauren Media sells the full breadth of Ralph Lauren apparel, accessories and home products via its website at www.polo.com. |
| are leaders in their respective markets, | |
| contribute the majority of our product development costs, | |
| provide the operational infrastructure required to support the business, and | |
| own the inventory. |
8
Product Licenses |
Licensing Partner | Licensed Product Category | |
LOreal S.A./ Cosmair, Inc.
|
Mens and Womens Fragrances and Skin Care Products | |
Jones Apparel Group, Inc.
|
Mens and Womens Polo Jeans Casual Apparel and Sportswear | |
Carole Hochman Design
|
Womens Sleepwear, Loungewear, Robes and Daywear | |
Corneliani S.P.A
|
Mens Polo Tailored Clothing | |
Peerless, Inc
|
Mens, Chaps and Lauren Tailored Clothing | |
Sara Lee Corporation
|
Mens Polo Ralph Lauren and Chaps Personal Wear Apparel and Chaps Hosiery for Mens and Boys | |
Reebok International, Inc.
|
Mens, Womens, Boys, Girls, Infants and Toddlers Footwear Dress, Casual and Performance Athletic Footwear | |
Wathne
|
Handbags and Luggage | |
Hot Sox, Inc.
|
Mens and Boys Polo Ralph Lauren and Womens Ralph Lauren and Lauren, and Boys Hosiery | |
New Campaign, Inc.
|
Chaps, Ralph Lauren and Lauren Belts and Other Small Leather Goods | |
Echo Scarves, Inc.
|
Mens Polo Ralph Lauren and Polo Jeans Company and Womens Ralph Lauren and Lauren Scarves and Gloves | |
Retail Brand Alliance, Inc. (successor to Carolee, Inc.)
|
Lauren Womens Jewelry | |
Safilo USA, Inc.
|
Eyewear | |
The Warnaco Group, Inc.
|
Mens Chaps Sportswear | |
Apparel Ventures, Inc.
|
Womens Swimwear | |
Philips Van-Heusen
|
Mens Chaps Dress Shirts | |
Randa Corp
|
Mens Chaps Ties | |
Bandanco Enterprise, Inc. (Champlain)
|
Mens Chaps Luggage |
International Licenses |
| the roll out of new products and brands following their launch in the U.S., | |
| the introduction of additional product lines, |
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| the entrance into new international markets, and | |
| the addition of Ralph Lauren or Polo Ralph Lauren stores in these markets. |
Licensing Partner | Territory | |
Oroton Group/ PRL Australia
|
Australia and New Zealand | |
Doosan Corporation
|
Korea | |
P.R.L. Enterprises, S.A.
|
Panama, Aruba, Curacao, The Cayman Islands, Costa Rica, Nicaragua, Honduras, El Salvador, Guatemala, Belize, Colombia, Ecuador, Bolivia, Peru, Antigua, Barbados, Bonaire, Dominican Republic, St. Lucia, Trinidad and Tobago | |
Dickson Concepts/ PRL Hong Kong
|
Hong Kong, China, Philippines, Malaysia, Singapore, Taiwan and Thailand | |
Impact21
|
Japan | |
Commercial Madison/ PRL Chile
|
Chile |
Ralph Lauren Home |
10
Category | Product | Licensing Partner | ||
Bedding and Bath
|
Sheets, bedding accessories, towels and shower curtains, blankets, down comforters, other decorative bedding and accessories |
WestPoint Stevens, Inc.
Fremaux-Delorme |
||
Bath rugs | Lacey Mills | |||
Home Décor
|
Fabric and wallpaper |
P. Kaufmann, Inc.
Designers Guild Ltd. |
||
Furniture | Henredon Furniture Industries, Inc. | |||
Tabletop and giftware | Mikasa, Inc. | |||
Table linens, placemats, tablecloths and napkins | Brownstone | |||
Home Improvement
|
Interior paints and stains
Broadloom carpets and area rugs |
ICI/Glidden Company Karastan, a division of Mohawk Carpet Corporation |
11
| LDP Purchasing purchases of finished products, where the supplier is responsible for the purchasing and carrying of raw materials, including all logistics and inbound duties and arrangements (custom and broker) to selected country port of entry; | |
| FOB Purchasing purchases of finished products, where the supplier is responsible for the purchasing and carrying of raw materials; and | |
| CMT Purchasing cut, make and trim purchasing, where we are responsible for purchasing and moving raw materials to finished product assemblers located around the world. |
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| anticipate and respond to changing consumer demands in a timely manner; | |
| maintain favorable brand recognition; | |
| develop and produce high quality products that appeal to consumers; | |
| appropriately price our products; | |
| provide strong and effective marketing support; | |
| ensure product availability; and | |
| obtain sufficient retail floor space and effectively present our products at retail. |
| comprehensive order processing; | |
| production information; |
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| accounting information; and | |
| an enterprise view of information for our marketing, manufacturing, importing and distribution functions. |
| Chaps | |
| Polo Sport | |
| Lauren/ Ralph Lauren | |
| Polo Jeans Co. | |
| RRL | |
| Club Monaco | |
| Rugby | |
| RLX | |
| Various trademarks pertaining to fragrances and cosmetics |
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Age 65
Mr. Lauren has been Chairman, Chief Executive Officer and a
director of the Company since prior to the Companys
initial public offering in 1997, and was a member of the
Advisory Board of the Board of Directors of the Companys
predecessors since their organization. He founded Polo in 1967
and has provided leadership in the design, marketing,
advertising and operational areas since such time.
Age 52
Mr. Farah has been President, Chief Operating Officer and a
director of the Company since April 2000. He was Chairman of the
Board of Venator Group, Inc. from December 1994 to April 2000,
and was Chief Executive Officer of Venator Group, Inc. from
December 1994 to August 1999.
Age 53
Ms. Nemerov has been Executive Vice President of the Company
since September 2004. From 1998 to 2002, she was President and
Chief Operating Officer of Jones Apparel Group, Inc.
Age 42
Ms. Travis has been Senior Vice President of Finance and Chief
Financial Officer of the Company since January 2005.
Ms. Travis served as Senior Vice President, Finance at
Limited Brands, Inc., an apparel and personal care products
retailer, from April 2002 until August 2004, and Chief Financial
Officer of Intimate Brands, Inc., a womens intimate
apparel and personal care products retailer, from April 2001 to
April 2002. Prior to that time, Ms. Travis was Chief
Financial Officer of the Beverage Can Americas group at American
National Can, a manufacturer of metal beverage cans, from 1999
to 2001.
Age 55
Mr. Kosh has served as Senior Vice President of Human Resources
and Legal since July 2000. He was Senior Vice President of Human
Resources of Conseco, Inc., from February 2000 to July 2000.
Prior to that, Mr. Kosh held executive human resource
positions with the Venator Group, Inc. starting in 1996.
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| our anticipated growth strategies; | |
| our intention to introduce new products or enter into new licensing alliances; | |
| our plans to open new retail stores; | |
| our ability to make strategic acquisitions of selected licensees; | |
| anticipated effective tax rates in future years; | |
| future expenditures for capital projects; | |
| our ability to continue to maintain our brand image and reputation; | |
| our ability to continue to initiate cost cutting efforts and improve profitability; | |
| our plans to expand internationally; and | |
| our efforts to improve the efficiency of our distribution system. |
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19
| quotas imposed by bilateral textile agreements with non-WTO countries. These agreements limit the amount and type of goods that may be imported annually from these countries; | |
| unilateral quotas imposed by the United States in May 2005 effecting seven product categories under the China Safeguard Agreement; the EU-China Memorandum of Understanding which restricts 10 product categories of imports through 2007; | |
| changes in social, political and economic conditions or terrorist acts that could result in the disruption of trade from the countries in which our manufacturers or suppliers are located; | |
| the imposition of additional regulations relating to imports or exports; |
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| the imposition of additional duties, taxes and other charges on imports or exports; | |
| significant fluctuations of the cost of raw materials; | |
| significant delays in the delivery of cargo due to security considerations; | |
| institution of antidumping of countervailing duty proceedings resulting in the potential assessment of special antidumping or countervailing duties; and | |
| imposition of sanctions in the form of additional duties either by the United States or its trading partners to remedy perceived illegal actions by national governments; currently the EU and Canada are imposing additional duties on certain U.S. products in retaliation for the failure of the U.S. Congress to resolve the Byrd Amendment, and additional sanctions are threatened for 2006 in response to the U.S.s failure to adequately respond to specific WTO decisions. |
| obtain capital; | |
| manage its labor relations; | |
| maintain relationships with its suppliers; | |
| manage its credit risk effectively; and | |
| maintain relationships with its customers. |
21
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| the burdens of complying with a variety of foreign laws and regulations; | |
| unexpected changes in regulatory requirements; and | |
| new tariffs or other barriers to some international markets. |
| political instability and terrorist attacks; | |
| changes in diplomatic and trade relationships; and | |
| general economic fluctuations in specific countries or markets. |
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| anticipating and responding to changing consumer demands in a timely manner; | |
| maintaining favorable brand recognition; | |
| developing innovative, high-quality products in sizes, colors and styles that appeal to consumers; | |
| appropriately pricing products; | |
| providing strong and effective marketing support; | |
| creating an acceptable value proposition for retail customers; | |
| ensuring product availability and optimizing supply chain efficiencies with manufacturers and retailers; and | |
| obtaining sufficient retail floor space and effective presentation of our products at retail. |
24
| general business conditions; | |
| interest rates; | |
| the availability of consumer credit; | |
| taxation; and | |
| consumer confidence in future economic conditions. |
| consolidating their operations; | |
| undergoing restructurings; | |
| undergoing reorganizations; or | |
| realigning their affiliations. |
Item 2. | Properties |
25
Approximate | Current Lease Term | |||||||||
Location | Use | Sq. Ft. | Expiration | |||||||
Greensboro, N.C.
|
Distribution Facility | 1,500,000 | Owned | |||||||
650 Madison Avenue, NYC
|
Executive, corporate office and design studio, Polo Brand showrooms | 206,000 | December 31, 2009 | |||||||
Lyndhurst, N.J.
|
Corporate and retail administrative offices | 162,000 | February 28, 2008 | |||||||
550 7th Avenue, NYC
|
Corporate office, design studio and Womens showrooms | 70,000 | December 31, 2018 | |||||||
625 Madison Avenue, NYC
|
Corporate offices | 33,000 | December 31, 2019 | |||||||
Geneva, Switzerland
|
European corporate offices | 48,000 | March 1, 2013 |
Item 3. | Legal Proceedings |
26
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Item 4. | Submission of Matters to a Vote of Security Holders |
28
Item 5. | Market for Registrants Common Equity and Related Stockholders Matters |
Market Price | |||||||||
of Class A | |||||||||
Common Stock | |||||||||
High | Low | ||||||||
Fiscal 2005:
|
|||||||||
First Quarter
|
$ | 37.05 | $ | 31.23 | |||||
Second Quarter
|
38.57 | 31.01 | |||||||
Third Quarter
|
42.83 | 33.75 | |||||||
Fourth Quarter
|
42.59 | 37.40 | |||||||
Fiscal 2004:
|
|||||||||
First Quarter
|
$ | 27.93 | $ | 21.25 | |||||
Second Quarter
|
30.10 | 25.06 | |||||||
Third Quarter
|
31.52 | 25.96 | |||||||
Fourth Quarter
|
35.35 | 27.28 |
Maximum Number | ||||||||||||||||
(or Approximate | ||||||||||||||||
Total Number of | Dollar Value) of | |||||||||||||||
Total Number | Shares (or Units) | Shares (or Units) | ||||||||||||||
of Shares | Purchased as Part of | That May Yet be | ||||||||||||||
(or Units) | Average Price | Publicly Announced | Purchased Under the | |||||||||||||
Period | Purchased | Paid Per Share | Plans or Programs | Plans or Programs | ||||||||||||
January 2, 2005 to January 29, 2005
|
| | | | (1) | |||||||||||
January 30, 2005 to February 26, 2005
|
| | | | ||||||||||||
February 27, 2005 to April 2, 2005
|
| | | | ||||||||||||
Total
|
| | | |
(1) | The Company has two Class A stock repurchase plans. The initial plan was first publicly announced in March 1998, and the extension of this Plan thru April 1, 2006 was announced on May 26, 2004. Approximately $22.5 million in shares may yet be repurchased under this plan. The second plan was first publicly announced on February 2, 2005. This plan provides for the repurchase of up to an additional $100 million of Class A Common stock. No repurchases have been made under this plan, which does not have a termination date. |
29
Item 6. | Selected Financial Data |
Fiscal Year Ended(1) | ||||||||||||||||||||
April 2, | April 3, | March 29, | March 30, | March 31, | ||||||||||||||||
2005 | 2004 | 2003 | 2002(2) | 2001 | ||||||||||||||||
(As | (As | (As | (As | |||||||||||||||||
Restated)(3) | Restated)(3) | Restated)(4) | Restated)(4) | |||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||||||
Statements of Income:
|
||||||||||||||||||||
Net sales
|
$ | 3,060,685 | $ | 2,380,844 | $ | 2,189,321 | $ | 2,122,333 | $ | 1,982,419 | ||||||||||
Licensing revenue
|
244,730 | 268,810 | 250,019 | 241,374 | 243,355 | |||||||||||||||
Net revenues
|
3,305,415 | 2,649,654 | 2,439,340 | 2,363,707 | 2,225,774 | |||||||||||||||
Cost of goods sold
|
1,620,869 | 1,326,335 | 1,231,739 | 1,216,904 | 1,162,727 | |||||||||||||||
Gross profit
|
1,684,546 | 1,323,319 | 1,207,601 | 1,146,803 | 1,063,047 | |||||||||||||||
Selling, general and administrative expenses
|
1,382,520 | 1,032,862 | 902,303 | 837,478 | 826,649 | |||||||||||||||
Restructuring charge
|
2,341 | 19,566 | 14,443 | 16,000 | 123,554 | |||||||||||||||
Income from operations
|
299,685 | 270,891 | 290,855 | 293,325 | 112,844 | |||||||||||||||
Foreign currency (gains) losses
|
(6,072 | ) | 1,864 | 529 | (1,820 | ) | (5,846 | ) | ||||||||||||
Interest expense
|
6,391 | 10,000 | 13,502 | 19,033 | 25,113 | |||||||||||||||
Income before provision for income taxes
|
299,366 | 259,027 | 276,824 | 276,112 | 93,577 | |||||||||||||||
Provision for income taxes
|
107,336 | 93,875 | 101,141 | 103,545 | 36,913 | |||||||||||||||
Income after tax, before other expense (income)
|
192,030 | 165,152 | 175,683 | 172,567 | 56,664 | |||||||||||||||
Other expense (income), net
|
1,605 | (4,077 | ) | | | | ||||||||||||||
Net income
|
$ | 190,425 | $ | 169,229 | $ | 175,683 | $ | 172,567 | $ | 56,664 | ||||||||||
Net income per share Basic
|
$ | 1.88 | $ | 1.71 | $ | 1.79 | $ | 1.77 | $ | 0.59 | ||||||||||
Net income per share Diluted
|
$ | 1.83 | $ | 1.68 | $ | 1.77 | $ | 1.75 | $ | 0.58 | ||||||||||
Dividends declared per share
|
$ | 0.20 | $ | 0.20 | $ | | $ | | $ | | ||||||||||
Weighted-average common shares outstanding Basic
|
101,519 | 98,977 | 98,331 | 97,470 | 96,773 | |||||||||||||||
Weighted-average common shares outstanding Diluted
|
104,010 | 100,960 | 99,263 | 98,522 | 97,446 | |||||||||||||||
30
Fiscal Year Ended(1)
April 2,
April 3,
March 29,
March 30,
March 31,
2005
2004
2003
2002
2001
(As
(As
(As
(As
Restated)
Restated)
Restated)
Restated)
(3)
(3)
(4)
(4)
(Dollars in thousands)
$
350,485
$
352,335
$
343,606
$
244,733
$
102,219
791,353
781,951
662,386
617,465
462,144
430,082
373,170
363,771
349,818
425,594
2,726,669
2,297,552
2,052,388
1,762,743
1,635,513
290,960
277,345
349,437
318,402
383,100
1,675,708
1,415,447
1,205,583
993,027
803,892
(1) | All periods presented represent a 52-week year, except Fiscal 2004, which represents a 53-week year. |
(2) | Effective December 31, 2001, for reporting purposes the Company changed the fiscal year ends of its European subsidiaries as reported in the consolidated financial statements to the Saturday closest to March 31 to conform with the fiscal year end of the Company. Previously, certain of the European subsidiaries were consolidated and reported on a three-month lag with a fiscal year ending December 31. Accordingly, the net activity shown below for the three-month period ended December 29, 2001, for those European subsidiaries is reported as an adjustment to Retained earnings in the fourth quarter of fiscal 2002 in the accompanying financial statements: |
Three-Months Ended | ||||
December 29, 2001 | ||||
As Restated | ||||
(4) | ||||
(Dollars in millions) | ||||
Net sales
|
$ | 49.5 | ||
Gross profit
|
25.5 | |||
Loss before benefit from income taxes
|
(0.7 | ) | ||
Benefit from income taxes
|
0.3 | |||
Net loss
|
$ | (0.4 | ) |
Twelve-Months Ended | ||||
March 30, 2002 | ||||
As Restated | ||||
(4) | ||||
(Dollars in millions) | ||||
Net revenues
|
$ | 2,286.9 | ||
Gross profit
|
1,105.8 | |||
Income before income taxes
|
255.6 | |||
Provision for income taxes
|
(95.8 | ) | ||
Net income
|
$ | 159.8 |
(3) | See Note 2 to our consolidated financial statements included in this Form 10-K. |
(4) | Fiscal 2002 and Fiscal 2001 have been restated to reflect the lease accounting adjustments discussed in Note 2 to the consolidated financial statements. |
31
Item 7. | Managements Discussion and Analysis of Financial Condition and Results of Operations |
32
33
34
35
For the Year Ended
April 2,
April 3,
2005
2004
(Unaudited)
(Unaudited)
$
3,359,168
$
2,858,458
195,338
186,164
$
1.92
$
1.88
$
1.88
$
1.84
Fiscal Year Ended | ||||||||||||||||||||||||
April 2, | April 3, | March 29, | April 2, | April 3, | March 29, | |||||||||||||||||||
2005 | 2004 | 2003 | 2005 | 2004 | 2003 | |||||||||||||||||||
Net sales
|
$ | 3,060.7 | $ | 2,380.9 | $ | 2,189.3 | 92.6 | % | 89.9 | % | 89.8 | % | ||||||||||||
Licensing revenue
|
244.7 | 268.8 | 250.0 | 7.4 | % | 10.1 | % | 10.2 | % | |||||||||||||||
Net revenues
|
3,305.4 | 2,649.7 | 2,439.3 | 100.0 | % | 100.0 | % | 100.0 | % | |||||||||||||||
Gross profit
|
1,684.5 | 1,323.3 | 1,207.6 | 51.0 | % | 49.9 | % | 49.5 | % | |||||||||||||||
Selling, general and administrative expenses
|
1,382.5 | 1,032.9 | 902.4 | 41.8 | % | 39.0 | % | 37.0 | % | |||||||||||||||
Restructuring charge
|
2.3 | 19.5 | 14.4 | 0.1 | % | 0.7 | % | 0.6 | % | |||||||||||||||
Income from operations
|
299.7 | 270.9 | 290.8 | 9.1 | % | 10.2 | % | 11.9 | % | |||||||||||||||
Foreign currency (gains) losses
|
(6.1 | ) | 1.9 | 0.5 | (0.2 | )% | | | ||||||||||||||||
Interest expense
|
6.4 | 10.0 | 13.5 | 0.2 | % | 0.4 | % | 0.6 | % | |||||||||||||||
Income before provision for income taxes and Other expense
(income)
|
299.4 | 259.0 | 276.8 | 9.1 | % | 9.8 | % | 11.3 | % | |||||||||||||||
Provision for income taxes
|
107.4 | 93.9 | 101.1 | 3.3 | % | 3.5 | % | 4.1 | % | |||||||||||||||
Other expense (income), net
|
1.6 | (4.1 | ) | | 0.0 | % | (0.1 | )% | | |||||||||||||||
Net income
|
$ | 190.4 | $ | 169.2 | $ | 175.7 | 5.8 | % | 6.4 | % | 7.2 | % | ||||||||||||
36
Fiscal 2005 Compared to Fiscal 2004 |
Fiscal Year Ended | ||||||||||||||||
April 2, | April 3, | Increase | ||||||||||||||
2005 | 2004 | (Decrease) | % Change | |||||||||||||
Net revenues:
|
||||||||||||||||
Wholesale
|
$ | 1,712,040 | $ | 1,210,397 | $ | 501,643 | 41.4 | % | ||||||||
Retail
|
1,348,645 | 1,170,447 | 178,198 | 15.2 | % | |||||||||||
Licensing
|
244,730 | 268,810 | (24,080 | ) | (9.0 | )% | ||||||||||
Total Net Revenue
|
$ | 3,305,415 | $ | 2,649,654 | $ | 655,761 | 24.7 | % | ||||||||
| incremental increase from the Lauren line of approximately $280.5 million in the current year due to the inclusion of a full years sales versus one quarters sales in the prior year; | |
| inclusion of sales from the newly acquired Childrenswear line of $180.2 million commencing July 2, 2004; | |
| a $51.2 million decrease in the domestic mens wholesale business, which resulted from a planned reduction in off-price sales and a reduction in spring sales due to a planned reduction of sales to lower margin customers; and | |
| increases in the European wholesale business of approximately $37.4 million on a constant dollar basis, as well as a $28.4 million favorable impact due to a stronger Euro in the current period. |
| a $21.2 million, or 5.5%, increase in comparable full price store sales and a $27.5 million, or 3.9%, increase in comparable outlet store sales. Sales increased $16.3 million, or 4.2%, in comparable full-price stores and a $21.8 million, or 3.1%, in comparable outlet stores on a constant dollar basis. Excluding the extra week in Fiscal 2004, comparable store sales increased 6.1% and 4.9% in full-price and outlet stores, respectively, on a constant dollar basis. Comparable store sales information includes both Ralph Lauren stores and Club Monaco stores. | |
| the inclusion of $60.6 million of sales as a result of consolidation of RL Media. | |
| worldwide store expansion. During Fiscal 2005, the Company added 30 stores and closed 13 stores. Our total store count at April 2, 2005 was 278 stores compared to 261 stores at April 3, 2004. | |
| the stronger Euro during the current year, which accounted for approximately $14.7 million of the increase in net sales. |
| the elimination of $34.6 million of royalties from our domestic licensing business due to the acquisition of the Childrenswear business and a full year without royalties from the Lauren licensee. | |
| a $13.1 million increase in international licensing. |
37
| the charge of $100.0 million recorded in connection with the Jones litigation and the charge of $6.2 million recorded in connection with the credit card matter. | |
| higher selling salaries and related costs of $84.8 million, on a constant dollar basis, in connection with the increase in retail sales and worldwide store expansion. | |
| approximately $19.8 million of the increase in SG&A was due to the impact of foreign currency exchange rate fluctuations, primarily as a result of the strengthening of the Euro Fiscal 2005. | |
| expenses of $29.6 million as a result of the consolidation of Ralph Lauren Media. | |
| incremental expenses of $22.3 million associated with a full years activity in the Lauren wholesale business, exclusive of additional corporate and overhead expenses incurred and reduced royalty revenues received. | |
| expenses of $37.8 million associated with the newly acquired Childrenswear business. |
Fiscal Year Ended | ||||||||||||||||||
April 2, | April 3, | Increase | ||||||||||||||||
2005 | 2004 | (Decrease) | % Change | |||||||||||||||
Income (Loss) from operations
|
||||||||||||||||||
Wholesale
|
$ | 299,710 | $ | 143,080 | $ | 156,630 | 109.5 | % | ||||||||||
Retail
|
82,788 | 55,717 | 27,071 | 48.6 | % | |||||||||||||
Licensing
|
159,537 | 191,575 | (32,038 | ) | (16.7 | )% | ||||||||||||
542,035 | 390,372 | $ | 151,663 | 38.9 | % | |||||||||||||
Less: Unallocated Corporate expense
|
(133,809 | ) | (99,915 | ) | (33,894 | ) | (33.9 | %) | ||||||||||
Unallocated legal and restructuring charges
|
(108,541 | ) | (19,566 | ) | ||||||||||||||
Income from operations
|
$ | 299,685 | $ | 270,891 | ||||||||||||||
38
Fiscal 2004 Compared to Fiscal 2003 |
39
Fiscal Year Ended | ||||||||||||||||
April 3, | March 29, | Increase | ||||||||||||||
2004 | 2003 | (Decrease) | % Change | |||||||||||||
Net revenues:
|
||||||||||||||||
Wholesale
|
$ | 1,210,397 | $ | 1,187,363 | $ | 23,034 | 1.9 | % | ||||||||
Retail
|
1,170,447 | 1,001,958 | 168,489 | 16.8 | % | |||||||||||
Licensing
|
268,810 | 250,019 | 18,791 | 7.5 | % | |||||||||||
Total Net Revenue
|
$ | 2,649,654 | $ | 2,439,340 | $ | 210,314 | 8.6 | % | ||||||||
| the addition of the Lauren line, which accounted for net sales of approximately $109.8 million in the current year, partially offset by: | |
| a $60.4 million decrease in the domestic mens wholesale business, which resulted from a planned reduction in off-price sales and a reduction in spring sales due to a planned reduction of sales to lower margin customers. | |
| the elimination of the womens Ralph Lauren Sport line, which accounted for net sales of approximately $12.3 million in the prior year. | |
| decreases in the European wholesale business, primarily due to the soft economic conditions in Europe, of approximately $65.4 million on a constant dollar basis, offset by a $45.1 million favorable impact due to a stronger Euro in the current period. |
| a $43.7 million, or 14.4%, increase in comparable full-price store sales and a $48.8 million, or 7.6%, increase in comparable outlet store sales on a constant dollar basis. Excluding the extra week in Fiscal 2004, comparable store sales increased 12.2% and 5.7% in full-price and outlet stores, respectively, on a constant dollar basis. Comparable store sales for the 53 weeks increased 18.0% and 8.8% for the full price stores and the outlet stores, respectively, while comparable store sales on a 52 week basis increased 15.8% for full price stores and 6.9% for outlet stores. Comparable store sales information includes both Ralph Lauren stores and Club Monaco stores. | |
| worldwide store expansion. During Fiscal 2004, the Company added 15 stores and closed 7 stores. Our total store count at April 3, 2004 was 261 stores compared to 253 stores at March 29, 2003. | |
| the stronger Euro and Canadian dollar in the current period, accounted for approximately $27.0 million of the increase in net sales. |
| a $27.5 million increase in international licensing primarily due to the incremental effect of the consolidation of revenues from the Japanese master license. | |
| $3.5 million increase in domestic licensing due to improvements in the footwear business. | |
| the loss of $15.8 million of Lauren and Ralph royalties from Jones compared to the prior year. |
40
| Higher selling salaries and related costs of $48.7 million, exclusive of the effect of foreign currency exchange rate fluctuations in connection with the increase in retail sales and worldwide store expansion. | |
| Approximately $30.4 million of the increase in SG&A was due to the impact of foreign currency exchange rate fluctuations, primarily as a result of the strengthening of the Euro and Canadian dollar in Fiscal 2004. | |
| Expenses of $28.1 million associated with the Lauren wholesale business, exclusive of additional corporate and overhead expenses incurred and reduced royalty revenues received. | |
| $19.0 million of increased international licensing SG&A primarily due to the consolidation of incremental expenses relating to the Japanese master license. |
Fiscal Year Ended | |||||||||||||||||
April 3, | March 29, | Increase | |||||||||||||||
2004 | 2003 | (Decrease) | % Change | ||||||||||||||
Income (Loss) from operations
|
|||||||||||||||||
Wholesale
|
$ | 143,080 | $ | 166,016 | $ | (22,936 | ) | (13.8 | )% | ||||||||
Retail
|
55,717 | 30,707 | 25,010 | 81.4 | % | ||||||||||||
Licensing
|
191,575 | 200,189 | (8,614 | ) | (4.3 | )% | |||||||||||
390,372 | 396,912 | $ | (6,540 | ) | (1.6 | )% | |||||||||||
Less: Unallocated Corporate expense
|
(99,915 | ) | (91,614 | ) | (8,301 | ) | (9.1 | )% | |||||||||
Unallocated restructuring
charge
|
(19,566 | ) | (14,443 | ) | |||||||||||||
Income from operations
|
$ | 270,891 | $ | 290,855 | |||||||||||||
41
Liquidity and Capital Resources |
42
Fiscal 2005 Compared to Fiscal 2004 |
43
Fiscal 2004 Compared to Fiscal 2003 |
44
Credit Facilities and Other |
45
| a minimum ratio of consolidated Earnings Before Interest, Taxes, Depreciation, Amortization and Rent (EBITDAR) to Consolidated Interest Expense (as such terms are described in the New Credit Facility); and | |
| a maximum ratio of Adjusted Debt (as defined in the New Credit Facility) to EBITDAR. |
| incur additional debt; | |
| incur liens and contingent liabilities; | |
| sell or dispose of assets, including equity interests; | |
| merge with or acquire other companies, liquidate or dissolve; | |
| engage in businesses that are not a related line of business; | |
| make loans, advances or guarantees; | |
| engage in transactions with affiliates; and | |
| make investments. |
46
Less than
1 Year
1-3 Years
4-5 Years
Thereafter
Total
(Dollars in thousands)
$
466,964
$
$
$
$
466,964
17,821
308,781
326,602
1,046
1,314
2,360
121,992
235,803
200,945
580,696
1,139,436
15,000
15,000
2,150
3,700
1,250
7,100
$
624,973
$
549,598
$
202,195
$
580,696
$
1,957,462
47
48
Revenue Recognition |
Year Ended | ||||||||
April 2, | April 3, | |||||||
2005 | 2004 | |||||||
Beginning reserve balance
|
$ | 90,269 | $ | 48,432 | ||||
Amount expensed
|
265,340 | 213,645 | ||||||
Amount credited against customer accounts
|
(256,730 | ) | (171,808 | ) | ||||
Foreign currency translation
|
1,122 | | ||||||
Ending reserve balance
|
$ | 100,001 | $ | 90,269 | ||||
Income Taxes |
Accounts Receivable, Net |
49
Inventories |
Goodwill, Other Intangibles, Net and Long-Lived Assets |
50
Accrued Expenses |
Derivative Instruments |
Inflation |
Alternative Accounting Methods |
| Two alternative methods for accounting for stock options are available, the intrinsic value method and the fair value method. We use the intrinsic value method of accounting for stock options, and |
51
accordingly, no compensation expense has been recognized. Beginning in Fiscal 2007, we will be required to expense the fair value of stock options granted to employees (see discussion below). Under the fair value method, the determination of the pro forma amounts involves several assumptions including option life and future volatility. If the fair value method were used, diluted earnings per share for Fiscal 2004 would decrease approximately 10%. See Note 1 to the Consolidated Financial Statements. | ||
| Two alternative methods for accounting for wholesale inventories are the First-In, First-Out (FIFO) method and the Last-in, First-out (LIFO) method. We account for all wholesale inventories under the FIFO method. Two alternative methods for accounting for retail inventories are the retail method and the cost method. We account for all retail inventories under the cost method. |
52
Item 7A. | Quantitative and Qualitative Disclosures About Market Risk |
53
Foreign Currency Exchange Rates |
Interest Rates |
Item 8. | Financial Statements and Supplementary Data |
Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
Item 9A. | Controls and Procedures |
54
55
Item 10. | Directors and Executive Officers of the Registrant |
Item 11. | Executive Compensation |
Item 12. | Security Ownership of Certain Beneficial Owners and Management |
Equity Compensation Plan Information at April 2, 2005. |
(a) | (b) | (c) | ||||||||||
Numbers of | Number of Securities | |||||||||||
Securities | Remaining Available for | |||||||||||
to be Issued upon | Future Issuance Under | |||||||||||
Exercise of | Equity Compensation | |||||||||||
Outstanding | Weighted-Average | Plans (Excluding | ||||||||||
Options, Warrants | Exercise Price of | Securities Reflected in | ||||||||||
Plan Category | and Rights | Outstanding Options ($) | Column (a)) | |||||||||
Equity compensation plans approved by security holders
|
10,503,190 | (1) | $ | 25.68 | (2) | 8,772,226 | (3) | |||||
Equity compensation plans not approved by security holders
|
| | | |||||||||
Total
|
10,503,190 | $ | 25.68 | 8,772,226 |
(1) | Consists of 9,626,000 options to purchase shares of our Class A Common Stock and 877,190 restricted stock units that are payable solely in shares of Class A Common Stock. Does not include 284,574 outstanding restricted shares that are subject to forfeiture. |
(2) | Represents the weighted average exercise price of the outstanding stock options. No exercise price is payable with respect to the outstanding restricted stock units. |
(3) | All of the securities remaining available for future issuance set forth in column (c) may be in the form of options, stock appreciation rights, restricted stock, restricted stock units, performance awards or other stock-based awards under the Companys Amended and Restated 1997 Long-Term Stock Incentive Plan or 1997 stock option plan for non-employee directors. An additional 284,574 outstanding shares of restricted stock granted under the Companys Amended and Restated 1997 Long-Term Stock Incentive Plan that remain subject to forfeiture are not reflected in column (c). |
56
Item 13. | Certain Relationships and Related Transactions |
Item 14. | Principal Accounting Fees and Services |
Item 15. | Exhibits and Financial Statement Schedules |
(a) 1, | 2. Financial Statements and Schedules. See index on Page F-1. |
Exhibit | ||||
Number | Description | |||
3 | .1 | Amended and Restated Certificate of Incorporation of the Company (filed as Exhibit 3.1 to the Companys Registration Statement on Form S-1 (File No. 333-24733) (the S-1))* | ||
3 | .2 | Amended and Restated By-laws of the Company (filed as Exhibit 3.2 to the S-1)* | ||
10 | .1 | Polo Ralph Lauren Corporation 1997 Stock Option Plan for Non-Employee Directors (filed as Exhibit 10.2 to the S-1)* | ||
10 | .2 | Registration Rights Agreement dated as of June 9, 1997 by and among Ralph Lauren, GS Capital Partners, L.P., GS Capital Partner PRL Holding I, L.P., GS Capital Partners PRL Holding II, L.P., Stone Street Fund 1994, L.P., Stone Street 1994 Subsidiary Corp., Bridge Street Fund 1994, L.P., and Polo Ralph Lauren Corporation (filed as Exhibit 10.3 to the S-1)* | ||
10 | .3 | U.S.A. Design and Consulting Agreement, dated January 1, 1985, between Ralph Lauren, individually and d/b/a Ralph Lauren Design Studio, and Cosmair, Inc., and letter Agreement related thereto dated January 1, 1985** (filed as Exhibit 10.4 to the S-1)* | ||
10 | .4 | Restated U.S.A. License Agreement, dated January 1, 1985, between Ricky Lauren and Mark N. Kaplan, as Licensor, and Cosmair, Inc., as Licensee, and letter Agreement related thereto dated January 1, 1985** (filed as Exhibit 10.5 to the S-1)* | ||
10 | .5 | Foreign Design and Consulting Agreement, dated January 1, 1985, between Ralph Lauren, individually and d/b/a Ralph Lauren Design Studio, as Licensor, and LOreal S.A., as Licensee, and letter Agreements related thereto dated January 1, 1985, September 16, 1994 and October 25, 1994** (filed as Exhibit 10.6 to the S-1)* | ||
10 | .6 | Restated Foreign License Agreement, dated January 1, 1985, between The Polo/Lauren Company, as Licensor, and LOreal S.A., as Licensee, Letter Agreement related thereto dated January 1, 1985, and Supplementary Agreement thereto, dated October 1, 1991** (filed as Exhibit 10.7 to the S-1)* | ||
10 | .7 | Amendment, dated November 27, 1992, to Foreign Design and Consulting Agreement and Restated Foreign License Agreement** (filed as Exhibit 10.8 to the S-1)* | ||
10 | .8 | Design Services Agreement, dated as of October 18, 1995, by and between Polo Ralph Lauren Enterprises, L.P. and Jones Apparel Group, Inc.** (filed as Exhibit 10.25 to the Companys Annual Report on Form 10-K for the Fiscal Year ended March 28, 1998 (the Fiscal 1998 10-K))* | ||
10 | .9 | License Agreement, dated as of October 18, 1995, by and between Polo Ralph Lauren Enterprises, L.P. and Jones Apparel Group, Inc.** (filed as Exhibit 10-26 to the Fiscal 1998 10-K)* |
57
Exhibit | ||||
Number | Description | |||
10 | .10 | Fiscal and Paying Agency Agreement dated November 22, 1999, among Polo Ralph Lauren Corporation, its subsidiary guarantors and The Bank of New York, as fiscal and principal paying agent (filed as Exhibit 10.1 to the Form 10-Q for the quarterly period ended January 1, 2000)* | ||
10 | .11 | Form of Indemnification Agreement between Polo Ralph Lauren Corporation and its Directors and Executive Officers (filed as Exhibit 10.26 to the S-1)* | ||
10 | .12 | Amended and Restated Employment Agreement, effective as of July 23, 2002, between Polo Ralph Lauren Corporation and Roger N. Farah (filed as Exhibit 10.1 to the Form 10-Q for the quarterly period ended June 29, 2002)* | ||
10 | .13 | Amended and Restated Employment Agreement, dated as of June 17, 2003, between Polo Ralph Lauren Corporation and Ralph Lauren (filed as Exhibit 10.1 to the Form 10-Q for the quarterly period ended June 28, 2003)* | ||
10 | .14 | Non-Qualified Stock Option Agreement, dated as of June 8, 2004, between Polo Ralph Lauren Corporation and Ralph Lauren | ||
10 | .15 | Restricted Stock Unit Award Agreement, dated as of June 8, 2004, between Polo Ralph Lauren Corporation and Ralph Lauren | ||
10 | .16 | Polo Ralph Lauren Corporation Executive Officer Annual Incentive Plan as Amended as of August 14, 2003 (filed as Exhibit 10.1 to the Form 10-Q for the quarterly period ended September 27, 2003)* | ||
10 | .17 | Amendment No. 1, dated July 1, 2004, to the Amended and Restated Employment Agreement between Polo Ralph Lauren Corporation and Roger N. Farah (filed as Exhibit 10.1 to the Form 10-Q for the quarterly period ended October 2, 2004)* | ||
10 | .18 | Restricted Stock Unit Award Agreement, dated as of July 1, 2004, between Polo Ralph Lauren Corporation and Roger N. Farah | ||
10 | .19 | Restricted Stock Award Agreement, dated as of July 23, 2002, between Polo Ralph Lauren Corporation and Roger N. Farah | ||
10 | .20 | Non-Qualified Stock Option Agreement, dated as of July 23, 2002, between Polo Ralph Lauren Corporation and Roger N. Farah | ||
10 | .21 | Deferred Compensation Agreement, dated as of September 19, 2002, between Polo Ralph Lauren Corporation and Roger N. Farah | ||
10 | .22 | Asset Purchase Agreement by and among Polo Ralph Lauren Corporation, RL Childrenswear Company, LLC and The Seller Affiliate Group (as defined therein) dated March 25, 2004 (filed as Exhibit 10.1 to the Form 10-Q for the quarterly period ended July 3, 2004)* | ||
10 | .23 | Amendment No. 1, dated as of July 2, 2004, to Asset Purchase Agreement by and among Polo Ralph Lauren Corporation, RL Childrenswear Company, LLC and The Seller Affiliate Group (as defined therein) (filed as Exhibit 10.2 to the Form 10-Q for the quarterly period ended July 3, 2004)* | ||
10 | .24 | Polo Ralph Lauren Corporation 1997 Long-Term Stock Incentive Plan, as Amended and Restated as of August 12, 2004 (the Stock Incentive Plan) (filed as Exhibit 99.1 to the Form 8-K dated August 12, 2004)* | ||
10 | .25 | Restricted Performance Share Unit Award Overview containing the standard terms of restricted performance share awards under the Stock Incentive Plan | ||
10 | .26 | Stock Option Award Overview U.S. containing the standard terms of stock option award under the Stock Incentive Plan | ||
10 | .27 | Credit Agreement, dated as of October 6, 2004, by and among the Company, JP Morgan Chase Bank, as Administrative Agent, The Bank of New York, Fleet National Bank, SunTrust Bank and Wachovia Bank National Association, as Syndication Agents, J.P.Morgan Securities Inc., as Sole Bookrunner and Sole Lead Arranger, and a Syndicate of Lending Banks (filed as Exhibit 99.1 to the Form 8-K dated October 6, 2004)* | ||
10 | .28 | Employment Agreement, dated as of September 4, 2004, between Polo Ralph Lauren Corporation and Jackwyn Nemerov (filed as Exhibit 10.3 to the Form 10-Q for the quarterly period ended October 2, 2004)* |
58
Exhibit
Number
Description
10
.29
Employment Agreement, dated January 3, 2005, between Polo
Ralph Lauren Corporation and Tracey T. Travis (filed as
Exhibit 10.1 to the Companys 10-Q for the quarter
ended January 1, 2005))*
10
.30
Amended and Restated Employment Agreement, dated as of
September 8, 2003, between Polo Ralph Lauren Corporation
and Mitchell A. Kosh (filed as Exhibit 10.2 to the
Form 10-Q for the quarterly period ended September 27,
2003)*
10
.31
Consulting Agreement, dated as of March 25, 2002, between
Polo Ralph Lauren Corporation and Arnold H. Aronson (filed as
Exhibit 10.34 to the Fiscal 2002 10-K)*
10
.32
Cross Default and Term Extension Agreement, dated May 11,
1998, among PRL USA, Inc., The Polo/ Lauren Company, L.P., Polo
Ralph Lauren Corporation, Jones Apparel Group, Inc. and Jones
Investment Co., Inc. (filed as Exhibit 10.1 to the
Form 10-Q for the quarterly period ended December 28,
2002)*
14
.1
Code of Ethics for Principal Executive Officers and Senior
Financial Officers (filed as Exhibit 14.1 to the Fiscal
2003 Form 10-K)*
21
.1
List of Significant Subsidiaries of the Company
23
.1
Consent of Deloitte & Touche LLP
31
.1
Certification of Ralph Lauren required by 17 CFR
240.13a-14(a)
31
.2
Certification of Tracey T. Travis required by 17 CFR
240.13a-14(a)
32
.1
Certification of Ralph Lauren Pursuant to 18 U.S.C.
Section 1350, as adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
32
.2
Certification of Tracey T. Travis Pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
* | Incorporated herein by reference. |
| is a management contract or compensatory plan or arrangement. |
** | Portions of Exhibits 10.3-10.9 have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission. |
59
POLO RALPH LAUREN CORPORATION |
By: | /s/ TRACEY T. TRAVIS |
|
|
Tracey T. Travis | |
Senior Vice President of Finance | |
and Chief Financial Officer | |
(Principal Financial and | |
Accounting Officer) |
Signature | Title | Date | ||||
/s/
RALPH LAUREN
|
Chairman of the Board, Chief
Executive Officer and Director (Principal Executive Officer) |
June 30, 2005 | ||||
/s/
ROGER N. FARAH
|
President, Chief Operating Officer
and Director |
June 30, 2005 | ||||
/s/
TRACEY T. TRAVIS
|
Senior Vice President and Chief
Financial Officer (Principal Financial and Accounting Officer) |
June 30, 2005 | ||||
/s/
ARNOLD H. ARONSON
|
Director | June 30, 2005 | ||||
/s/
FRANK A. BENNACK,
JR.
|
Director | June 30, 2005 | ||||
/s/
DR. JOYCE F. BROWN
|
Director | June 30, 2005 | ||||
/s/
JUDITH A. MCHALE
|
Director | June 30, 2005 | ||||
/s/
MYRON E. ULLMAN,
III
|
Director | June 30, 2005 |
60
Page | ||||
FINANCIAL STATEMENTS
|
||||
Managements Report on Responsibility for Financial
Statements
|
F-2 | |||
Reports of Independent Registered Public Accounting Firm
|
F-3 | |||
Consolidated Balance Sheets as of April 2, 2005 and
April 3, 2004 (as restated)
|
F-6 | |||
Consolidated Statements of Income for the year ended
April 2, 2005 and for the years ended April 3, 2004
and March 29, 2003 (as restated)
|
F-7 | |||
Consolidated Statements of Stockholders Equity for the
year ended April 2, 2005 and for the years ended
April 3, 2004 and March 29, 2003 (as restated)
|
F-8 | |||
Consolidated Statements of Cash Flows for the year ended
April 2, 2005 and for the years ended April 3, 2004
and March 29, 2003 (as restated)
|
F-9 | |||
Notes to Consolidated Financial Statements
|
F-10 | |||
Schedule II Valuation and Qualifying Accounts
|
F-44 |
F-1
/s/ RALPH LAUREN | /s/ TRACEY T. TRAVIS | |
Ralph Lauren | Tracey T. Travis | |
Chairman and Chief Executive Officer | Senior Vice President and Chief Financial Officer |
F-2
F-3
Table of Contents
F-4
F-5
Table of Contents
Table of Contents
F-6
F-7
F-8
F-9
F-10
F-11
F-12
F-13
F-14
F-15
F-16
F-17
F-18
F-19
F-20
F-21
F-22
F-23
F-24
F-25
F-26
F-27
F-28
F-29
F-30
F-31
F-32
F-33
F-34
F-35
F-36
F-37
F-38
F-39
F-40
F-41
F-42
F-43
F-44
Table of Contents
Fiscal Year Ended
April 2,
April 3,
March 29,
2005
2004
2003
(As Restated
(As Restated
See Note 2)
See Note 2)
(Dollars in thousands, except per share data)
$
3,060,685
$
2,380,844
$
2,189,321
244,730
268,810
250,019
3,305,415
2,649,654
2,439,340
1,620,869
1,326,335
1,231,739
1,684,546
1,323,319
1,207,601
1,382,520
1,032,862
902,303
2,341
19,566
14,443
1,384,861
1,052,428
916,746
299,685
270,891
290,855
(6,072
)
1,864
529
10,964
12,693
19,075
(4,573
)
(2,693
)
(5,573
)
299,366
259,027
276,824
107,336
93,875
101,141
1,605
(4,077
)
$
190,425
$
169,229
$
175,683
$
1.88
$
1.71
$
1.79
$
1.83
$
1.68
$
1.77
101,519
98,977
98,331
104,010
100,960
99,263
$
0.20
$
0.20
$
Table of Contents
Table of Contents
Fiscal Year Ended
April 2,
April 3,
March 29,
2005
2004
2003
(As Restated
(As Restated
See Note 2)
See Note 2)
(Dollars in thousands)
$
190,425
$
169,229
$
175,683
10,103
(5,095
)
9,891
103,633
85,635
80,618
6,020
2,623
1,760
12,851
4,050
1,526
18,604
5,703
1,189
26,239
(15,524
)
1,445
7,700
7,391
13,452
19,566
14,443
(11,637
)
(4,398
)
529
(16,096
)
(56,581
)
(7,798
)
(23,530
)
14,118
6,365
10,470
(30,741
)
(21,347
)
(8,352
)
(29,515
)
2,868
(6,632
)
1,382
(5,080
)
(40,641
)
22,275
102,815
23,490
10,644
381,972
213,608
286,188
(174,138
)
(126,250
)
(102,426
)
(243,248
)
3,839
(30,326
)
(4,548
)
(47,631
)
(7,500
)
(3,100
)
(417,386
)
(134,459
)
(183,483
)
(21,718
)
(14,847
)
(1,052
)
(1,047
)
(4,682
)
54,281
40,414
7,718
68,000
(7,700
)
(100,943
)
(80,000
)
31,511
(76,423
)
(16,664
)
2,053
6,003
12,832
(1,850
)
8,729
98,873
352,335
343,606
244,733
$
350,485
$
352,335
$
343,606
$
10,125
$
10,164
$
19,654
$
107,745
$
60,810
$
65,163
$
273,915
$
$
38,832
241,890
30,326
20,000
$
12,025
$
$
8,506
Table of Contents
1.
Significant Accounting Policies
Principles of Consolidation
Business
Fiscal Year
Use of Estimates
Table of Contents
Revenue Recognition
Year Ending
April 2,
April 3,
2005
2004
$
90,269
$
48,432
265,340
213,645
(256,730
)
(171,808
)
1,122
$
100,001
$
90,269
Income Taxes
Accounts Receivable, Net
Table of Contents
Inventories
Goodwill, Other Intangibles, Net and Long-Lived
Assets
Table of Contents
Inflation
Cash and Cash Equivalents
Property and Equipment, Net
Officers Life Insurance
Deferred Rent Obligations
Other Comprehensive Income
Financial Instruments
Table of Contents
Foreign Currency Transactions and Translations
Cost of Goods Sold and Selling Expenses
Shipping and Handling Costs
Advertising
Table of Contents
Net Income Per Share
Stock Options
Fiscal Year Ended
April 2,
April 3,
March 29,
2005
2004
2003
$
190,425
$
169,229
$
175,683
8,160
2,580
969
21,821
19,156
17,957
$
176,764
$
152,653
$
158,695
$
1.88
$
1.71
$
1.79
$
1.83
$
1.68
$
1.77
$
1.74
$
1.54
$
1.61
$
1.70
$
1.51
$
1.60
Reclassifications
Table of Contents
2.
Restatement of Previously Issued Financial Statements
Table of Contents
April 3, 2004
As
Lease
Previously
Accounting
RL Media
Reported
Adjustments
Consolidation
As Restated
$
343,477
$
$
8,858
$
352,335
363,691
9,479
373,170
100,862
16
(2,521
)
98,357
1,271,319
16
15,816
1,287,151
397,328
11,379
34
408,741
61,579
3,963
65,542
180,772
(3,897
)
176,875
2,270,241
11,461
15,850
2,297,552
187,355
1,564
188,919
234,218
(2,472
)
4,978
236,724
69,693
20,559
9,308
99,560
1,422,073
(6,626
)
1,415,447
2,270,241
11,461
15,850
2,297,552
Fiscal Year Ended April 3, 2004
As
Lease
Previously
Accounting
Reported
Adjustments
As Restated
$
1,029,957
$
2,905
$
1,032,862
273,796
(2,905
)
270,891
95,055
(1,180
)
93,875
170,954
(1,725
)
169,229
1.69
(0.01
)
1.68
Fiscal Year Ended March 29, 2003
As
Lease
Previously
Accounting
As
Reported
Adjustments
Restated
$
904,741
$
(2,438
)
$
902,303
288,417
2,438
290,855
100,151
990
101,141
174,235
1,448
175,683
1.76
0.01
1.77
Table of Contents
As
Lease
Other Cash
Previously
Accounting
RL Media
Flow
As
Reported
Adjustments
Consolidation
Adjustments
Restated
$
210,606
$
3,224
$
$
(222
)
$
213,608
132,702
3,224
(8,858
)
7,391
134,459
(1,610
)
7,613
6,003
(129
)
8,858
8,729
268,974
3,762
13,452
286,188
166,269
3,762
13,452
183,483
98,873
98,873
3.
Recent Accounting Pronouncements
Table of Contents
Table of Contents
4.
Acquisitions and Joint Venture
For the Year Ended
April 2, 2005
April 3, 2004
Actual
$
3,359,168
$
2,858,458
195,338
186,164
$
1.92
$
1.88
$
1.88
$
1.84
Table of Contents
Table of Contents
5.
Inventories
April 2,
April 3,
2005
2004
$
5,276
$
5,516
8,283
4,669
416,523
362,985
$
430,082
$
373,170
April 2,
April 3,
2005
2004
$
9,925
$
3,725
19,006
18,540
402,711
345,668
211,408
187,073
409,916
352,413
1,052,966
907,419
565,072
498,678
$
487,894
$
408,741
7.
Goodwill and Other Intangible Assets
Wholesale
Retail
Licensing
Total
$
151.1
$
74.0
$
116.5
$
341.6
209.6
209.6
7.2
0.5
7.7
$
367.9
$
74.5
$
116.5
$
558.9
Table of Contents
April 2, 2005
April 3, 2004
Gross
Gross
Carrying
Accum.
Carrying
Accum.
Estimated
Amount
Amort.
Net
Amount
Amort.
Net
Lives
$
17,400
$
(3,125
)
$
14,275
$
17,400
$
(1,260
)
$
16,140
10 years
2,500
(625
)
1,875
3 years
29,900
(897
)
29,003
25 years
353
(12
)
341
15 years
8.
Other Assets
April 2,
April 3,
2005
2004
$
61,970
$
57,766
51,169
50,250
70,051
68,859
$
183,190
$
176,875
9.
Accrued Expenses and Other
April 2,
April 3,
2005
2004
$
192,196
$
185,069
106,200
61,660
38,820
5,812
12,835
$
365,868
$
236,724
10.
Restructuring Charge
Table of Contents
2003 Restructuring Plan
Lease and
Severance and
Other Contract
Termination
Termination
Benefits
Costs
Total
$
11,876
$
2,567
$
14,443
(3,777
)
(3,777
)
8,099
2,567
10,666
7,104
757
7,861
(11,887
)
(1,465
)
(13,352
)
3,316
1,859
5,175
2,067
2,067
(5,242
)
(968
)
(6,210
)
$
141
$
891
$
1,032
Table of Contents
Lease and
Severance and
Contract
Termination
Termination
Other
Benefits
Costs
Costs
Total
$
2,942
$
4,169
$
782
$
7,893
(2,150
)
(6,014
)
(767
)
(8,931
)
16,000
16,000
792
14,155
15
14,962
(792
)
(9,004
)
(15
)
(9,811
)
5,151
5,151
10,404
10,404
(9,195
)
(9,195
)
6,360
6,360
(2,294
)
(2,294
)
$
$
4,066
$
$
4,066
11.
Income Taxes
Fiscal Year Ended
April 2,
April 3,
March 29,
2005
2004
2003
$
102,068
$
81,781
$
77,299
17,265
4,135
6,550
16,113
10,450
7,401
135,446
96,366
91,250
(33,704
)
(5,350
)
9,818
2,404
(1,082
)
(1,834
)
3,190
3,941
1,907
(28,110
)
(2,491
)
9,891
$
107,336
$
93,875
$
101,141
Table of Contents
Fiscal Year Ended
April 2,
April 3,
March 29,
2005
2004
2003
$
152,584
$
196,052
$
192,605
146,782
62,975
84,219
$
299,366
$
259,027
$
276,824
April 2,
April 3,
2005
2004
$
58,973
$
83,752
4,416
24,964
22,838
13,792
6,633
5,117
15,356
8,597
3,365
5,018
42,422
1,788
17,678
19,585
10,718
(93
)
182,399
162,520
55,249
62,934
127,150
99,586
(17,742
)
(9,854
)
1,226
(4,572
)
(16,516
)
(14,426
)
$
110,634
$
85,160
Table of Contents
Fiscal Year Ended
April 2,
April 3,
March 29,
2005
2004
2003
$
104,778
$
90,659
$
96,888
12,785
1,986
3,065
(13,260
)
4,803
623
3,033
(3,573
)
565
$
107,336
$
93,875
$
101,141
Table of Contents
12.
Financing Agreements
a minimum ratio of consolidated Earnings Before Interest, Taxes,
Depreciation, Amortization and Rent (EBITDAR) to
Consolidated Interest Expense (as such terms are described in
the New Credit Facility); and
a maximum ratio of Adjusted Debt (as defined in the New Credit
Facility) to EBITDAR.
incur additional debt;
incur liens and contingent liabilities;
sell or dispose of assets, including equity interests;
merge with or acquire other companies, liquidate or dissolve;
engage in businesses that are not a related line of business;
make loans, advances or guarantees;
engage in transactions with affiliates; and
make investments.
Table of Contents
13.
Financial Instruments
Table of Contents
April 2, 2005
April 3, 2004
Notional
Fair Value
Notional
Fair Value
$
224.0
$
(7.3
)
$
144.9
$
(13.0
)
205.2
$
10.9
105.2
$
14.9
Table of Contents
14.
Commitments and Contingencies
Leases
Fiscal Year Ending
$
121,991
121,485
114,319
104,777
96,169
580,694
$
1,139,435
Employment Agreements
Acquisitions
Concentration of Credit Risk
Table of Contents
Declaration of Dividends
Other Commitments
15.
Earnings Per Share
Fiscal Year Ended
April 2,
April 3,
March 29,
2005
2004
2003
(Shares in thousands)
101,519
98,977
98,331
2,491
1,983
932
104,010
100,960
99,263
16.
Common Stock
Table of Contents
17.
Stock Incentive Plans
Table of Contents
Weighted
Number
Average
of Shares
Exercise Price
9,472
$
22.16
2,665
23.72
(424
)
18.21
(945
)
23.60
10,768
$
21.75
2,497
24.30
(1,950
)
20.72
(592
)
23.82
10,723
$
23.43
1,887
33.97
(2,443
)
22.21
(541
)
25.77
9,626
$
25.68
Number of
Weighted-Average
Weighted-Average
Number of
Weighted-Average
Range of
Shares
Remaining
Exercise Price of
Shares
Exercise Price of
Exercise Prices
Outstanding
Contractual Life
Options Outstanding
Exercisable
Exercisable Options
682
5.2
$
14.61
682
$
14.61
1,007
5.5
18.71
740
18.89
2,934
7.6
24.25
1,286
24.28
5,003
6.0
29.42
3,113
26.80
9,626
6.4
$
25.68
5,821
$
23.81
Table of Contents
Table of Contents
18.
Employee Benefits
Table of Contents
19.
Segment Reporting
Table of Contents
Fiscal Year Ended
April 2,
April 3,
March 29,
2005
2004
2003
$
1,712,040
$
1,210,397
$
1,187,363
1,348,645
1,170,447
1,001,958
244,730
268,810
250,019
$
3,305,415
$
2,649,654
$
2,439,340
$
299,710
$
143,080
$
166,016
82,788
55,717
30,707
159,537
191,575
200,189
542,035
390,372
396,912
(133,809
)
(99,915
)
(91,614
)
(108,541
)
(19,566
)
(14,443
)
$
299,685
$
270,891
$
290,855
$
28,362
$
23,123
$
21,163
44,029
36,213
35,574
6,422
5,768
5,136
24,820
20,531
18,745
$
103,633
$
85,635
$
80,618
$
50,590
$
33,491
$
32,020
77,512
45,480
39,455
3,105
1,871
5,587
44,638
45,408
25,364
$
175,845
$
126,250
$
102,426
April 2,
April 3,
2005
2004
$
1,247,694
$
857,721
605,783
595,185
203,306
200,136
669,886
644,510
$
2,726,669
$
2,297,552
Table of Contents
Fiscal Year Ended
April 2,
April 3,
March 29,
2005
2004
2003
$
2,587,233
$
2,073,401
$
1,916,096
579,161
464,098
458,627
139,021
112,155
64,617
$
3,305,415
$
2,649,654
$
2,439,340
April 2,
April 3,
2005
2004
$
402,665
$
335,885
80,663
69,507
4,566
3,349
$
487,894
$
408,741
20.
Accumulated Other Comprehensive Income
April 2,
April 3,
2005
2004
$
85,104
$
73,782
(55,131
)
(50,678
)
$
29,973
$
23,104
Table of Contents
Unrealized Losses
Changes in Fair
Unrealized Losses
Unrealized Gains
on Hedging
Value During the
on Hedges
(Losses) on Hedging
Derivatives as of
Year Ended
Reclassified into
Derivatives as of
April 3, 2004
April 2, 2005
Earnings
April 2, 2005
$
(7.2
)
$
0.1
$
9.0
$
1.9
(10.7
)
(5.0
)
1.9
(13.8
)
(60.2
)
(17.2
)
(77.4
)
$
(78.1
)
$
(22.1
)
$
10.9
$
89.3
$
(50.7
)
$
(13.8
)
$
9.4
$
(55.1
)
21.
Legal Proceedings
Table of Contents
Table of Contents
Table of Contents
22.
Quarterly Information (Unaudited)
July 3,
July 3,
October 2,
October 2,
January 1,
January 1,
April 2,
Fiscal 2005
2004
2004
2004
2004
2005
2005
2005
(As
(As Restated
(As
(As Restated
(As
(As Restated
Reported)
See Note 2)
Reported)
See Note 2)
Reported)
See Note 2)
$
592,750
$
606,006
$
883,680
$
895,614
$
887,993
$
901,574
$
902,222
307,100
315,528
437,755
446,034
438,033
446,076
476,909
13,403
12,725
80,407
79,268
74,842
75,036
23,396
$
0.13
$
0.13
$
0.79
$
0.78
$
0.73
$
0.74
$
0.23
0.13
0.12
0.78
0.77
0.72
0.72
0.22
100,481
100,481
101,192
101,192
101,896
101,896
102,506
102,802
102,802
103,571
103,571
104,325
104,325
105,341
June 28,
June 28,
Sept. 27,
Sept. 27,
Dec. 27,
Dec. 27,
April 3,
April 3,
Fiscal 2004
2003
2003
2003
2003
2003
2003
2004
2004
(As
(As Restated
(As
(As Restated
(As
(As Restated
(As
(As Restated
Reported)
See Note 2)
Reported)
See Note 2)
Reported)
See Note 2)
Reported)
See Note 2)
$
477,731
$
477,731
$
707,777
$
707,777
$
645,365
$
645,365
$
818,781
$
818,781
248,752
248,752
350,566
350,566
333,002
333,002
390,999
390,999
5,055
5,042
54,010
53,323
35,358
34,418
76,531
76,446
$
0.05
$
0.05
$
0.55
$
0.54
$
0.36
$
0.35
$
0.77
$
0.77
$
0.05
0.05
0.54
0.53
0.35
0.34
0.75
0.75
98,377
98,377
98,704
98,704
99,072
99,072
99,699
99,699
99,544
99,544
100,781
100,781
101,291
101,291
102,265
102,265
23.
Subsequent Event
Table of Contents
Balance at
Charge to
Charge
Foreign
Balance
Beginning
Costs and
to Other
Currency
at End
Description
of Year
Expenses
Accounts(a)
Deductions
Translation
of Year
(In thousands)
$
7,023
$
6,020
$
$
2,119
(b)
$
117
$
11,041
90,269
265,340
256,730
(c)
1,122
100,001
$
97,292
$
6,020
$
265,340
$
258,849
$
1,239
$
111,042
$
6,394
$
2,633
$
$
2,004
(b)
$
$
7,023
48,432
213,645
171,808
(c)
90,269
$
54,826
$
2,633
$
213,645
$
173,812
$
$
97,292
$
5,091
$
1,760
$
$
457
(b)
$
$
6,394
64,161
129,009
144,738
(c)
48,432
$
69,252
$
1,760
$
129,009
$
145,195
$
$
54,826
(a)
Reserves and allowances recorded as a reduction of net sales.
(b)
Accounts written-off as uncollectible.
(c)
End of season customer allowances, operational chargebacks and
returns credited against customers accounts.
EXECUTION COPY
Exhibit 10.14
POLO RALPH LAUREN CORPORATION
NONQUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT (the Agreement), is made effective as of the 8th day of June, 2004, (the Date of Grant), between Polo Ralph Lauren Corporation, a Delaware corporation (the Company), and Mr. Ralph Lauren (the Participant):
R E C I T A L S :
WHEREAS, the Company has adopted the Polo Ralph Lauren Corporation 1997 Long-Term Stock Incentive Plan, as amended from time to time (the Plan), which Plan is incorporated herein by reference and made a part of this Agreement. Capitalized terms not otherwise defined herein shall have the same meanings as in the Plan; and
WHEREAS, the Company and the Participant have entered into an Amended and Restated Employment Agreement dated June 23, 2003 (such agreement, as amended from time to time, the Employment Agreement), which contemplates that the Committee will grant the Option (as hereinafter defined) to the Participant; and
WHEREAS, the Committee has determined that it would be in the best interests of the Company and its stockholders to grant the option provided for herein (the Option) to the Participant pursuant to the Plan and the terms set forth herein.
NOW THEREFORE, in consideration of the mutual covenants hereinafter set forth, the parties hereto agree as follows:
1. Grant of the Option . The Company hereby grants to the Participant the right and option to purchase, on the terms and conditions hereinafter set forth, all or any part of an aggregate of 150,000 shares of Class A Common Stock of the Company (the Shares)(the Option), subject to adjustment as set forth in the Plan. The purchase price of the Shares subject to the Option shall be $33.12 per Share (the Exercise Price), which amount is equal to the Fair Market Value on the Date of Grant. The Option is intended to be a non-qualified stock option, and is not intended to be treated as an option that complies with Section 422 of the Internal Revenue Code of 1986, as amended (the Code).
2. Vesting and Exercisability .
(a) Subject to the Participants continued employment with the Company, the Option shall vest and become exercisable with respect to one third (1/3) of the Shares initially covered by the Option on each of the first, second and third anniversaries of the Date of Grant
(each, an Option Vesting Date). At any given time, the portion of the Option that has become vested and exercisable as described above (or pursuant to Sections 2(c) below) is hereinafter referred to as the Vested Portion.
(b) If the Company shall terminate the Participants employment with the Company without Cause (as defined below), if the Company elects not to extend the Term (as defined below) or if the Participant terminates his employment with the Company for Good Reason (as defined below), then any unvested portion of the Option on the last day of the Participants employment with the Company (the Termination Date) shall continue to vest in accordance with the vesting schedule set forth in Section 2(a) hereof, subject to Participants continued compliance with Section 8 of the Employment Agreement (relating to non-solicitation and non-competition). In addition, any Vested Portion (and any other portion that vests as described above in this Section 2(b)) will remain exercisable until the later to occur of (i) one (1) year from the Termination Date or (ii) thirty (30) days from the date such portion of the Option becomes vested and exercisable, but in no event later than the Expiration Date (as defined below) of the Option.
(c) If the Participants employment is terminated due to his death or Disability (as defined below), then any unvested portion of the Option held by the Participant on the Termination Date will vest immediately and remain exercisable for three (3) years from the Termination Date, but in no event later than the Expiration Date (as defined below) of the Option.
(d) If the Participants employment with the Company is terminated by the Company for Cause, by the Participant other than for Good Reason, or if the Participant elects not to extend the Term, then any portion of the Option that has not been exercised as of the Termination Date shall be forfeited.
(e) Notwithstanding any other provision of this Agreement to the contrary, in the event of a Change of Control (as defined in the Plan) the Option shall, to the extent not then vested and not previously canceled, immediately become fully vested and exercisable as contemplated by Section 13 of the Plan.
(f) For purposes of this Agreement, the terms Cause, Term, Good Reason, and Disability shall have the respective meanings specified in the Employment Agreement.
3. Exercise of Option .
(a) Period of Exercise . Subject to the provisions of the Plan and this Agreement, the Participant may exercise all or any part of the Vested Portion of the Option at any time prior to the tenth anniversary of the Date of Grant (the Expiration Date).
2
(b) Method of Exercise .
(i) Subject to Section 3(a), the Vested Portion of the Option may be exercised by delivering to the Company at its principal office written notice of intent to so exercise or by delivering such notice to the Company by such other method as may be permitted by the Committee; provided that the Option may be exercised with respect to whole Shares only. Such notice shall specify the number of Shares for which the Option is being exercised and shall be accompanied by payment in full of the Exercise Price. The payment of the Exercise Price may be made in cash, or its equivalent, or (x) by exchanging Shares owned by the Participant (which are not the subject of any pledge or other security interest and which have been owned by the Participant for at least 6 months) or (y) subject to such rules as may be established by the Committee and then only to the extent permitted by law, through delivery of irrevocable instructions to a broker to sell the Shares otherwise deliverable upon the exercise of the Option and to deliver promptly to the Company an amount equal to the aggregate exercise price, or by a combination of the foregoing, provided that the combined value of all cash and cash equivalents and the Fair Market Value of any such Shares so tendered to the Company as of the date of such tender is at least equal to such aggregate exercise price.
(ii) Notwithstanding any other provision of the Plan or this Agreement to the contrary, the Option may not be exercised prior to the completion of any registration or qualification of the Option or the Shares under applicable state and federal securities or other laws, or under any ruling or regulation of any governmental body or national securities exchange that the Committee shall in its sole discretion determine to be necessary or advisable.
(iii) Upon the Companys determination that the Option has been validly exercised as to any of the Shares, the Company shall issue certificates in the Participants name for such Shares. However, the Company shall not be liable to the Participant for damages relating to any delays in issuing the certificates to him, any loss of the certificates, or any mistakes or errors in the issuance of the certificates or in the certificates themselves.
4. No Right to Continued Employment . Neither the Plan nor this Agreement shall be construed as giving the Participant the right to be retained in the employ of, or in any consulting relationship to, the Company or any Affiliate. Further, the Company or an Affiliate may at any time dismiss the Participant or discontinue any consulting relationship, free from any liability or any claim under the Plan or this Agreement, except as otherwise expressly provided herein.
5. Legend on Certificates . The certificates representing the Shares purchased by exercise of the Option shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which such Shares are listed, and any applicable Federal or state laws, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.
6. Transferability . Except as otherwise determined by the Committee pursuant to its authority under Section 14(a)(iii) of the Plan, the Option is nontransferable during the
3
Participants lifetime, except for transfers by the Participant to family members (or trusts for their benefit) pursuant to the terms of the Plan.
7. Withholding .
(a) The Participant may be required to pay to the Company or any Affiliate and the Company or any Affiliate shall have the right and is hereby authorized to withhold from any payment due or transfer made under the Option or under the Plan or from any compensation or other amount owing to a Participant the amount (in cash, Shares, other securities, other Awards or other property) of any applicable federal, state or local income tax withholding requirements in respect of the Option, its exercise, or any payment or transfer under the Option or under the Plan and to take such other action as may be necessary in the opinion of the Company to satisfy all obligations for the payment of such taxes, provided, however, that in no event shall the amount so withheld by the Company exceed the minimum withholding rates required by applicable statutes.
(b) Without limiting the generality of clause (a) above, the Participant may satisfy, in whole or in part, the foregoing withholding liability by delivery of Shares owned by the Participant (which are not subject to any pledge or other security interest and which have been owned by the Participant for at least 6 months) with a Fair Market Value equal to such withholding liability or by having the Company withhold from the number of Shares otherwise issuable pursuant to the exercise of the option a number of Shares with a Fair Market Value equal to such withholding liability.
8. Securities Laws . Upon the acquisition of any Shares pursuant to the exercise of the Option, the Participant will make or enter into such written representations, warranties and agreements as the Committee may reasonably request in order to comply with applicable securities laws or with this Agreement.
9. Notices . Any notice necessary under this Agreement shall be addressed to the Company in care of its Secretary at the principal executive office of the Company and to the Participant at the address appearing in the personnel records of the Company for the Participant or to either party at such other address as either party hereto may hereafter designate in writing to the other. Any such notice shall be deemed effective upon receipt thereof by the addressee.
10. Option Subject to Plan . By accepting this Agreement and the Award evidenced hereby, the Participant agrees and acknowledges that the Participant has received and read a copy of the Plan. The Option is subject to the Plan. The terms and provisions of the Plan as it may be amended from time to time are hereby incorporated herein by reference. In the event of a conflict between any term or provision contained herein and a term or provision of the Plan, the applicable terms and provisions of the Plan will govern and prevail.
11. Failure to Enforce Not a Waiver . The failure of the Company to enforce at any time any provision of this Agreement shall in no way be construed to be a waiver of such provision or of any other provision hereof.
4
12. Authority of Committee . The Committee shall have full authority to interpret and construe the terms of the Plan and this Agreement. The determination of the Committee as to any such matter of interpretation or construction shall be final, conclusive and binding.
13. Choice of Law . THE INTERPRETATION, PERFORMANCE AND ENFORCEMENT OF THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
5
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed and the Participant has hereunto set his hand, effective as of the Date of Grant.
POLO RALPH LAUREN CORPORATION | ||||||
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By: | /s/ Mitchell A. Kosh | ||||
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Mitchell A. Kosh | |||||
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Senior Vice President Human Resources | |||||
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/s/ Ralph Lauren | |||||
Participant: Ralph Lauren |
6
EXECUTION COPY
Exhibit 10.15
POLO RALPH LAUREN CORPORATION
RESTRICTED STOCK UNIT AWARD AGREEMENT
THIS AGREEMENT (the Agreement) is made effective as of the 8th day of June 2004 (the Grant Date), between Polo Ralph Lauren Corporation, a Delaware corporation (the Company), and Mr. Ralph Lauren (the Participant).
R E C I T A L S :
WHEREAS, the Company has adopted the Polo Ralph Lauren Corporation 1997 Long-Term Stock Incentive Plan, as amended from time to time (the Plan), which Plan is incorporated herein by reference and made a part of this Agreement. Capitalized terms not otherwise defined herein shall have the same meanings as in the Plan; and
WHEREAS, the Company and the Participant have entered into an Amended and Restated Employment Agreement dated June 23, 2003 (such agreement, as amended from time to time, the Employment Agreement), which contemplates that the Committee will grant the Unit Award (as hereinafter defined) to the Participant; and
WHEREAS, the Committee has determined that it would be in the best interests of the Company and its stockholders to grant the restricted stock unit award provided for herein (the Unit Award) to the Participant pursuant to the Plan and the terms set forth herein.
NOW THEREFORE, in consideration of the mutual covenants hereinafter set forth, the parties agree as follows:
1. Grant of the Restricted Stock Units . Subject to the terms and conditions of the Plan and the additional terms and conditions set forth in this Agreement, the Company hereby grants to the Participant a Unit Award consisting of 100,000 restricted stock units (each, a Unit), subject to adjustment as set forth in the Plan. Each Unit represents the right to receive one share of Class A Common Stock of the Company (each, a Share). Each Unit shall vest and become nonforfeitable in accordance with Section 2 hereof.
2. Vesting .
(a) Each Unit shall vest and become nonforfeitable on the fifth (5 th ) anniversary of the Grant Date, subject to accelerated vesting as set forth in Section 2(b) hereof.
(b) (i) If the Participants employment with the Company is terminated (a) due to Participants death or Disability (as defined below), (b) by the Company without Cause (as defined below), (c) by the Participant for Good Reason (as defined below) or (d) by the Participant without Good Reason (as defined below) on any date that is after the last day of the Companys fiscal year that ends in the 2008 calendar year or (ii) if the Company elects not to extend the Term (as defined below) or (iii) in the event of a Change of Control (as defined in the Plan), then any then unvested Unit shall vest immediately and the Executive shall be entitled to payment in respect of such Unit in accordance with Section 3 hereof.
(c) For purposes of this Agreement the terms Disability, Cause, Good Reason and Term shall have the respective meanings specified in the Employment Agreement.
3. Distribution of Shares .
(a) Subject to Section 3(c) hereof, as soon as practicable following the date of the Participants termination of employment with the Company or, if applicable, the date of a Change of Control (the applicable date being referred to as the Termination Date) (but in no event later than 90 days following the Termination Date), the Company shall issue and deliver to the Executive or to his estate, as applicable, one Share in respect of each whole Unit that is vested as of the Termination Date and cash in lieu of any vested fractional Unit (based on the fair market value per Share on the Termination Date). The Company shall deliver to the Participant or to his estate, as applicable, certificates in respect of such Shares along with the stock powers relating thereto.
(b) Any Unit that remains unvested on the Termination Date, after taking into account any applicable acceleration of vesting of Units pursuant to Section 2(b) hereof, shall be forfeited to the Company and shall terminate immediately.
(c) In accordance with rules and regulations prescribed by the Committee, the Executive may elect to defer the receipt of Shares otherwise issuable pursuant to Section 3(a) hereof.
4. Rights as a Stockholder . Except as set forth in Section 5 hereof, neither the Participant nor Participants successor in interest shall have any rights as a stockholder of the Company with respect to any Shares subject to the Units until such Shares have been issued to or in respect of the Participant following the Termination Date.
5. Dividend Equivalents . In the event of any issuance of a cash dividend on the Shares (a Dividend), the Participant shall be credited, as of the payment date for such Dividend, with an additional number of Units (each, a Dividend Unit) equal to the quotient obtained by dividing (a) the product of (i) the number of Units granted pursuant to this Agreement and outstanding as of the record date for such Dividend multiplied by (ii) the amount of the Dividend per Share, divided by (b) the fair
2
market value per Share on the payment date for such Dividend, such quotient to be rounded to the nearest one-one hundredth of a Unit. Once credited, each Dividend Unit shall be treated as a Unit granted hereunder and shall be subject to all terms and conditions set forth in this Agreement and the Plan. For purposes of the vesting schedule set forth in Section 3 hereof, each Dividend Unit credited hereunder shall be treated as having been granted on the Grant Date.
6. Unit Award Subject to the Plan . By accepting this Agreement and the Unit Award evidenced hereby, the Participant agrees and acknowledges that the Participant has received and read a copy of the Plan. The Unit Award is subject to the Plan. The terms and provisions of the Plan as amended from time to time are hereby incorporated herein by reference. In the event of a conflict between any term or provision contained herein and a term or provision of the Plan, the applicable terms and provisions of the Plan will govern and prevail.
7. No Right to Continued Employment . Neither the Plan nor this Agreement shall be construed as giving the Participant the right to be retained in the employ of, or in any consulting relationship to, the Company or any Affiliate. Further, the Company or an Affiliate may at any time dismiss the Participant or discontinue any consulting relationship, free from any liability or any claim under the Plan or this Agreement, except as otherwise expressly provided herein.
8. Transferability . Except as expressly contemplated in this Agreement, the Units may not at any time be sold, assigned, transferred, pledged or otherwise encumbered.
9. Withholding . By accepting this Unit Award, the Participant agrees to make appropriate arrangements with the Company for satisfaction of any applicable federal, state or local income tax withholding requirements, including the payment to the Company of all such taxes and requirements in connection with the distribution or delivery of the Shares, or other settlement in respect of the Units, and the Company shall be authorized to take such action as may be necessary in the opinion of the Companys counsel (including, without limitation, withholding Shares otherwise deliverable to Participant hereunder and/or withholding amounts from any compensation or other amount owing from the Company to the Participant) to satisfy all obligations for the payment of such taxes; provided, however, that in no event shall the value of Shares so withheld by the Company exceed the minimum withholding rates required by applicable statutes.
10. Securities Laws . Prior to issuance and delivery of any Shares, the Participant will make or enter into such written representations, warranties and agreements as the Committee may reasonably request in order to comply with applicable securities laws or with this Agreement.
11. Notices . Any notice necessary under this Agreement shall be addressed to the Company in care of its Secretary at the principal executive office of the Company and to the Participant at the address appearing in the personnel records of the
3
Company for such Participant or to either party at such other address as either party hereto may hereafter designate in writing to the other. Any such notice shall be deemed effective upon receipt thereof by the addressee.
12. Failure to Enforce Not a Waiver . The failure of the Company to enforce at any time any provision of this Agreement shall in no way be construed to be a waiver of such provision or of any other provision hereof.
13. Authority of Committee . The Committee shall have full authority to interpret and construe the terms of the Plan and this Agreement. The determination of the Committee as to any such matter of interpretation or construction shall be final, conclusive and binding.
14. Choice of Law . THE INTERPRETATION, PERFORMANCE AND ENFORCEMENT OF THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF STATE OF THE NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
4
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed and the Participant has hereunto set his hand, effective as of the Grant Date.
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POLO RALPH LAUREN CORPORATION | |||||
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By: | /s/ Mitchell A. Kosh | ||||
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Mitchell A. Kosh | |||||
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Senior Vice President Human Resources | |||||
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/s/ Ralph Lauren | |||||
Participant: Ralph Lauren |
5
Exhibit 10.18
POLO RALPH LAUREN CORPORATION
RESTRICTED STOCK UNIT AWARD AGREEMENT
THIS AGREEMENT (the Agreement) is made effective as of the 1 st day of July 2004 (the Grant Date), between Polo Ralph Lauren Corporation, a Delaware corporation (hereinafter called the Company), and Roger N. Farah (hereinafter called the Participant).
R E C I T A L S :
WHEREAS, the Company has adopted the Polo Ralph Lauren Corporation 1997 Long-Term Stock Incentive Plan (the Plan) and, subject to approval of stockholders at the Companys 2004 annual meeting, has adopted an amendment and restatement to the Plan, effective as of July 1, 2004 (the Restated Plan) (capitalized terms not otherwise defined herein shall have the same meanings as in the Restated Plan); and
WHEREAS, the Company and the Participant have executed an Amendment No. 1 to the Amended and Restated Employment Agreement dated July 23, 2002 (such agreement, as amended from time to time, the Employment Agreement), which contemplates that the Committee will grant the Unit Award (as hereinafter defined) to the Participant; and
WHEREAS, the Committee has determined that it would be in the best interests of the Company and its stockholders to grant the restricted stock unit award provided for herein (the Unit Award) to the Participant pursuant to the Restated Plan and the terms set forth herein.
NOW THEREFORE, in consideration of the mutual covenants hereinafter set forth, the parties agree as follows:
1. Grant of the Restricted Stock Units . Subject to stockholder approval of the Restated Plan at the 2004 annual meeting, and subject further to the terms and conditions of the Restated Plan and the additional terms and conditions set forth in this Agreement, the Company hereby grants to the Participant a Restricted Stock Unit Award consisting of 437,500 Restricted Stock Units (each, a Unit), 187,500 of which shall vest upon the attainment of certain performance goals (the Performance Award) and 250,000 of which shall vest based upon Participants continued employment with the Company (the Time-Based Award). The Units shall vest and become nonforfeitable in
accordance with Section 2 hereof. Each Unit represents the right to receive one share of Class A Common Stock of the Company (each, a Share).
2. Vesting .
(a) Time-Based Award. Subject to the Participants continued employment with the Company through the applicable vesting date, or as otherwise set forth in Section 2(c) hereof, the Units subject to the Time-Based Award shall vest and become nonforfeitable with respect to one-third (1/3) of such Units on the last day of the Companys 2008, 2009 and 2010 fiscal years, (i.e., the fiscal years ending in those calendar years), respectively (determined without regard to any future changes of the Companys fiscal year).
(b) Performance Award. Subject to the Participants continued employment with the Company through the applicable fiscal year, or as otherwise set forth in Section 2(c) hereof, the Units subject to the Performance Award shall vest and become nonforfeitable with respect to up to one-third (1/3) of such Units on the last day of the Companys 2005, 2006 and 2007 fiscal years (i.e., the fiscal years ending in those calendar years), respectively (determined without regard to any future changes of the Companys fiscal year), based on the extent to which the performance goals set forth in Exhibit A hereto shall have been attained. Any Units subject to the Performance Award which are eligible to vest at the end of the applicable fiscal year noted above, but which do not so vest, shall thereupon be cancelled and forfeited to the Company and shall terminate immediately.
(c) If the Participants employment with the Company is terminated due to Participants death or Disability, by the Company without Cause or by the Participant for Good Reason, (i) any then outstanding unvested Units attributable to the Time-Based Award shall vest immediately and the Participant shall be entitled to payment in respect of all outstanding vested Units attributable to the Time-Based Award in accordance with Section 3 hereof and (ii) a pro rata portion of any outstanding Units attributable to the Performance Award shall vest immediately, such pro rata portion to be determined based upon a fraction the numerator of which is the number of full and partial months commencing April 2004 through the date of termination and the denominator of which is thirty-six (36), and the Executive shall be entitled to payment in respect of such vested Units in accordance with Section 3 hereof. If a Change of Control occurs during the Participants employment, all then outstanding Units (whether or not vested) shall thereupon vest and the Participant shall be entitled to payment in respect of such Units in accordance with Section 3 hereof.
(d) For purposes of this Agreement, the terms Disability, Cause, Good Reason and Change of Control shall have the respective meanings specified in the Employment Agreement.
3. Distribution of Shares .
2
(a) The Participant shall be entitled to receive payment in the form of Shares for each vested Unit subject to the Performance Award as soon as practicable following the end of the applicable fiscal year at which vesting of such Units is determined (or at such earlier time of vesting prescribed by Section 2(c) hereof). The Participant shall be entitled to receive payment in the form of Shares for each vested Unit subject to the Time-Based Award as soon as practicable following the Participants termination of employment for any reason (or, if earlier, upon the occurrence of a Change of Control during participants employment). In connection with any such payment, the Company shall issue and deliver to the Participant or to his estate, as applicable, one Share in respect of each whole vested Unit and cash in lieu of any vested fractional Unit (based on the fair market value per Share on the vesting date or, in the case of fractional Units attributable to the Time-Based Award which are settled in connection with Participants termination of employment, based on the fair market value per Share on the date of such termination). The Company shall deliver to the Participant or to his estate, as applicable, certificates in respect of such Shares along with the stock powers relating thereto.
(b) Any Unit not previously cancelled and forfeited pursuant to Section 2(b) above that remains unvested on the date of Participants termination of employment, after taking into account any applicable acceleration of vesting of Units pursuant to Section 2(c) hereof, shall thereupon be cancelled and forfeited to the Company and shall terminate immediately.
4. Rights as a Stockholder . Neither the Participant nor Participants successor in interest shall have any rights as a stockholder of the Company with respect to any Shares subject to the Units until such Shares have been issued to or in respect of the Participant.
5. Dividend Equivalents . In the event of any issuance of a cash dividend on the Shares (a Dividend), the Participant shall be credited, as of the payment date for such Dividend, with an additional number of Units (each, a Dividend Unit) equal to the quotient obtained by dividing (a) the product of (i) the number of Units granted pursuant to this Agreement and outstanding as of the record date for such Dividend multiplied by (ii) the amount of the Dividend per Share, divided by (b) the fair market value per Share on the payment date for such Dividend, such quotient to be rounded to the nearest one-one hundredth of a Unit. Once credited, each Dividend Unit shall be treated as a Unit granted hereunder and shall be subject to all terms and conditions set forth in this Agreement and the Restated Plan applicable to the Units in respect of which the Dividend Unit was created ( i.e. , Units subject to the Time-Based Award or Performance Award, as the case may be).
6. Unit Award Subject to the Restated Plan . By accepting this Agreement and the Unit Award evidenced hereby, the Participant agrees and acknowledges that the Participant has received and read a copy of the Restated Plan. The Unit Award is subject to the Restated Plan. The terms and provisions of the Restated Plan as amended from time to time are hereby incorporated herein by reference. In the event of a conflict between any term or provision contained herein and a term or
3
provision of the Restated Plan, the applicable terms and provisions of the Restated Plan will govern and prevail.
7. No Right to Continued Employment . Neither the Restated Plan nor this Agreement shall be construed as giving the Participant the right to be retained in the employ of, or in any consulting relationship to, the Company or any Affiliate. Further, the Company or an Affiliate may at any time dismiss the Participant or discontinue any consulting relationship, free from any liability or any claim under the Restated Plan or this Agreement, except as otherwise expressly provided herein.
8. Transferability . Except as expressly contemplated in this Agreement, the Units may not at any time be sold, assigned, transferred, pledged or otherwise encumbered.
9. Withholding . By accepting this Unit Award, the Participant agrees to make appropriate arrangements with the Company for satisfaction of any applicable federal, state or local income tax withholding requirements, including the payment to the Company of all such taxes and requirements in connection with the distribution or delivery of the Shares, or other settlement in respect of the Units, and the Company shall be authorized to take such action as may be necessary in the opinion of the Companys counsel (including, without limitation, withholding Shares otherwise deliverable to Participant hereunder and/or withholding amounts from any compensation or other amount owing from the Company to the Participant) to satisfy all obligations for the payment of such taxes; provided, however, that in no event shall the value of Shares so withheld by the Company exceed the minimum withholding rates required by applicable statutes.
10. Securities Laws . Prior to issuance and delivery of any Shares, the Participant will make or enter into such written representations, warranties and agreements as the Committee may reasonably request in order to comply with applicable securities laws or with this Agreement.
11. Notices . Any notice necessary under this Agreement shall be addressed to the Company in care of its Secretary at the principal executive office of the Company and to the Participant at the address appearing in the personnel records of the Company for such Participant or to either party at such other address as either party hereto may hereafter designate in writing to the other. Any such notice shall be deemed effective upon receipt thereof by the addressee.
12. Failure to Enforce Not a Waiver . The failure of the Company to enforce at any time any provision of this Agreement shall in no way be construed to be a waiver of such provision or of any other provision hereof.
13. Authority of Committee . The Committee shall have full authority to interpret and construe the terms of the Restated Plan and this Agreement. The determination of the Committee as to any such matter of interpretation or construction shall be final, conclusive and binding.
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14. Choice of Law . THE INTERPRETATION, PERFORMANCE AND ENFORCEMENT OF THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF STATE OF THE NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
15. Stockholder Approval of Restated Plan . This Agreement shall take effect as of the date hereof, subject to approval of the stockholders of the Company, at the 2004 annual meeting, of the Restated Plan. In the event that the Restated Plan is not so approved, this Agreement shall be null and void and of no force and effect.
16. Modification . No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by the Participant and an appropriate officer of the Company.
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed and the Participant has hereunto set his hand, effective as of the Grant Date, subject to the conditions set forth herein.
POLO RALPH LAUREN CORPORATION | ||||||||
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By: | /s/ Mitchell A. Kosh | |||||||
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Name: | Mitchell A. Kosh | ||||||
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Title: | Senior Vice President, | ||||||
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Human Resources | |||||||
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/s/ Roger N. Farah | ||||||||
Participant: Roger N. Farah |
5
EXHIBIT A
Performance Goals
for Initial Performance-Based Grant
Performance-Based Award of 187,500 restricted stock units that shall be subject to the vesting
criteria set forth below. Straight-line interpolation shall be applied for net income amounts
achieved between the threshold and 100% target as of the end of the applicable fiscal year as set
forth below. Performance below the threshold as of the end of the applicable fiscal year shall
result in 0% vesting.
Vesting Date
1
Net
Income
2
Threshold for
Vesting
3
New
Income
2
Target for
100% Vesting
End of fiscal year 2005
For fiscal year
2005, net income
equal to
$197,529,000 (prior
to reduction for
Award
Expense"
4
for fiscal year
2005).
For fiscal year
2005, net income
equal to
$240,858,000 minus
the Award Expense
for fiscal year
2005.
End of fiscal year 2006
For fiscal years
2005 2006,
cumulative net
income equal to
$408,886,000 (prior
to reduction for
cumulative Award
Expense for fiscal
years 2005
2006).
For fiscal years
2005 2006,
cumulative net
income equal to
$507,609,000 minus
the cumulative
Award Expense for
fiscal years 2005
2006.
End of fiscal year 2007
For fiscal years
2005 2007,
cumulative net
income equal to
$635,038,000 (prior
to reduction for
cumulative Award
Expense for fiscal
years 2005
2007).
For fiscal years
2005 2007,
cumulative net
income equal to
$818,058,000 minus
the cumulative
Award Expense for
fiscal years 2005
2007.
2 Net income shall be determined taking into account the performance of RL Childrenswear Company LLC. All net income targets shall otherwise be adjusted to omit the effects of extraordinary items; gain or loss on the disposal of a business segment; unusual or infrequently occurring events and transactions (including, without limitation, restructuring charges); and cumulative effects of changes in accounting principles; and changes to the Companys fiscal year.
3 50% vesting at end of fiscal 2005; 60% vesting at end of fiscal year 2006; and 75% vesting at end of fiscal year 2007.
4 Award Expense shall mean the after-tax expense to the Company attributable to the grant of restricted stock unit awards pursuant to Amendment No.1 to the Employment Agreement with Mr. Farah.
6
Exhibit 10.19
POLO RALPH LAUREN CORPORATION
RESTRICTED STOCK AWARD AGREEMENT
THIS AGREEMENT (the Agreement) is made effective as of the 23rd day of July 2002 (the Grant Date), between Polo Ralph Lauren Corporation, a Delaware corporation (hereinafter called the Company), and Roger N. Farah (hereinafter called the Participant).
R E C I T A L S :
WHEREAS, the Company has adopted the Polo Ralph Lauren Corporation 1997 Long-Term Stock Incentive Plan (the Plan), which Plan is incorporated herein by reference and made a part of this Agreement. Capitalized terms not otherwise defined herein shall have the same meanings as in the Plan; and
WHEREAS, the Committee has determined that it would be in the best interests of the Company and its stockholders to grant the restricted stock award provided for herein (the Restricted Stock Award) to the Participant pursuant to the Plan and the terms set forth herein.
NOW THEREFORE, in consideration of the mutual covenants hereinafter set forth, the parties hereto agree as follows:
1. Grant of the Restricted Shares . Subject to the terms and conditions of the Plan and the additional terms and conditions set forth in this Agreement, the Company hereby grants to the Participant a Restricted Stock Award consisting of 300,000 Shares (hereinafter called the Restricted Shares). The Restricted Shares shall vest and become nonforfeitable in accordance with Section 2 hereof.
2. Vesting .
(a) Subject to the Participants continued employment with the Company, the Restricted Shares shall vest and become nonforfeitable with respect to one fifth (1/5) of the Shares initially granted hereunder on each of the first five anniversaries of the Grant Date. Notwithstanding the foregoing, in the event the above vesting schedule results in the vesting of any fractional Shares, such fractional Shares shall not be deemed vested hereunder but shall vest and become nonforfeitable when such fractional Shares aggregate whole Shares.
(b) (i) If the Participants employment with the Company is terminated by the Participant for Good Reason (as defined below) or by the Company without Cause (as defined below) (other than as a result of the Companys election not to extend the Term of the Employment Agreement (as defined below) as contemplated by Section 2 of the Employment Agreement, or by reason of death or Disability (as defined below)), then the Restricted Shares shall vest with respect to the greater of (x) the percentage of Restricted Shares that otherwise would have vested on the next anniversary of the Grant Date if no such termination had occurred and (y) the percentage of Restricted Shares so that, in the aggregate, 150,000 Restricted Shares would then be vested hereunder.
(ii) If the Participants employment with the Company is terminated for any reason other than as set forth in Section 2(b)(i), then the Restricted Shares shall, to the extent not then vested, be forfeited by the Participant without consideration.
(iii) For purposes of this Agreement the (x) the term Employment Agreement shall mean the Amended and Restated Employment Agreement between the Participant and the Company dated as of July 23, 2002 and (y) the terms Cause, Good Reason, Disability and Change of Control shall have the respective meanings specified in such Amended and Restated Employment Agreement.
(c) Notwithstanding any other provision of this Agreement to the contrary, in the event of a Change of Control (either as defined in Section 2(b)(iii) above or in the Plan), the Restricted Shares shall, to the extent not then vested and not previously forfeited, immediately become fully vested as contemplated by Section 13 of the Plan.
3. Certificates . Certificates evidencing the Restricted Shares shall be issued by the Company and shall be registered in the Participants name on the stock transfer books of the Company promptly after the date hereof, but shall remain in the physical custody of the Company or its designee at all times prior to the vesting of such Restricted Shares pursuant to Section 2. As a condition to the receipt of this Restricted Stock Award, the Participant shall deliver to the Company a stock power, duly endorsed in blank, relating to the Restricted Shares. No certificates shall be issued for fractional Shares.
4. Rights as a Stockholder . The Participant shall be the record owner of the Restricted Shares until or unless such Shares are forfeited pursuant to Section 2 hereof, and as record owner shall be entitled to all rights of a common stockholder of the Company, including, without limitation, voting rights with respect to the Restricted Shares; provided that (i) any cash or in-kind dividends paid with respect to the Restricted Shares which have not previously vested shall be withheld by the Company and shall be paid to the Participant only when, and if, such Restricted Shares shall become fully vested pursuant to Section 2 and (ii) the Restricted Shares shall be subject to the limitations on transfer and encumbrance set forth in Section 7. As soon as practicable following the vesting of any Restricted Shares pursuant to Section 2, certificates for the Restricted Shares which shall have vested shall be delivered to the Participant or to the Participants legal guardian or representative along with the stock powers relating thereto.
5. Legend on Certificates . The certificates representing the vested Restricted Shares delivered to the Participant as contemplated by Section 4 above shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which such Shares are listed, and any applicable Federal or state laws, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.
6. No Right to Continued Employment . Neither the Plan nor this Agreement shall be construed as giving the Participant the right to be retained in the employ of, or in any
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consulting relationship to, the Company or any Affiliate. Further, the Company or an Affiliate may at any time dismiss the Participant or discontinue any consulting relationship, free from any liability or any claim under the Plan or this Agreement, except as otherwise expressly provided herein.
7. Transferability . The Restricted Shares may not, at any time prior to becoming vested pursuant to Section 2, be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by the Participant and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against the Company or any Affiliate; provided that the designation of a beneficiary shall not constitute an assignment, alienation, pledge, attachment, sale, transfer or encumbrance.
8. Withholding . By accepting this Restricted Stock Award, the Participant agrees to make appropriate arrangements with the Company for satisfaction of any applicable federal, state or local income tax, withholding requirements or like requirements, including the payment to the Company upon the vesting of the Restricted Shares (or such earlier or later date as may be applicable under Section 83 of the Internal Revenue Code of 1986), or other settlement in respect of, the Restricted Shares of all such taxes and requirements and the Company shall be authorized to take such action as may be necessary in the opinion of the Companys counsel (including, without limitation, withholding vested Shares otherwise deliverable to Participant hereunder and/or withholding amounts from any compensation or other amount owing from the Company to the Participant ) to satisfy all obligations for the payment of such taxes.
9. Securities Laws . Upon the vesting of any Restricted Shares, the Participant will make or enter into such written representations, warranties and agreements as the Committee may reasonably request in order to comply with applicable securities laws or with this Agreement.
10. Notices . Any notice necessary under this Agreement shall be addressed to the Company in care of its Secretary at the principal executive office of the Company and to the Participant at the address appearing in the personnel records of the Company for such Participant or to either party at such other address as either party hereto may hereafter designate in writing to the other. Any such notice shall be deemed effective upon receipt thereof by the addressee.
11. Choice of Law . THE INTERPRETATION, PERFORMANCE AND ENFORCEMENT OF THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
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12. Restricted Stock Award Subject to Plan . By accepting this Agreement and the Award evidenced hereby, the Participant agrees and acknowledges that the Participant has received and read a copy of the Plan. The Restricted Stock Award is subject to the Plan. The terms and provisions of the Plan as it may be amended from time to time are hereby incorporated herein by reference. In the event of a conflict between any term or provision contained herein and a term or provision of the Plan, the applicable terms and provisions of the Plan will govern and prevail.
ROGER FARAH
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POLO RALPH LAUREN CORPORATION | |
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/s/ Roger Farah
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By: /s/ Mitchell Kosh | |
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Title: Senior Vice President Human Resources |
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Exhibit 10.20
POLO RALPH LAUREN CORPORATION
NONQUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT (the Agreement), is made effective as of the 23rd day of July, 2002, (hereinafter called the Date of Grant), between Polo Ralph Lauren Corporation, a Delaware corporation (hereinafter called the Company), and Roger N. Farah (hereinafter called the Participant):
R E C I T A L S :
WHEREAS, the Company has adopted the Polo Ralph Lauren Corporation 1997 Long-Term Stock Incentive Plan (the Plan), which Plan is incorporated herein by reference and made a part of this Agreement. Capitalized terms not otherwise defined herein shall have the same meanings as in the Plan or, where specifically referenced, the Amended and Restated Employment Agreement between the Company and the Participant effective as of the date hereof (the Employment Agreement); and
WHEREAS, the Committee has determined that it would be in the best interests of the Company and its stockholders to grant the option provided for herein (the Option) to the Participant pursuant to the Plan and the terms set forth herein.
NOW THEREFORE, in consideration of the mutual covenants hereinafter set forth, the parties hereto agree as follows:
1. Grant of the Option . The Company hereby grants to the Participant the right and option (the Option) to purchase, on the terms and conditions hereinafter set forth, all or any part of an aggregate of 400,000 Shares, subject to adjustment as set forth in the Plan. The purchase price of the Shares subject to the Option shall be $18.22 per Share (the Exercise Price). The Option is intended to be a non-qualified stock option, and is not intended to be treated as an option that complies with Section 422 of the Internal Revenue Code of 1986, as amended (the Code).
2. Vesting .
(a) Subject to the Participants continued employment with the Company, the Option shall vest and become exercisable with respect to one third (1/3) of the Shares initially covered by the Option on each of the second, third and fourth anniversaries of the Date of Grant (each, an Option Vesting Date).
At any given time, the portion of the Option which has become vested and exercisable as described above (or pursuant to Sections 2(b) or (d) below) is hereinafter referred to as the Vested Portion.
(b) If the Participants employment with the Company is terminated due to the Participants normal retirement at or after age 65, then the Option shall continue to vest on the
schedule provided in Section 2(a) above, subject to the Participants not engaging in any Competitive Activity (as defined in Section 3(a) below).
(c) If the Participants employment with the Company is terminated by the Participant for Good Reason (as defined below) or by the Company without Cause (as defined below) (other than as a result of the Companys election not to extend the Term of the Employment Agreement as contemplated by Section 2 of the Employment Agreement, or by reason of death or Disability (as defined below)), the Option shall vest with respect to the greater of (x) the percentage of the Option that otherwise would have vested on the next Option Vesting Date if no such termination had occurred and (y) the percentage of the Option so that, in the aggregate, 200,000 Shares subject to the Option would then be vested hereunder.
(d) If the Participants employment with the Company is terminated for any reason other than that expressly described in Section 2(b) or 2(c) above, the Option shall, to the extent not then vested, be canceled by the Company without consideration and the Vested Portion of the Option shall remain exercisable for the period set forth in Section 3(a).
(e) Notwithstanding any other provision of this Agreement to the contrary, in the event of a Change of Control (either as defined in the Employment Agreement or in the Plan) the Option shall, to the extent not then vested and not previously canceled, immediately become fully vested and exercisable as contemplated by Section 13 of the Plan.
3. Exercise of Option .
(a) Period of Exercise . Subject to the provisions of the Plan and this Agreement, the Participant may exercise all or any part of the Vested Portion of the Option at any time prior to the earliest to occur of:
(i) the tenth anniversary of the Date of Grant;
(ii) in the event of the Participants termination of employment due to death or Disability, then the third anniversary of the date of the Participants termination of employment;
(iii) in the event of the Participants termination of employment due to the Participants normal retirement at or after age 65, then the third anniversary of the date of the Participants termination of employment;
(iv) in the event of the Participants termination of employment due to the Participants early retirement at or after age 55 with at least 7 years of service with the Company and its affiliates, then the earlier of (x) the first anniversary of the date of the Participants termination of employment and (y) the Participants engagement in a Competitive Activity;
(v) in the event of the Participants termination of employment by the Participant for Good Reason (as defined below) or by the Company without Cause (as defined
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below) (other than as a result of the Companys election not to extend the Term of the Employment Agreement as contemplated by Section 2 of the Employment Agreement, or by reason of death or Disability (as defined below)), then the later of (x) the expiration of the Term (as defined in the Employment Agreement, determined without regard to any earlier termination or further extensions thereof) or (y) the first anniversary of the Participants termination of employment;
(vi) in the event of the Participants termination of employment by the Company for Cause or due to the Participants voluntary resignation other than for Good Reason, then the date of the Participants termination of employment; and
(vii) notwithstanding paragraphs (ii), (iii), (iv), (v), and (vi), above, in the event a Change of Control (either as defined in the Employment Agreement or in the Plan) shall have occurred prior to the date of the Participants termination of employment, the Option shall be exercisable until the later of (x) the applicable period set forth in paragraph (ii), (iii), (iv), (v), or (vi), above, depending on the reason for termination, or (y) the later of (A) the expiration of the remaining Term (as defined in the Employment Agreement, determined without regard to any earlier termination or further extensions hereunder) or (B) the first anniversary of the date of such Change of Control.
For purposes of this agreement:
Cause shall have the meaning given in the Employment Agreement; and
Competitive Activity shall mean the Participants direct or indirect (i) engagement in any Competitive Business (as defined below) for his or her own account, (ii) entering into the employ of, or rendering of services to, any person engaged in a Competitive Business, or (iii) becoming interested in any entity engaged in a Competitive Business, directly or indirectly as an individual, partner, shareholder, officer, director, principal, agent, employee, trustee, consultant, or in any other relationship or capacity; provided that the Participant may own, solely as an investment, securities of any entity which are traded on a national securities exchange if the Participant is not a controlling person of, or a member of a group that controls such entity and does not, directly or indirectly, own 2% or more of any class of securities of such entity; and
Competitive Business shall mean Competitive Business as defined in any employment agreement then in effect between the Participant and the Company or if not defined therein or, if there shall be no such agreement, the design, manufacture, sale, marketing or distribution of branded or designer apparel and other products in the categories of products sold by, or under license from, the Company or its affiliates within the United States; and
Disability shall have the meaning given in the Employment Agreement; and
Good Reason shall have the meaning given in the Employment Agreement.
(b) Method of Exercise.
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(i) Subject to Section 3(a), the Vested Portion of the Option may be exercised by delivering to the Company at its principal office written notice of intent to so exercise or by delivering such notice to the Company by such other method as may be permitted by the Committee; provided that the Option may be exercised with respect to whole Shares only. Such notice shall specify the number of Shares for which the Option is being exercised and shall be accompanied by payment in full of the Exercise Price. The payment of the Exercise Price may be made in cash, or its equivalent, or (x) by exchanging Shares owned by the Participant (which are not the subject of any pledge or other security interest and which have been owned by the Participant for at least 6 months), (y) subject to such rules as may be established by the Committee, through delivery of irrevocable instructions to a broker to sell the Shares otherwise deliverable upon the exercise of the Option and to deliver promptly to the Company an amount equal to the aggregate exercise price, or (z) with the consent of the Committee in its sole discretion, by the promissory note and agreement of the Participant providing for the payment with interest of the unpaid balance accruing at a rate not less than needed to avoid the imputation of income under Code Section 7872 and upon such terms and conditions (including the security, if any therefor) as the Committee may determine, or by a combination of the foregoing, provided that the combined value of all cash and cash equivalents and the Fair Market Value of any such Shares so tendered to the Company as of the date of such tender is at least equal to such aggregate exercise price.
(ii) Notwithstanding any other provision of the Plan or this Agreement to the contrary, the Option may not be exercised prior to the completion of any registration or qualification of the Option or the Shares under applicable state and federal securities or other laws, or under any ruling or regulation of any governmental body or national securities exchange that the Committee shall in its sole discretion determine to be necessary or advisable.
(iii) Upon the Companys determination that the Option has been validly exercised as to any of the Shares, the Company shall issue certificates in the Participants name for such Shares. However, the Company shall not be liable to the Participant for damages relating to any delays in issuing the certificates to him, any loss of the certificates, or any mistakes or errors in the issuance of the certificates or in the certificates themselves.
(iv) In the event of the Participants death, the Vested Portion of the Option shall remain exercisable by the Participants executor or administrator, or the person or persons to whom the Participants rights under this Agreement shall pass by will or by the laws of descent and distribution as the case may be, to the extent set forth in Section 3(a). Any heir or legatee of the Participant shall take rights herein granted subject to the terms and conditions hereof.
4. No Right to Continued Employment . Neither the Plan nor this Agreement shall be construed as giving the Participant the right to be retained in the employ of, or in any consulting relationship to, the Company or any Affiliate. Further, the Company or an Affiliate may at any time dismiss the Participant or discontinue any consulting relationship, free from any liability or any claim under the Plan or this Agreement, except as otherwise expressly provided herein.
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5. Legend on Certificates . The certificates representing the Shares purchased by exercise of the Option shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which such Shares are listed, and any applicable Federal or state laws, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.
6. Transferability . Except as otherwise determined by the Committee pursuant to its authority under Section 14(a)(iii) of the Plan, during the Participants lifetime, the Option is exercisable only by the Participant and the Option may not be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by the Participant otherwise than by will or by the laws of descent and distribution, and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against the Company or any Affiliate; provided that the designation of a beneficiary shall not constitute an assignment, alienation, pledge, attachment, sale, transfer or encumbrance. No such permitted transfer of the Option to heirs or legatees of the Participant shall be effective to bind the Company unless the Committee shall have been furnished with written notice thereof and a copy of such evidence as the Committee may deem necessary to establish the validity of the transfer and the acceptance by the transferee or transferees of the terms and conditions hereof.
7. Withholding .
(a) The Participant may be required to pay to the Company or any Affiliate and the Company or any Affiliate shall have the right and is hereby authorized to withhold from any payment due or transfer made under the Option or under the Plan or from any compensation or other amount owing to a Participant the amount (in cash, Shares, other securities, other Awards or other property) of any applicable withholding taxes in respect of the Option, its exercise, or any payment or transfer under the Option or under the Plan and to take such other action as may be necessary in the opinion of the Company to satisfy all obligations for the payment of such taxes.
(b) Without limiting the generality of clause (i) above, the Participant may satisfy, in whole or in part, the foregoing withholding liability by delivery of Shares owned by the Participant (which are not subject to any pledge or other security interest and which have been owned by the Participant for at least 6 months) with a Fair Market Value equal to such withholding liability or by having the Company withhold from the number of Shares otherwise issuable pursuant to the exercise of the option a number of Shares with a Fair Market Value equal to such withholding liability.
8. Securities Laws . Upon the acquisition of any Shares pursuant to the exercise of the Option, the Participant will make or enter into such written representations, warranties and agreements as the Committee may reasonably request in order to comply with applicable securities laws or with this Agreement.
9. Notices . Any notice necessary under this Agreement shall be addressed to the Company in care of its Secretary at the principal executive office of the Company and to the
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Participant at the address appearing in the personnel records of the Company for the Participant or to either party at such other address as either party hereto may hereafter designate in writing to the other. Any such notice shall be deemed effective upon receipt thereof by the addressee.
10. Choice of Law . THE INTERPRETATION, PERFORMANCE AND ENFORCEMENT OF THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
11. Option Subject to Plan . By accepting this Agreement and the Award evidenced hereby, the Participant agrees and acknowledges that the Participant has received and read a copy of the Plan. The Option is subject to the Plan. The terms and provisions of the Plan as it may be amended from time to time are hereby incorporated herein by reference. In the event of a conflict between any term or provision contained herein and a term or provision of the Plan, the applicable terms and provisions of the Plan will govern and prevail.
ROGER FARAH
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POLO RALPH LAUREN CORPORATION | |
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/s/ Roger Farah
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By: /s/ Mitchell Kosh | |
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Title: Senior Vice President Human Resources |
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Exhibit 10.21
DEFERRED COMPENSATION AGREEMENT
AGREEMENT made as of the 19 th day of September, 2002, by and between Polo Ralph Lauren Corporation, a corporation organized under the laws of the State of Delaware (the Company), and Roger N. Farah (the Executive).
The Company recognizes that the Executives contribution to the growth and success of the Company has been substantial. The Company desires to assure itself of the continued employment of the Executive by providing an incentive for him to continue his employment with the Company.
In order to effect the foregoing, the Company and the Executive wish to enter into a Deferred Compensation Agreement on the terms and conditions set forth below, as provided for in the Amended and Restated Employment Agreement, dated as of July 23, 2002, between the Company and the Executive (the Employment Agreement).
Accordingly, in consideration of the premises and covenants hereinafter contained, the parties hereto agree as follows:
Section 1. Deferred Compensation Account; Contributions to Trust .
(a) The Company shall credit to a book reserve (the Deferred Compensation Account) established for this purpose the aggregate amount of $250,000 per year for each of the
Companys fiscal years from fiscal 2003 through fiscal 2008, inclusive, in monthly installments, provided that the Executive is employed with the Company on the last business day of such month, and provided further that the initial payment to be made will equal the aggregate amount that would have been credited if this Agreement had been dated as of July 23 rd , 2002. The amount of the monthly installments shall be equal within each fiscal year. The Executive shall select one or more investment elections from the mutual funds managed by the Vanguard Group of Investment Companies, subject to their rules, in which the amounts in his Deferred Compensation Account will be notionally invested. The Deferred Compensation Account shall be debited or credited with amounts representing all losses or earnings of such notional investments.
(b) The Company agrees to establish a grantor trust (the Trust) to which any amounts represented by credits made to the Deferred Compensation Account in accordance with the first sentence of paragraph (a) above shall be contributed by the Company on the last business day of each month. Such Trust shall be established pursuant to the Trust Agreement, as amended, annexed as Exhibit A hereto (such agreement as further amended or supplemented and any successor agreement hereinafter referred to as the Trust Agreement).
(c) The Executive agrees on behalf of himself and his designated beneficiary to assume all risk in connection with
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any debits or credits made to his Deferred Compensation Account by reason of losses or earnings on the notional investments selected by him in accordance with Section 1(a) (or by reason of the Executives failure to select any such notional investment).
Section 2. Benefit Payments .
(a) On the earlier of (i) January 1, 2012 and (ii) the earliest date reasonably practicable following the Executives termination of employment with the Company for any reason, the Company shall pay (or cause to be paid from the Trust) to the Executive or to the Executives beneficiary or estate (in the event of his death) in cash a lump sum amount equal to the vested amount (determined pursuant to Section 3 hereof) reflected in the Deferred Compensation Account as of the date of such termination.
(b) The beneficiary referred to in paragraph (a) above may be designated or changed by the Executive (without the consent of any prior beneficiary) on a form provided by the Company and delivered to the Company before his death. If no such beneficiary shall have been designated, or if no designated beneficiary shall survive the Executive, the lump sum payment payable under paragraph (a) above shall be payable to the Executives estate.
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Section 3. Vesting .
(a) Except as provided in paragraph (b) below, the Executives interest in the Deferred Compensation Account shall vest at the rate of 20% per year, commencing on the first anniversary of the date of this Agreement, and on each of the following four anniversaries thereof, thereby becoming 100% vested on July 23, 2007, but only if the Executive is actively employed by the Company and has remained continuously so employed from the date hereof to and including the applicable anniversary date. The Executive shall not be deemed to be actively employed for a period during which the Executive remains on the payroll for the purpose of collecting salary pursuant to a severance or similar termination arrangement.
(b) In the event that (i) the Executive dies, (ii) the Executives employment is terminated by reason of Disability (as defined in the Employment Agreement), (iii) the Executives employment is terminated by the Company for other than Cause (as defined in the Employment Agreement) or (iv) the Executive terminates his employment for Good Reason (as defined in the Employment Agreement), then the Executives Deferred Compensation Account shall be 100% vested.
Section 4. Unfunded Arrangement.
It is the intention of the parties hereto that the
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arrangement described in this Agreement be unfunded for tax purposes and for purposes of Title I of the Employee Retirement Income Security Act of 1974, as amended. Nothing contained in this Agreement or the Trust Agreement and no action taken pursuant to the provisions of this Agreement or the Trust Agreement shall create or be construed to create a fiduciary relationship between the Company and the Executive, his designated beneficiary or any other person. Any funds that may be invested under the provisions of the Trust Agreement shall continue for all purposes to be a part of the general funds of the Company and no person other than the Company shall by virtue of the provisions of this Agreement have any interest in such funds. To the extent that any person acquires a right to receive payments from the Company under this Agreement, such right shall be no greater than the right of any unsecured general creditor of the Company. This Agreement constitutes a mere promise by the Company to make a benefit payment in the future.
Section 5. Nonalienation of Benefits .
The right of the Executive or any other person to the payment of deferred compensation or other benefits under this Agreement shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment or garnishment by creditors of the Executive or the Executives beneficiary or estate.
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Section 6. No Right to Employment .
Nothing contained herein shall be construed as conferring upon the Executive the right to continue in the employ of the Company as an executive or in any other capacity.
Section 7. Effect on Other Benefits .
Any deferred compensation payable under this Agreement shall not be deemed salary or other compensation to the Executive for the purpose of computing benefits to which he may be entitled under any pension plan or other arrangement of the Company for the benefit of its employees.
Section 8. Binding Agreement .
This Agreement shall be binding upon and inure to the benefit of the Company, its successors and assigns and the Executive and his heirs, executors, administrators and legal representatives.
Section 9. Governing Law .
This Agreement shall be construed in accordance with and governed by the laws of the State of New York without regard to its conflict of laws principles.
Section 10. Validity .
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The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.
Section 11. Counterparts .
This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.
Section 12. Arbitration .
Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in the City of New York in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrators award in any court having jurisdiction. Fees and expenses payable to the American Arbitration Association and the arbitration shall be shared equally by the Company and by the Executive, but the parties shall otherwise bear their own costs in connection with the arbitration; provided that the arbitrator shall be entitled to include as part of the award to the prevailing party the
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reasonable legal fees and expenses incurred by such party in an amount not to exceed $25,000.
Section 13. Amendment .
The Agreement may be amended in whole or in part by a written instrument executed by both parties hereto.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officers and the Executive has hereunto set his hand and seal as of the date first above written.
POLO RALPH LAUREN CORPORATION
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By: | /s/ Mitchell A. Kosh | |||
EXECUTIVE:
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/s/ Roger N. Farah | ||||
Roger N. Farah | ||||
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EXHIBIT 10.25
THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING
SECURITIES THAT HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED.
Restricted Performance
Share Unit Award
Overview
June 2005
Highlights of the Award
This Overview is qualified in its entirety by reference to the accompanying Memorandum to Participants in the Polo Ralph Lauren 1997 Long-Term Stock Incentive Plan and to the Plan itself. Copies of the Memorandum and the Plan are available from your Human Resources Department or by logging on to the Intranet at http://poloweb/HRWeb/Benefits .
OVERVIEW
On June 9, 1997, the Board of Directors adopted the Polo Ralph Lauren Corporation 1997 Long-Term Stock Incentive Plan (as amended and restated, the Plan), which authorizes the granting of equity awards to officers and other employees and third party service providers of the Company and its subsidiaries by the Compensation Committee of the Board of Directors.
A Restricted Performance Share Unit award granted under the Plan provides a participant the right to receive shares of Polo Ralph Lauren stock (traded on the New York Stock Exchange: RL) based on the achievement of specified performance goals over a specified period, generally three financial years. The performance measure(s) are set by the Compensation Committee of the Board of Directors at the time of grant, and may include one or more of the following:
Net Earnings
Earnings Per Share
Net Revenue or Net Revenue Growth
Gross Profit or Gross Profit Growth
Return on Assets
Cash Flow
This Overview explains the Restricted Performance Share Unit Award program, its benefits to you as a participant and outlines the various steps you need to take in regard to managing your restricted performance share unit award.
OBJECTIVES
The intent of the award is to provide additional performance-based compensation opportunities:
1. | For selected executives, to link a portion of their long-term incentive to the achievement of specific corporate performance objectives. |
2. | To attract and retain individuals of superior talent. |
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PLAN ADMINISTRATION
Polo Ralph Laurens Human Resources Department administers the Restricted Performance Share Unit Award program. Record keeping for restricted performance share unit awards is performed by Merrill Lynch.
The Companys Board of Directors reserves the right to amend, modify, or terminate the plan at any time. No such amendment to the plan would adversely affect any restricted performance share unit awards then outstanding.
If you have any questions regarding this overview, please consult the Memorandum to Participants or contact your local Human Resources generalist.
ELIGIBILITY FOR GRANT
Restricted performance share unit awards are granted to individuals in key executive positions that have a significant impact on the strategic direction and business results of the Company.
Individuals in designated positions will generally receive each year both a stock option award and a restricted performance share unit award.
Guidelines have been established for the number of restricted performance share units that participants may receive. The guidelines reflect a positions scope, accountability and impact on the organization.
Please note that the guidelines do not constitute a guarantee that any specific individual will receive a restricted performance share unit award, or a stock option award, in any given year or guarantee the number of shares (of either restricted performance share units or stock options) if a grant is made.
An employee who receives an Improvement Needed (I) or Unsatisfactory (U) rating on his/her annual performance evaluation is not eligible for either restricted performance share units or stock options in that fiscal year.
STRUCTURE OF GRANTS AND PAYOUT SCHEDULE
At the time of grant, the award has a target number of share units. Threshold, Target, and Maximum levels of performance have been established for the measure(s) applicable to that award. The payout schedule will normally be as follows:
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Performance Level | % of Goal Achieved | % of Target Share Units Paid | ||||||
Threshold
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70 | % | 75 | % | ||||
Target
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100 | % | 100 | % | ||||
Maximum
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110 | % | 150 | % |
Note: Restricted Performance Share Unit awards interpolate between 70%-100% of target. No payout will be earned for performance below Threshold.
Once an award is given in any fiscal year, the measure(s), performance goals, or payout schedule will not be modified prior to the end of the award term. However, for any future awards, the Compensation Committee may change the performance measure(s), goals and/or payout schedule.
EXAMPLE
An award granted in fiscal 2005 will mature at the end of fiscal 2007 and will be paid in fiscal 2008 (subject to achievement of the specified performance goals set for FY 2005-FY 2007) at approximately the same time as the Executive Incentive Plan (EIP).
Beginning with fiscal 2008, participants would have the opportunity to receive a LTI payout each
year as awards previously granted would mature, as shown below:
Year Granted
Performance Period
Year Paid
1
FY05 FY07
FY08
FY06 FY08
FY09
FY07 FY09
FY10
1 If at least Threshold performance is achieved.
3
Example of awards and payouts to a Division SVP
:
Year Granted
Performance Period
Year Paid
and # Share Units
and Achievement
Payout %
and # Share Units
FY05 FY07 Target
100
%
FY08 2,500
Fy06 FY08 70%
75
%
FY09 1,875
FY07 FY09 110%
150
%
FY10 3,750
Total Share Units Granted | Total Share Units Paid | |||
7,500
|
8,125 |
AWARD VESTING/EXPIRATION
As shown below, all restricted performance share units granted for a particular award will vest at the end of the three-year performance period, subject to achieving at least a Threshold level of performance. This is sometimes referred to as cliff vesting since all share units vest at the same time.
If Threshold or better performance is achieved and shares are paid out, you will own those shares, so you will have voting rights and you will receive dividends.
If performance is below Threshold at the end of the three-year period, all share units for that award will be forfeited. As noted above, as participants receive awards over a period of years, they will have potential vesting on their other awards even if the award maturing in that fiscal year does not pay out.
4
If a participant leaves Polo Ralph Lauren (except as a result of retirement, disability, or death) before the three-year period is over, all rights to unvested share units are forfeited. (For details, please see chart on Page 8.)
VALUE OF RESTRICTED PERFORMANCE SHARE UNITS
A restricted performance share unit offers two opportunities to recognize value.
First, if Threshold or better performance is achieved you will receive a payout of actual shares. Unlike options, this type of award is not dependent on the share price going up to provide value.
The second opportunity would result from an increase in the share price. The benefit to you is that you receive the same number of shares regardless of how much the stock price may have increased.
The potential gain from restricted performance share units can be significant, as shown in the following example. In this example, we are not forecasting actual growth in the companys stock price, but merely illustrating both the original award value and the potential for gains based on potential rates of stock price appreciation.
In the example, the participant received a grant for 2,500 restricted performance share units. At a stock price of $30 when the grant was made, the award has a value at target of $75,000. Any increase in the stock price above the stock price at the grant date increases the value of the award as shown below.
SALE OF SHARES
When shares acquired through payout of a restricted performance share unit award are sold at a later date, participants can benefit from any price appreciation that has occurred since the purchase date, similar to any other stock you own. Shares received from a performance share unit award payout may be sold at any time, except during those Blackout periods specified by the Companys Securities Trading Policy (see Page10). Executive Officers, however, may sell shares only pursuant to SEC Rule 144 or another applicable exception under the Securities Act of 1933, as Amended.
5
Impact of Employment Termination
The following chart explains what happens if you leave Polo Ralph Lauren.
IMPACT ON RESTRICTED PERFORMANCE SHARE UNIT AWARDS
Event | Unvested Awards | |||
Retirement Beginning at age 55,
Disability or Death |
· | In the case of retirement, disability or death, a pro-rated target number of share units will be determined. | ||
|
· | These pro-rated share units will vest at the end of the three-year period, and payout will be based on the actual degree of achievement. If performance does not reach the Threshold level, then the pro-rated share units will be forfeited. | ||
Involuntary Termination (without cause)
|
· | All unvested share units are forfeited. | ||
Dismissal for Cause
|
· | All vested share units not yet paid are forfeited. All unvested share units are forfeited. | ||
Voluntary Resignation
|
· | All unvested share units are forfeited. |
If a participant has received any shares of Polo Ralph Lauren stock, as a result of payout of any Restricted Performance Share Unit award, the participant retains all rights to those shares.
6
Tax Liability
The following statements regarding United States federal income tax consequences of the grant and vesting of Restricted Performance Share Unit awards under the Plan should be read in conjunction with the Federal Income Tax Consequences of the Memorandum to Participants in the Polo Ralph Lauren Corporation 1997 Long-Term Stock Incentive Plan and are not intended to be a complete summary of applicable law, nor do they address state, local or non-U.S. tax considerations. Moreover, the federal income tax consequences to any particular participant may differ from those described herein by reason of, among other things, the specific circumstances of such participant. For these reasons, participants are urged to consult their tax advisors with respect to the consequences of their participation in the Plan.
AT GRANT
No United States federal income tax is owed at grant.
AT VESTING
United States federal income tax is owed on the value of the share units, if any, received at payout. As previously indicated, the value at vesting is based on the number of share units earned times the share price on the payout date.
A percentage of the share units earned will be withheld to satisfy applicable federal, state, and local payroll and income tax withholding requirements. However, the amount withheld by Polo may be less than a participants actual federal, state or local income tax liabilities because the rate at which the participants income is taxed may exceed required withholding rates. Participants may wish to arrange for additional withholding or estimated tax payments.
The value of the share units paid out is treated as ordinary income for U.S. federal tax liability. In the example above, the value of 2,500 share units at $30 per share is $75,000, so that amount will be subject to federal income taxes. In addition, the value will be subject to state and local taxes, as well as Federal Insurance Contributions Act (FICA) to the extent applicable.
Any value generated from the payout of a restricted performance share unit award must be reported as income to the Internal Revenue Service (IRS) and will therefore be included on the W-2 form received in January.
SUBSEQUENT SALES
Please consult the Prospectus and your own tax advisor.
7
Other Administrative Issues
INSIDER TRADING
As provided in the Polo Ralph Lauren Employee Handbook, employees are prohibited by law from buying or selling stock if an employee has or is aware of any material, non-public information about Polo Ralph Lauren. This is commonly referred to as insider information. Material, non-public information is any information that has not been disclosed to the public that could affect the price of RL stock either positively or negatively or affect a persons decision to buy, hold or sell stock.
Examples of what might be considered insider information include but are not limited to the following:
| Earnings or other financial information; | |||
| Changes in dividend policy; | |||
| Stock splits; | |||
| Mergers and acquisitions; | |||
| Major new contracts or product-line introductions; | |||
| Litigation involving substantial amounts of money; or | |||
| Changes in management |
These insider-trading rules are applicable to employees of Polo Ralph Lauren and its related companies worldwide.
COMPANY BLACKOUT PERIODS
To avoid even the appearance of insider trading, our Companys policy prohibits members of the Board of Directors and all employees from making trades involving stock of the Company during certain blackout periods. This prohibition covers buying or selling shares. These blackout periods generally begin two weeks before the end of each of our fiscal quarters and continue through one trading day after the Company issues its earnings release for the fiscal quarter or year just ended. If the earnings release is issued before the opening of the market on a trading day, trading may begin the next day. The blackout periods are announced at the start of each year. In addition, the Board of Directors, officers, and employees in the Finance and Legal departments must clear all trades with the Corporate Counsel, whether they occur within a blackout period or not.
8
ADDITIONAL PROHIBITED TRANSACTIONS
Because we believe it is inappropriate for any Company personnel to engage in short-term or speculative transactions involving the Companys common stock, it is Company policy that employees do not engage in any of the following activities with respect to the securities of the Company:
| In and out trading in securities of the Company. Any Company stock purchased in the market must be held for a minimum of six months, and ideally longer. (Note that the Securities and Exchange Commission (SEC) has a short-swing profit recapture rule that effectively prohibits Executive Officers and members of the Board of Directors from selling any Company stock within six months of a purchase. The Company has extended this prohibition to all employees. (The receipt of shares pursuant to the vesting of Restricted Performance Share Unit awards is not considered a purchase under the SECs rule.) | |||
| Short sales (i.e., selling stock one does not own and then borrowing the shares to make delivery.) | |||
| Buying or selling puts or calls (i.e., making commitments to buy or sell securities at a specified price for a fixed period of time.) |
CLEARANCE OF ALL TRADES BY DIRECTORS, OFFICERS AND OTHER KEY PERSONNEL
All transactions in Company stock (purchases, sales, transfers, etc.) by members of the Board of Directors, officers, and personnel in the Finance and Legal departments must be cleared by the Corporate Counsel. If you contemplate a transaction, you must contact the Corporate Counsel at (212) 705-8280 before contacting Merrill Lynch or taking any other step to initiate a transaction.
In the event of any discrepancy between the terms of the Plan and this Restricted Performance Share Unit Award Overview, the terms of the Plan will govern. A copy of the official Polo Ralph Lauren Corporation 1997 Long-Term Stock Incentive Plan is available from your Human Resources department or you may log on to the Intranet at http://poloweb/HRWeb/Benefits .
9
EXHIBIT 10.26
THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING
SECURITIES THAT HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED.
Stock Option Award
Overview United States
June 2005
Highlights of the Award
This Overview is qualified in its entirety by reference to the accompanying Memorandum to Participants in the Polo Ralph Lauren 1997 Long-Term Stock Incentive Plan and to the Plan itself. Copies of the Memorandum and the Plan are available from your Human Resources Department or by logging on to the Intranet at http://poloweb/HRWeb/Benefits .
OVERVIEW
On June 9, 1997, the Board of Directors adopted the Polo Ralph Lauren Corporation 1997 Long-Term Stock Incentive Plan (as amended and restated, the Plan), which authorizes the granting of equity awards to officers and other employees and third party service providers of the Company and its subsidiaries by the Compensation Committee of the Board of Directors.
A stock option granted under the Plan provides a participant the right to purchase, within a specified period of time, a stated number of shares of Polo Ralph Lauren stock (traded on the New York Stock Exchange: RL) at a fixed price (the option price). The option price equals the fair market value (the average of the high and the low price) of a share of Polo Ralph Lauren common stock on the grant date. Stock options increase in value when the price of Polo Ralph Laurens stock moves above the option price.
Stock option grants reward individuals who make important leadership contributions to the companys success. Along with Polo Ralph Laurens other compensation elements, stock options create a highly competitive and attractive total compensation package.
This Overview explains the Stock Option program, its benefits to you as a participant and outlines the various steps you need to take in regards to managing your stock option grant.
OBJECTIVES
The intent of the stock option program is to provide awards that:
1. | Attract and retain individuals of superior talent. | |||
2. | Motivate key contributors to continuously improve the Companys performance which should ultimately result in increased shareholder value. | |||
3. | Enable individuals to participate in the long-term growth and financial success of the Company. |
PLAN ADMINISTRATION
1
Polo Ralph Laurens Human Resources Department administers the stock option program. Stock option exercise transactions and record keeping services are performed by Merrill Lynch.
The Companys Board of Directors reserves the right to amend, modify, or terminate the plan at any time. No such amendment to the Plan would adversely affect any stock options then outstanding.
If you have any questions regarding this overview please consult the Memorandum to Participants or contact your local Human Resources generalist.
ELIGIBILITY FOR GRANT
The Polo Ralph Lauren stock option program awards stock option grants to key contributors who have a direct impact on the strategic direction and business results of the Company.
Each year, participants are notified of their eligibility to participate in the stock option program and to receive a stock option award for that fiscal year.
Guidelines are established for the number of shares eligible participants may receive. These guidelines are based on current position levels and reflect competitive opportunities which are determined by a positions scope, accountability and direct impact on the organization.
Please note that these guidelines do not constitute a guarantee that any specific individual will receive a grant in any given year or guarantee a specific number of shares if a grant is awarded.
A Polo Ralph Lauren employee who receives an Improvement Needed (I) or Unsatisfactory (U) rating on his/her annual performance evaluation is not eligible to participate in the stock option program for that fiscal year.
OPTION PRICE
The option price, which is determined on the date of grant, is stated in the grant notification letter. Though the stock price may fluctuate over the term of the option, participants retain the right to purchase the stock at the option price once the stock options become vested.
A stock option is not the same as owning actual shares of stock. Stock option holders do not have the right to participate in shareholder voting or the right to receive dividends. However, these rights do apply to individuals who own actual shares of Polo Ralph Lauren stock.
VESTING PERIOD
The vesting period for your options is three years starting from the grant date. Stock options vest in equal installments over the three year period. Stock options are 100% vested three years from
2
the initial grant date. As stock options vest, participants may exercise any portion of the vested stock option award.
As shown below, one-third of the stock options in any annual grant vest on the anniversary of the initial grant date.
Although participants have the right to exercise stock options once they have vested, they may choose to hold them in anticipation of future gains from an increase in the stocks price. If a participant leaves Polo Ralph Lauren (except as a result of retirement, disability, or death) before the stock options have fully vested, all rights to unvested options are forfeited. (For further details on the impact of termination, please see the chart on Page 7).
In addition, the expiration date of any vested stock options may be accelerated. (See chart on Page 7.)
EXPIRATION OF OPTIONS
Options that have not been exercised by the end of the option period expire. All stock options in a grant must be exercised within ten years of the initial grant date.
3
VALUE OF STOCK OPTIONS
As mentioned earlier, stock options increase in value when the market price of Polo Ralph Lauren common stock rises above the option grant price. When this occurs, participants can exercise their vested stock options by buying stock at a price below the market price. The difference between the market price and the option price is considered the gain received from the exercise.
The potential gain from stock options can be significant, as shown in the example above. This example is not a forecast of actual growth in Polo Ralph Laurens stock, but merely an illustration showing potential gains based on potential rates of stock price appreciation.
Example: the participant has 1,000 stock options at a $30 option price. The gain per share is calculated by subtracting the option price from the stock trading price (i.e., $30 $30 = $0, $40 $30 = $10 per share, etc.) The total gain is calculated by multiplying the gain per share by the number of stock options (1,000).
POTENTIAL STOCK OPTION GAINS
1,000 Options/$30 Option Price
If Future Stock Price Reaches: | ||||||||||||||||
$30 | $40 | $50 | $70 | |||||||||||||
Gain per Share
|
$ | 0 | $ | 10 | $ | 20 | $ | 40 | ||||||||
|
||||||||||||||||
Total gain
|
$ | 0 | $ | 10,000 | $ | 20,000 | $ | 40,000 | ||||||||
|
4
OPTION EXERCISE
All stock option exercise transaction and record keeping are performed for the Company by Merrill Lynch.
If you wish to exercise your vested stock options, you should use the Merrill Lynch website at www.benefits.ml.com and follow the instructions you received for accessing the site. You may also view information about stock options you have received at the Merrill Lynch website.
You must have an open brokerage account at Merrill Lynch in order to exercise your options .
If you prefer to use the Merrill Lynch call center (exercise fees for this option are higher) you may contact a Merrill Lynch representative at 1-877-765-POLO and indicate your intent to exercise.
Please refer to Page 7 for important information regarding the tax consequences of stock option exercise and Page 8 for information about Blackout periods when stock options may not be exercised.
Methods of exercising stock options :
When you exercise your stock options, you purchase Polo Ralph Lauren shares at the option price set at the time the option was granted. Stock options may be exercised in three ways:
| Cash Exercise : Paying cash for the exercise cost. | |||
| Cashless Exercise : Exercising stock options and paying for the exercise costs by simultaneously selling the stock and retaining the net gain. | |||
| Stock-for-Stock Exchange : Using shares of Polo Ralph Lauren stock that you have owned for at least six months to pay for the exercise costs. |
SALE OF SHARES
When shares are acquired due to exercise of stock options and sold at a later date, participants can benefit from any price appreciation that has occurred since the purchase date. As noted above, shares realized from a stock option exercise may be sold at any time, except during those Blackout periods specified by the Companys Securities Trading Policy (see Page 8). Executive Officers, however, may sell shares only pursuant to SEC Rule 144 or another applicable exception under the Securities Act of 1933, as Amended.
5
Impact of Employment Termination
The following chart explains the impact on options if you leave Polo Ralph Lauren.
IMPACT ON OPTIONS
Event
Vested Options
Unvested Options
age 65
·
Up to three
years to exercise any
vested stock options
after retirement,
provided they do not
expire sooner. The
options expire after
the three years.
·
Unvested
options continue to
vest according to the
original vesting
schedule (one-third
each year for three
years). If the
options are not
exercised once vested
within three years of
retirement date, they
expire. Any unvested
options are forfeited
if the participant
goes to work for a
competitor.
·
Up to one year
to exercise vested
options after
retirement, provided
they do not expire
sooner. The options
expire at the end of
one year. However, any
vested options are
forfeited if a
participant goes to
work for a competitor.
·
All unvested
stock options are
forfeited.
·
In the case of
death, the estate has
up to three years to
exercise any vested
stock options,
provided they do not
expire sooner.
Options expire if not
exercised after three
years.
·
Unvested
options continue to
vest according to the
original vesting
schedule (i.e.,
one-third each year
for three years). If
not exercised, once
vested, within three
years of the date of
death or disability,
the options expire.
·
In the case of
disability,
participants have up
to three years to
exercise any vested
stock options after
long-term disability
begins, provided they
do not expire sooner.
The options expire if
not exercised within
the three years.
·
Up to three
months to exercise any
vested stock options,
provided they do not
expire sooner.
·
All unvested
stock options are
forfeited.
Voluntary Resignation
·
All vested
stock options are
forfeited as of date
of termination.
·
All unvested
stock options are
forfeited.
If a participant has exercised any stock options or currently owns Polo Ralph Lauren stock, the participant retains all rights to those shares.
6
Tax Liability
The following statements regarding United States federal income tax consequences of the grant and exercise of Stock Option awards under the Plan should be read in conjunction with the Federal Income Tax Consequences section of the Memorandum to Participants in the Polo Ralph Lauren 1997 Long-Term Stock Incentive Plan and are not intended to be a complete summary of applicable law, nor do they address state, local or non-U.S. tax considerations. Moreover, the federal income tax consequences to any particular participant may differ from those described herein by reason of, among other things, the specific circumstances of such participant. For these reasons, participants are urged to consult their tax advisors with respect to the consequences of their participation in the Plan.
AT GRANT
No United States federal income tax is owed at grant.
AT EXERCISE
United States federal income tax is owed on the stock option gain when options are exercised. The gain is the amount equal to the difference between the option grant price and the market price of the stock at the time of exercise.
A percentage of the gain will be withheld to satisfy applicable federal, state, and local payroll and income tax withholding requirements. However, the amount withheld by Polo may be less than a participants actual federal, state, or local income tax liabilities because the rate at which the participants income is taxed may exceed required withholding rates. Participants may wish to arrange for additional withholding or estimated tax payments.
U.S. Federal tax liability is based on ordinary income on the gain. For example, if the gain is $10,000, and the federal income tax withholding rate is 25 percent, the withholding tax will be $2,500 ($10,000 x .25). In addition, the gain will be subject to state and local taxes, as well as Federal Insurance Contributions Act (FICA) to the extent applicable.
Participants are required to provide Polo Ralph Lauren with either cash or stock to satisfy any withholding tax requirements at the time they exercise their stock options.
Any income generated from exercising stock options must be reported to the Internal Revenue Service (IRS) and will therefore be included on the W-2 form received in January.
SUBSEQUENT SALES
Please consult the Prospectus and your own tax advisor.
7
Other Administrative Issues
INSIDER TRADING
As provided in the Polo Ralph Lauren Employee Handbook, employees are prohibited by law from buying or selling stock if an employee has or is aware of any material, non-public information about Polo Ralph Lauren. This is commonly referred to as insider information. Material, non-public information is any information that has not been disclosed to the public that could affect the price of RL stock either positively or negatively or affect a persons decision to buy, hold or sell stock.
Examples of what might be considered insider information include but are not limited to the following:
| Earnings or other financial information; | |||
| Changes in dividend policy; | |||
| Stock splits; | |||
| Mergers and acquisitions; | |||
| Major new contracts or product-line introductions; | |||
| Litigation involving substantial amounts of money; or | |||
| Changes in management |
These insider-trading rules are applicable to employees of Polo Ralph Lauren and its related companies worldwide.
COMPANY BLACKOUT PERIODS
To avoid even the appearance of insider trading, our Companys policy prohibits members of the Board of Directors and all employees from making trades involving stock of the Company during certain blackout periods. This prohibition covers buying or selling shares, including the exercise of stock options. These blackout periods generally begin two weeks before the end of each of our fiscal quarters and continue through one trading day after the Company issues its earnings release for the fiscal quarter or year just ended. If the earnings release is issued before the opening of the market on a trading day, trading may begin the next day. The blackout periods are announced at the start of each year. In addition, members of the Board of Directors, officers, and employees in the Finance and Legal departments must clear all trades with the Corporate Counsel, whether they occur within a blackout period or not.
8
ADDITIONAL PROHIBITED TRANSACTIONS
Because we believe it is inappropriate for any Company personnel to engage in short-term or speculative transactions involving the Companys common stock, it is Company policy that employees do not engage in any of the following activities with respect to the securities of the company:
| In and out trading in securities of the Company. Any Company stock purchased in the market must be held for a minimum of six months, and ideally longer. (Note that the Securities and Exchange Commission (SEC) has a short-swing profit recapture rule that effectively prohibits Executive Officers and members of the Board of Directors from selling any Company stock within six months of a purchase we have simply extended this prohibition to all employees. (Exercise of options with an exercise price above the then current market price of the stock, however, is not considered a purchase under the SECs rule.) | |||
| Short sales (i.e., selling stock one does not own and then borrowing the shares to make delivery.) | |||
| Buying or selling puts or calls (i.e., making commitments to buy or sell securities at a specified price for a fixed period of time.) |
CLEARANCE OF ALL TRADES BY DIRECTORS, OFFICERS AND OTHER KEY PERSONNEL
All transactions in Company stock (purchases, sales, transfers, etc.) by members of the Board of Directors, officers, and personnel in the Finance and Legal departments must be cleared by the Corporate Counsel. If you contemplate a transaction, you must contact the Corporate Counsel at (212) 705-8280 before contacting Merrill Lynch
In the event of any discrepancy between the terms of the Plan and the Stock Option Overview, the terms of the Plan will govern. A copy of the official Polo Ralph Lauren Corporation 1997 Long-Term Stock Incentive Plan is available from your Human Resources department or you may log on to the intranet at http://poloweb/HRWeb/Benefits .
9
Entity Name
Jurisdiction of Formation
Delaware
Delaware
New York
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Hong Kong
Singapore
Hong Kong
New York
Delaware
Delaware
Delaware
Delaware
Canada
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
New York
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Entity Name
Jurisdiction of Formation
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
California
Delaware
Delaware
Delaware
Colorado
Colorado
Delaware
Entity Name
Jurisdiction of Formation
Delaware
Delaware
Delaware
Japan
Nova Scotia
Delaware
Hong Kong
United Kingdom
Principality of Monaco
Delaware
Delaware
Delaware
Netherlands
Netherlands
Spain
Spain
France
France
Germany
Sweden
Austria
France
Belgium
Italy
Netherlands
Netherlands
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Argentina
Italy
Italy
Switzerland
Delaware
New York
Delaware
Delaware
Colorado
Delaware
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statement No. 333-46808 and
333-29023 of Polo Ralph Lauren Corporation and subsidiaries (the Company) on Form S-8 of our
reports dated June 30, 2005 relating to the consolidated financial statements and financial statement schedule of the Company (which
report expresses an unqualified opinion and includes an explanatory paragraph for the restatement described in Note 2)
and managements report on the effectiveness of internal control over
financial reporting dated June 30, 2005 (which report expresses an unqualified opinion on managements
assessment and an adverse opinion on the effectiveness of the Companys internal control over
financial reporting because of a material weakness), appearing in this Annual Report on Form 10-K of
Polo Ralph Lauren Corporation and subsidiaries for the year ended April 2, 2005.
Deloitte & Touche LLP
New York, New York
108
June 30, 2005
EXHIBIT 31.1
CERTIFICATION
I, Ralph Lauren, certify that:
1. I have reviewed this annual report on Form 10-K of Polo Ralph Lauren Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period
covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included
in this report, fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer(s) and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to
the registrant, including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control
over financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrants disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrants internal control over financial
reporting that occurred during the registrants most recent fiscal quarter (the registrants
fourth fiscal quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrants internal control over financial
reporting, and
5. The registrants other certifying officer(s) and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the equivalent function):
a) all significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to adversely affect the
registrants ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have
a significant role in the registrants internal control over financial reporting.
109
/s/ RALPH LAUREN
Chairman of the Board and Chief Executive Officer
(Principal Executive Officer)
Date: June 30, 2005
EXHIBIT 31.2
CERTIFICATION
I, Tracey T. Travis, certify that:
1. I have reviewed this annual report on Form 10-K of Polo Ralph Lauren Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period
covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included
in this report, fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer(s) and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to
the registrant, including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control
over financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrants disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrants internal control over financial
reporting that occurred during the registrants most recent fiscal quarter (the registrants
fourth fiscal quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrants internal control over financial
reporting, and
5. The registrants other certifying officer(s) and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the equivalent function):
a) all significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to adversely affect the
registrants ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have
a significant role in the registrants internal control over financial reporting.
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/s/ TRACEY T. TRAVIS
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
Date: June 30, 2005
EXHIBIT 32.1
Certification of Ralph Lauren Pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Annual Report of Polo Ralph Lauren Corporation (the Company) on Form 10-K for the period ended April 2, 2005 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Ralph Lauren, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
/s/ RALPH LAUREN
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June 30, 2005 | ||||
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Polo Ralph Lauren Corporation and will be retained by Polo Ralph Lauren Corporation and furnished to the Securities and Exchange Commission or its staff upon request.
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EXHIBIT 32.2
Certification of Tracey T. Travis Pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Annual Report of Polo Ralph Lauren Corporation (the Company) on Form 10-K for the period ended April 2, 2005 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Tracey T. Travis, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
/s/ TRACEY T. TRAVIS
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June 30, 2005 | ||||
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Polo Ralph Lauren Corporation and will be retained by Polo Ralph Lauren Corporation and furnished to the Securities and Exchange Commission or its staff upon request.
112