POLO RALPH LAUREN CORPORATION
1997 LONG-TERM STOCK INCENTIVE PLAN
SECTION 1. Purpose. The purposes of this Polo Ralph Lauren
Corporation 1997 Long-Term Stock Incentive Plan are to promote the interests of
Polo Ralph Lauren Corporation and its stockholders by (i) attracting and
retaining exceptional officers and other employees, directors and consultants of
the Company and its Subsidiaries, as defined below; (ii) motivating such
individuals by means of performance-related incentives to achieve longer-range
performance goals; and (iii) enabling such individuals to participate in the
long-term growth and financial success of the Company.
SECTION 2. Definitions. As used in the Plan, the following
terms shall have the meanings set forth below:
'Affiliate' shall mean (i) any entity that, directly or
indirectly, is controlled by, or controls or is under common control with, the
Company and (ii) any entity in which the Company has a significant equity
interest, in either case as determined by the Committee.
'Award' shall mean any Option, Stock Appreciation Right,
Restricted Stock Award, Restricted Stock Unit Award, Performance Award, Other
Stock-Based Award or Performance Compensation Award.
'Award Agreement' shall mean any written agreement, contract,
or other instrument or document evidencing any Award, which may, but need not,
be executed or acknowledged by a Participant.
'Board' shall mean the Board of Directors of the Company.
'Change of Control' shall mean the occurrence of any of the
following: (i) the sale, lease, transfer, conveyance or other disposition, in
one or a series of related transactions, of all or substantially all of the
assets of the Company to any 'person' or 'group' (as such terms are used in
Sections 13(d)(3) and 14(d)(2) of the Exchange Act) other than the Permitted
Holders, (ii) any person or group, other than the Permitted Holders, is or
becomes the 'beneficial owner' (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act, except that a person shall be deemed to have 'beneficial
ownership' of all shares that any such person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time),
directly or indirectly, of more than 50% of the total voting power of the voting
stock of the Company, including by way of merger, consolidation or otherwise or
(iii) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board (together with any new directors
whose election by such Board or whose nomination for election by the
shareholders of the Company was
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approved by a vote of a majority of the directors of the Company, then still in
office, who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for any
reason to constitute a majority of the Board, then in office.
'Code' shall mean the Internal Revenue Code of 1986, as
amended from time to time.
'Committee' shall mean either (i) the Board or (ii) a
committee of the Board designated by the Board to administer the Plan and
composed of not less two directors, each of whom is expected, but not required,
to be a 'Non-Employee Director' (within the meaning of Rule 16b-3) and an
'outside director' (within the meaning of Code section 162(m)) to the extent
Rule 16b-3 and Code section 162(m), respectively, are applicable to the Company
and the Plan. If at any time such a committee has not been so designated, the
Board shall constitute the Committee.
'Company' shall mean Polo Ralph Lauren Corporation, together
with any successor thereto.
'Exchange Act' shall mean the Securities Exchange Act of 1934,
as amended.
'Fair Market Value' shall mean, (A) with respect to any
property other than Shares, the fair market value of such property determined by
such methods or procedures as shall be established from time to time by the
Committee and (B) with respect to the Shares, as of any date, (i) the mean
between the high and low sales prices of the Shares as reported on the composite
tape for securities traded on the New York Stock Exchange for such date (or if
not then trading on the New York Stock Exchange, the mean between the high and
low sales price of the Shares on the stock exchange or over-the-counter market
on which the Shares are principally trading on such date), or if, there were no
sales on such date, on the closest preceding date on which there were sales of
Shares or (ii) in the event there shall be no public market for the Shares on
such date, the fair market value of the Shares as determined in good faith by
the Committee.
'Incentive Stock Option' shall mean a right to purchase Shares
from the Company that is granted under Section 6 of the Plan and that is
intended to meet the requirements of Section 422 of the Code or any successor
provision thereto.
'Negative Discretion' shall mean the discretion authorized by
the Plan to be applied by the Committee to eliminate or reduce the size of a
Performance Compensation Award; provided that the exercise of such discretion
would not cause the Performance Compensation Award to fail to qualify as
'performance-based compensation' under section 162(m) of the Code. By way of
example and not by way of limitation, in no event shall any discretionary
authority granted to the Committee by the Plan including, but not limited to,
Negative Discretion, be used to
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(a) grant or provide payment in respect of Performance Compensation Awards for a
Performance Period if the Performance Goals for such Performance Period have not
been attained; or (b) increase a Performance Compensation Award above the
maximum amount payable under Sections 4(a) or 11(d)(vi) of the Plan.
Notwithstanding anything herein to the contrary, in no event shall Negative
Discretion be exercised by the Committee with respect to any Option or Stock
Appreciation Right (other than an Option or Stock Appreciation Right that is
intended to be a Performance Compensation Award under Section 11 of the Plan).
'Non-Qualified Stock Option' shall mean a right to purchase
Shares from the Company that is granted under Section 6 of the Plan and that is
not intended to be an Incentive Stock Option.
'Option' shall mean an Incentive Stock Option or a
Non-Qualified Stock Option.
'Other Stock-Based Award' shall mean any right granted under
Section 10 of the Plan.
'Participant' shall mean any officer or other employee,
director or consultant of the Company or its Subsidiaries eligible for an Award
under Section 5 and selected by the Committee to receive an Award under the
Plan.
'Performance Award' shall mean any right granted under Section
9 of the Plan.
'Performance Compensation Award' shall mean any Award
designated by the Committee as a Performance Compensation Award pursuant to
Section 11 of the Plan.
'Performance Criteria' shall mean the criterion or criteria
that the Committee shall select for purposes of establishing the Performance
Goal(s) for a Performance Period with respect to any Performance Compensation
Award under the Plan. The Performance Criteria that will be used to establish
the Performance Goal(s) shall be based on the attainment of specific levels of
performance of the Company (or Subsidiary, Affiliate, division or operational
unit of the Company) and shall be limited to the following: Return on net
assets, return on stockholders' equity, return on assets, return on capital,
stockholder returns, profit margin, earnings per Share, net earnings, operating
earnings, price per Share, earnings before interest and taxes and sales or
market share. To the extent required under section 162(m) of the Code, the
Committee shall, within the first 90 days of a Performance Period (or, if
longer, within the maximum period allowed under section 162(m) of the Code),
define in an objective fashion the manner of calculating the Performance
Criteria it selects to use for such Performance Period.
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'Performance Formula' shall mean, for a Performance Period,
the one or more objective formulas applied against the relevant Performance Goal
to determine, with regard to the Performance Compensation Award of a particular
Participant, whether all, some portion but less than all, or none of the
Performance Compensation Award has been earned for the Performance Period.
'Performance Goals' shall mean, for a Performance Period, the
one or more goals established by the Committee for the Performance Period based
upon the Performance Criteria. The Committee is authorized at any time during
the first 90 days of a Performance Period, or at any time thereafter (but only
to the extent the exercise of such authority after the first 90 days of a
Performance Period would not cause the Performance Compensation Awards granted
to any Participant for the Performance Period to fail to qualify as
'performance-based compensation' under section 162(m) of the Code), in its sole
and absolute discretion, to adjust or modify the calculation of a Performance
Goal for such Performance Period to the extent permitted under section 162(m) of
the Code in order to prevent the dilution or enlargement of the rights of
Participants, (a) in the event of, or in anticipation of, any unusual or
extraordinary corporate item, transaction, event or development affecting the
Company; or (b) in recognition of, or in anticipation of, any other unusual or
nonrecurring events affecting the Company, or the financial statements of the
Company, or in response to, or in anticipation of, changes in applicable laws,
regulations, accounting principles, or business conditions.
'Performance Period' shall mean the one or more periods of
time of at least one year in duration, as the Committee may select, over which
the attainment of one or more Performance Goals will be measured for the purpose
of determining a Participant's right to and the payment of a Performance
Compensation Award.
'Permitted Holders' shall mean, as of the date of
determination, (i) any and all of Ralph Lauren, his spouse, his siblings and
their spouses, and descendants of any of them (whether natural or adopted)
(collectively, the 'Lauren Group') and (ii) any trust established and maintained
primarily for the benefit of any member of the Lauren Group and any entity
controlled by any member of the Lauren Group.
'Person' shall mean any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated organization, government
or political subdivision thereof or other entity.
'Plan' shall mean this Polo Ralph Lauren Corporation 1997
Long-Term Stock Incentive Plan.
'Restricted Stock' shall mean any Share granted under Section
8 of the Plan.
'Restricted Stock Unit' shall mean any unit granted under
Section 8 of the Plan.
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'Rule 16b-3' shall mean Rule 16b-3 as promulgated and
interpreted by the SEC under the Exchange Act, or any successor rule or
regulation thereto as in effect from time to time.
'SEC' shall mean the Securities and Exchange Commission or any
successor thereto and shall include the Staff thereof.
'Shares' shall mean the shares of Class A Common Stock of the
Company, $.01 par value, or such other securities of the Company (i) into which
such common shares shall be changed by reason of a recapitalization, merger,
consolidation, split-up, combination, exchange of shares or other similar
transaction or (ii) as may be determined by the Committee pursuant to Section
4(b).
'Stock Appreciation Right' shall mean any right granted under
Section 7 of the Plan.
'Subsidiary' shall mean (i) any entity that, directly or
indirectly, is controlled by the Company and (ii) any entity in which the
Company has a significant equity interest, in either case as determined by the
Committee
'Substitute Awards' shall have the meaning specified in
Section 4(c).
SECTION 3. Administration. (a) The Plan shall be administered
by the Committee. Subject to the terms of the Plan and applicable law, and in
addition to other express powers and authorizations conferred on the Committee
by the Plan, the Committee shall have full power and authority to: (i) designate
Participants; (ii) determine the type or types of Awards to be granted to a
Participant and designate those Awards which shall constitute Performance
Compensation Awards; (iii) determine the number of Shares to be covered by, or
with respect to which payments, rights, or other matters are to be calculated in
connection with, Awards; (iv) determine the terms and conditions of any Award;
(v) determine whether, to what extent, and under what circumstances Awards may
be settled or exercised in cash, Shares, other securities, other Awards or other
property, or canceled, forfeited, or suspended and the method or methods by
which Awards may be settled, exercised, canceled, forfeited, or suspended; (vi)
determine whether, to what extent, and under what circumstances cash, Shares,
other securities, other Awards, other property, and other amounts payable with
respect to an Award (subject to section 162(m) of the Code with respect to
Performance Compensation Awards) shall be deferred either automatically or at
the election of the holder thereof or of the Committee; (vii) interpret,
administer reconcile any inconsistency, correct any default and/or supply any
omission in the Plan and any instrument or agreement relating to, or Award made
under, the Plan; (viii) establish, amend, suspend, or waive such rules and
regulations and appoint such agents as it shall deem appropriate for the proper
administration of the Plan; (ix) establish and administer Performance Goals and
certify whether, and to what extent, they have been attained; and (x) make any
other determination and take
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any other action that the Committee deems necessary or desirable for the
administration of the Plan.
(b) Unless otherwise expressly provided in the Plan, all
designations, determinations, interpretations, and other decisions under or with
respect to the Plan or any Award shall be within the sole discretion of the
Committee, may be made at any time and shall be final, conclusive, and binding
upon all Persons, including the Company, any Affiliate, any Participant, any
holder or beneficiary of any Award, and any shareholder.
(c) The mere fact that a Committee member shall fail to
qualify as a 'Non-Employee Director' or 'outside director' within the meaning of
Rule 16b-3 and Code section 162(m), respectively, shall not invalidate any award
made by the Committee which award is otherwise validly made under the Plan.
(d) No member of the Committee shall be liable for any action
or determination made in good faith with respect to the Plan or any Award
hereunder.
(e) With respect to any Performance Compensation Award granted
under the Plan, the Plan shall be interpreted and construed in accordance with
section 162(m) of the Code.
(f) Notwithstanding the foregoing, the Committee may delegate
to one or more officers of the Company the authority to grant awards to
Participants who are not officers or directors of the Company subject to Section
16 of the Exchange Act or 'covered employees' within the meaning of Code section
162(m).
SECTION 4. Shares Available for Awards.
(a) Shares Available. Subject to adjustment as provided in
Section 4(b), the aggregate number of Shares with respect to which Awards may be
granted under the Plan shall be 10,000,000; the maximum number of Shares with
respect to which Options and Stock Appreciation Rights may be granted to any
Participant in any fiscal year shall be 600,000 and the maximum number of Shares
which may be paid to a Participant in the Plan in connection with the settlement
of any Award(s) designated as 'Performance Compensation Awards' in respect of a
single Performance Period shall be 600,000 or, in the event such Performance
Compensation Award is paid in cash, the equivalent cash value thereof. If, after
the effective date of the Plan, any Shares covered by an Award granted under the
Plan, or to which such an Award relates, are forfeited, or if an Award has
expired, terminated or been canceled for any reason whatsoever (other than by
reason of exercise or vesting), then the Shares covered by such Award shall
again be, or shall become, Shares with respect to which Awards may be granted
hereunder.
(b) Adjustments. Notwithstanding any provisions of the Plan to
the contrary, in the event that the Committee determines that any dividend or
other
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distribution (whether in the form of cash, Shares, other securities, or other
property), recapitalization, stock split, reverse stock split, reorganization,
merger, consolidation, split-up, spin-off, combination, repurchase, or exchange
of Shares or other securities of the Company, issuance of warrants or other
rights to purchase Shares or other securities of the Company, or other similar
corporate transaction or event affects the Shares such that an adjustment is
determined by the Committee in its discretion to be appropriate in order to
prevent dilution or enlargement of the benefits or potential benefits intended
to be made available under the Plan, then the Committee shall, in such manner as
it may deem equitable, adjust any or all of (i) the number of Shares or other
securities of the Company (or number and kind of other securities or property)
with respect to which Awards may be granted, (ii) the number of Shares or other
securities of the Company (or number and kind of other securities or property)
subject to outstanding Awards, and (iii) the grant or exercise price with
respect to any Award or, if deemed appropriate, make provision for a cash
payment to the holder of an outstanding Award in consideration for the
cancellation of such Award which, in the case of Options and Stock Appreciation
Rights shall equal the excess if any, of the Fair Market Value of the Shares
subject to such Options or Stock Appreciation Rights over the aggregate exercise
price or grant price of such Options or Stock Appreciation Rights.
(c) Substitute Awards. Awards may, in the discretion of the
Committee, be made under the Plan in assumption of, or in substitution for,
outstanding awards previously granted by the Company or its Affiliates or a
company acquired by the Company or with which the Company combines ('Substitute
Awards'). The number of Shares underlying any Substitute Awards shall be counted
against the aggregate number of Shares available for Awards under the Plan.
(d) Sources of Shares Deliverable Under Awards. Any Shares
delivered pursuant to an Award may consist, in whole or in part, of authorized
and unissued Shares or of treasury Shares.
SECTION 5. Eligibility. Any officer or other employee,
director or consultant to the Company or any of its Subsidiaries (including any
prospective officer, employee, director or consultant) shall be eligible to be
designated a Participant.
SECTION 6. Stock Options.
(a) Grant. Subject to the provisions of the Plan, the
Committee shall have sole and complete authority to determine the Participants
to whom Options shall be granted, the number of Shares to be covered by each
Option, the exercise price therefor and the conditions and limitations
applicable to the exercise of the Option. The Committee shall have the authority
to grant Incentive Stock Options, or to grant Non-Qualified Stock Options, or to
grant both types of Options. In the case of Incentive Stock Options, the terms
and conditions of such grants shall be subject to and comply with such rules as
may be prescribed by Section 422 of the Code, as from
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time to time amended, and any regulations implementing such statute. All Options
when granted under the Plan are intended to be Non-Qualified Stock Options,
unless the applicable Award Agreement expressly states that the Option is
intended to be an Incentive Stock Option. If an Option is intended to be an
Incentive Stock Option, and if for any reason such Option (or any portion
thereof) shall not qualify as an Incentive Stock Option, then, to the extent of
such nonqualification, such Option (or portion thereof) shall be regarded as a
Non-Qualified Stock Option appropriately granted under the Plan; provided that
such Option (or portion thereof) otherwise complies with the Plan's requirements
relating to Non-Qualified Stock Options.
(b) Exercise Price. The Committee shall establish the exercise
price at the time each Option is granted, which exercise price shall be set
forth in the applicable Award Agreement.
(c) Exercise. Each Option shall be exercisable at such times
and subject to such terms and conditions as the Committee may, in its sole
discretion, specify in the applicable Award Agreement or thereafter. The
Committee may impose such conditions with respect to the exercise of Options,
including without limitation, any relating to the application of federal or
state securities laws, as it may deem necessary or advisable. Options with an
exercise price equal to or greater than the Fair Market Value per Share as of
the date of grant are intended to qualify as 'performance-based compensation'
under section 162(m) of the Code. In the sole discretion of the Committee,
Options may be granted with an exercise price that is less than the Fair Market
Value per Share and such Options may, but need not, be intended to qualify as
performance-based compensation in accordance with Section 11 hereof.
(d) Payment.
(i) No Shares shall be delivered pursuant to any
exercise of an Option until payment in full of the aggregate exercise price
therefor is received by the Company. Such payment may be made in cash, or its
equivalent or (x) by exchanging Shares owned by the optionee (which are not the
subject of any pledge or other security interest and which have been owned by
such optionee 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 a 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.
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(ii) Wherever in this Plan or any Award Agreement a
Participant is permitted to pay the exercise price of an Option or taxes
relating to the exercise of an Option by delivering Shares, the Participant may,
subject to procedures satisfactory to the Committee, satisfy such delivery
requirement by presenting proof of beneficial ownership of such Shares, in which
case the Company shall treat the Option as exercised without further payment and
shall withhold such number of Shares from the Shares acquired by the exercise of
the Option.
SECTION 7. Stock Appreciation Rights.
(a) Grant. Subject to the provisions of the Plan, the
Committee shall have sole and complete authority to determine the Participants
to whom Stock Appreciation Rights shall be granted, the number of Shares to be
covered by each Stock Appreciation Right Award, the grant price thereof and the
conditions and limitations applicable to the exercise thereof. Stock
Appreciation Rights with a grant price equal to or greater than the Fair Market
Value per Share as of the date of grant are intended to qualify as
'performance-based compensation' under section 162(m) of the Code. In the sole
discretion of the Committee, Stock Appreciation Rights may be granted with an
exercise price that is less than the Fair Market Value per Share and such Stock
Appreciation Rights may, but need not, be intended to qualify as
performance-based compensation in accordance with Section 11 hereof. Stock
Appreciation Rights may be granted in tandem with another Award, in addition to
another Award, or freestanding and unrelated to another Award. Stock
Appreciation Rights granted in tandem with or in addition to an Award may be
granted either at the same time as the Award or at a later time.
(b) Exercise and Payment. A Stock Appreciation Right shall
entitle the Participant to receive an amount equal to the excess of the Fair
Market Value of a Share on the date of exercise of the Stock Appreciation Right
over the grant price thereof. The Committee shall determine whether a Stock
Appreciation Right shall be settled in cash, Shares or a combination of cash and
Shares.
(c) Other Terms and Conditions. Subject to the terms of the
Plan and any applicable Award Agreement, the Committee shall determine, at or
after the grant of a Stock Appreciation Right, the term, methods of exercise,
methods and form of settlement, and any other terms and conditions of any Stock
Appreciation Right. Any such determination by the Committee may be changed by
the Committee from time to time and may govern the exercise of Stock
Appreciation Rights granted or exercised prior to such determination as well as
Stock Appreciation Rights granted or exercised thereafter. The Committee may
impose such conditions or restrictions on the exercise of any Stock Appreciation
Right as it shall deem appropriate.
SECTION 8. Restricted Stock and Restricted Stock Units.
(a) Grant. Subject to the provisions of the Plan, the
Committee shall have sole and complete authority to determine the Participants
to whom Shares of
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Restricted Stock and Restricted Stock Units shall be granted, the number of
Shares of Restricted Stock and/or the number of Restricted Stock Units to be
granted to each Participant, the duration of the period during which, and the
conditions, if any, under which, the Restricted Stock and Restricted Stock Units
may be forfeited to the Company, and the other terms and conditions of such
Awards.
(b) Transfer Restrictions. Shares of Restricted Stock and
Restricted Stock Units may not be sold, assigned, transferred, pledged or
otherwise encumbered, except, in the case of Restricted Stock, as provided in
the Plan or the applicable Award Agreements. Certificates issued in respect of
Shares of Restricted Stock shall be registered in the name of the Participant
and deposited by such Participant, together with a stock power endorsed in
blank, with the Company. Upon the lapse of the restrictions applicable to such
Shares of Restricted Stock, the Company shall deliver such certificates to the
Participant or the Participant's legal representative.
(c) Payment. Each Restricted Stock Unit shall have a value
equal to the Fair Market Value of a Share. Restricted Stock Units shall be paid
in cash, Shares, other securities or other property, as determined in the sole
discretion of the Committee, upon the lapse of the restrictions applicable
thereto, or otherwise in accordance with the applicable Award Agreement.
Dividends paid on any Shares of Restricted Stock may be paid directly to the
Participant, withheld by the Company subject to vesting of the Restricted Shares
pursuant to the terms of the applicable Award Agreement, or may be reinvested in
additional Shares of Restricted Stock or in additional Restricted Stock Units,
as determined by the Committee in its sole discretion.
SECTION 9. Performance Awards.
(a) Grant. The Committee shall have sole and complete
authority to determine the Participants who shall receive a 'Performance Award',
which shall consist of a right which is (i) denominated in cash or Shares, (ii)
valued, as determined by the Committee, in accordance with the achievement of
such performance goals during such performance periods as the Committee shall
establish, and (iii) payable at such time and in such form as the Committee
shall determine.
(b) Terms and Conditions. Subject to the terms of the Plan and
any applicable Award Agreement, the Committee shall determine the performance
goals to be achieved during any performance period, the length of any
performance period, the amount of any Performance Award and the amount and kind
of any payment or transfer to be made pursuant to any Performance Award.
(c) Payment of Performance Awards. Performance Awards may be
paid in a lump sum or in installments following the close of the performance
period or, in accordance with procedures established by the Committee, on a
deferred basis.
SECTION 10. Other Stock-Based Awards.
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(a) General. The Committee shall have authority to grant to
Participants an 'Other Stock-Based Award', which shall consist of any right
which is (i) not an Award described in Sections 6 through 9 above and (ii) an
Award of Shares or an Award denominated or payable in, valued in whole or in
part by reference to, or otherwise based on or related to, Shares (including,
without limitation, securities convertible into Shares), as deemed by the
Committee to be consistent with the purposes of the Plan; provided that any such
rights must comply, to the extent deemed desirable by the Committee, with Rule
16b-3 and applicable law. Subject to the terms of the Plan and any applicable
Award Agreement, the Committee shall determine the terms and conditions of any
such Other Stock-Based Award, including the price, if any, at which securities
may be purchased pursuant to any Other Stock-Based Award granted under this
Plan.
(b) Dividend Equivalents. In the sole and complete discretion
of the Committee, an Award, whether made as an Other Stock-Based Award under
this Section 10 or as an Award granted pursuant to Sections 6 through 9 hereof,
may provide the Participant with dividends or dividend equivalents, payable in
cash, Shares, other securities or other property on a current or deferred basis.
SECTION 11. Performance Compensation Awards.
(a) General. The Committee shall have the authority, at the
time of grant of any Award described in Sections 6 through 10 (other than
Options and Stock Appreciation Rights granted with an exercise price or grant
price, as the case may be, equal to or greater than the Fair Market Value per
Share on the date of grant), to designate such Award as a Performance
Compensation Award in order to qualify such Award as 'performance-based
compensation' under section 162(m) of the Code.
(b) Eligibility. The Committee will, in its sole discretion,
designate within the first 90 days of a Performance Period (or, if longer,
within the maximum period allowed under section 162(m) of the Code) which
Participants will be eligible to receive Performance Compensation Awards in
respect of such Performance Period. However, designation of a Participant
eligible to receive an Award hereunder for a Performance Period shall not in any
manner entitle the Participant to receive payment in respect of any Performance
Compensation Award for such Performance Period. The determination as to whether
or not such Participant becomes entitled to payment in respect of any
Performance Compensation Award shall be decided solely in accordance with the
provisions of this Section 11. Moreover, designation of a Participant eligible
to receive an Award hereunder for a particular Performance Period shall not
require designation of such Participant eligible to receive an Award hereunder
in any subsequent Performance Period and designation of one person as a
Participant eligible to receive an Award hereunder shall not require designation
of any other person as a Participant eligible to receive an Award hereunder in
such period or in any other period.
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(c) Discretion of Committee with Respect to Performance
Compensation Awards. With regard to a particular Performance Period, the
Committee shall have full discretion to select the length of such Performance
Period, the type(s) of Performance Compensation Awards to be issued, the
Performance Criteria that will be used to establish the Performance Goal(s), the
kind(s) and/or level(s) of the Performance Goals(s) is(are) to apply to the
Company and the Performance Formula. Within the first 90 days of a Performance
Period (or, if longer, within the maximum period allowed under section 162(m) of
the Code), the Committee shall, with regard to the Performance Compensation
Awards to be issued for such Performance Period, exercise its discretion with
respect to each of the matters enumerated in the immediately preceding sentence
of this Section 11(c) and record the same in writing.
(d) Payment of Performance Compensation Awards
(i) Condition to Receipt of Payment. Unless otherwise
provided in the applicable Award Agreement, a Participant must be employed by
the Company on the last day of a Performance Period to be eligible for payment
in respect of a Performance Compensation Award for such Performance Period.
(ii) Limitation. A Participant shall be eligible to receive
payment in respect of a Performance Compensation Award only to the extent that:
(1) the Performance Goals for such period are achieved; and (2) the Performance
Formula as applied against such Performance Goals determines that all or some
portion of such Participant's Performance Award has been earned for the
Performance Period.
(iii) Certification. Following the completion of a Performance
Period, the Committee shall meet to review and certify in writing whether, and
to what extent, the Performance Goals for the Performance Period have been
achieved and, if so, to calculate and certify in writing that amount of the
Performance Compensation Awards earned for the period based upon the Performance
Formula. The Committee shall then determine the actual size of each
Participant's Performance Compensation Award for the Performance Period and, in
so doing, may apply Negative Discretion, if and when it deems appropriate.
(iv) Negative Discretion In determining the actual size of an
individual Performance Award for a Performance Period, the Committee may reduce
or eliminate the amount of the Performance Compensation Award earned under the
Performance Formula in the Performance Period through the use of Negative
Discretion if, in its sole judgement, such reduction or elimination is
appropriate.
(v) Timing of Award Payments. The Awards granted for a
Performance Period shall be paid to Participants as soon as administratively
possible following completion of the certifications required by this Section 11.
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(vi) Maximum Award Payable. Notwithstanding any provision
contained in this Plan to the contrary, the maximum Performance Compensation
Award payable to any one Participant under the Plan for a Performance Period is
600,000 Shares or, in the event the Performance Compensation Award is paid in
cash, the equivalent cash value thereof on the last day of the Performance
Period to which such Award relates. Furthermore, any Performance Compensation
Award that has been deferred shall not (between the date as of which the Award
is deferred and the payment date) increase (i) with respect to Performance
Compensation Award that is payable in cash, by a measuring factor for each
fiscal year greater than a reasonable rate of interest set by the Committee or
(ii) with respect to a Performance Compensation Award that is payable in Shares,
by an amount greater than the appreciation of a Share from the date such Award
is deferred to the payment date.
SECTION 12. Amendment and Termination.
(a) Amendments to the Plan. The Board may amend, alter,
suspend, discontinue, or terminate the Plan or any portion thereof at any time;
provided that no such amendment, alteration, suspension, discontinuation or
termination shall be made without shareholder approval if such approval is
necessary to comply with any tax or regulatory requirement applicable to the
Plan and provided further that any such amendment, alteration, suspension,
discontinuance or termination that would impair the rights of any Participant or
any holder or beneficiary of any Award theretofore granted shall not to that
extent be effective without the consent of the affected Participant, holder or
beneficiary.
(b) Amendments to Awards. The Committee may waive any
conditions or rights under, amend any terms of, or alter, suspend, discontinue,
cancel or terminate, any Award theretofore granted, prospectively or
retroactively; provided that any such waiver, amendment, alteration, suspension,
discontinuance, cancellation or termination that would impair the rights of any
Participant or any holder or beneficiary of any Award theretofore granted shall
not to that extent be effective without the consent of the affected Participant,
holder or beneficiary.
(c) Adjustment of Awards Upon the Occurrence of Certain
Unusual or Nonrecurring Events. The Committee is hereby authorized to make
adjustments in the terms and conditions of, and the criteria included in, Awards
in recognition of unusual or nonrecurring events (including, without limitation,
the events described in Section 4(b) hereof) affecting the Company, any
Affiliate, or the financial statements of the Company or any Affiliate, or of
changes in applicable laws, regulations, or accounting principles, whenever the
Committee determines that such adjustments are appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under the Plan; provided that no such adjustment shall be
authorized to the extent that such authority or adjustment would cause an Award
designated by the Committee as a Performance Compensation Award under Section 11
of the Plan to fail to qualify as 'performance-based compensation' under section
162(m) of the Code.
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SECTION 13. Change of Control. In the event of a Change of
Control after the date of the adoption of this Plan, any outstanding Awards then
held by Participants which are unexercisable or otherwise unvested shall
automatically be deemed exercisable or otherwise vested, as the case may be, as
of immediately prior to such Change of Control.
SECTION 14. General Provisions.
(a) Nontransferability.
(i) Each Award, and each right under any Award, shall be
exercisable only by the Participant during the Participant's lifetime,
or, if permissible under applicable law, by the Participant's legal
guardian or representative.
(ii) No Award may be assigned, alienated, pledged, attached,
sold or otherwise transferred or encumbered by a 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.
(iii) Notwithstanding the foregoing, the Committee may in the
applicable Award Agreement evidencing an option granted under the Plan
or at any time thereafter in an amendment to an Award Agreement provide
that Options granted hereunder which are not intended to qualify as
Incentive Options may be transferred by the Participant to whom such
Option was granted (the 'Grantee') without consideration, subject to
such rules as the Committee may adopt to preserve the purposes of the
Plan, to:
(A) the Grantee's spouse, children or
grandchildren (including adopted and
stepchildren and grandchildren)
(collectively, the 'Immediate Family');
(B) a trust solely for the benefit of the
Grantee and his or her Immediate Family; or
(C) a partnership or limited liability company
whose only partners or shareholders are the
Grantee and his or her Immediate Family
members;
(each transferee described in clauses (A), (B) and (C) above
is hereinafter referred to as a 'Permitted Transferee');
provided that the grantee gives the Committee advance written
notice describing the terms and conditions of the proposed
transfer and the Committee notifies the Grantee in writing
that such a transfer would comply with
15
the requirements of the Plan and any applicable Award
Agreement evidencing the option.
The terms of any option transferred in accordance with the
immediately preceding sentence shall apply to the Permitted
Transferee and any reference in the Plan or in an Award
Agreement to an optionee, Grantee or Participant shall be
deemed to refer to the Permitted Transferee, except that (a)
Permitted Transferees shall not be entitled to transfer any
Options, other than by will or the laws of descent and
distribution; (b) Permitted Transferees shall not be entitled
to exercise any transferred Options unless there shall be in
effect a registration statement on an appropriate form
covering the shares to be acquired pursuant to the exercise of
such Option if the Committee determines that such a
registration statement is necessary or appropriate, (c) the
Committee or the Company shall not be required to provide any
notice to a Permitted Transferee, whether or not such notice
is or would otherwise have been required to be given to the
Grantee under the Plan or otherwise and (d) the consequences
of termination of the Grantee's employment by, or services to,
the Company under the terms of the Plan and applicable Award
Agreement shall continue to be applied with respect to the
Grantee, following which the Options shall be exercisable by
the Permitted Transferee only to the extent, and for the
periods, specified in the Plan and the applicable Award
Agreement.
(b) No Rights to Awards. No Participant or other Person shall
have any claim to be granted any Award, and there is no obligation for
uniformity of treatment of Participants, or holders or beneficiaries of Awards.
The terms and conditions of Awards and the Committee's determinations and
interpretations with respect thereto need not be the same with respect to each
Participant (whether or not such Participants are similarly situated).
(c) Share Certificates. All certificates for Shares or other
securities of the Company or any Affiliate delivered under the Plan pursuant to
any Award or the exercise thereof 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 or other securities are
then 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.
(d) Withholding.
(i) A 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 Award, from any payment due or transfer made
under any Award or under the Plan or from any compensation or other amount owing
16
to a Participant the amount (in cash, Shares, other securities, other Awards or
other property) of any applicable withholding taxes in respect of an Award, its
exercise, or any payment or transfer under an Award 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. The Committee may provide
for additional cash payments to holders of Awards to defray or offset any tax
arising from the grant, vesting, exercise or payments of any Award.
(ii) Without limiting the generality of clause (i) above, a
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.
(iii) Notwithstanding any provision of this Plan to the
contrary, in connection with the transfer of an Option to a Permitted Transferee
pursuant to Section 14(a) of the Plan, the Grantee shall remain liable for any
withholding taxes required to be withheld upon the exercise of such Option by
the Permitted Transferee.
(e) Award Agreements. Each Award hereunder shall be
evidenced by an Award Agreement which shall be delivered to the Participant and
shall specify the terms and conditions of the Award and any rules applicable
thereto, including but not limited to the effect on such Award of the death,
disability or termination of employment or service of a Participant and the
effect, if any, of such other events as may be determined by the Committee.
(f) No Limit on Other Compensation Arrangements. Nothing
contained in the Plan shall prevent the Company or any Affiliate from adopting
or continuing in effect other compensation arrangements, which may, but need
not, provide for the grant of options, restricted stock, Shares and other types
of Awards provided for hereunder (subject to shareholder approval if such
approval is required), and such arrangements may be either generally applicable
or applicable only in specific cases.
(g) No Right to Employment. The grant of an Award shall not
be construed as giving a 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 a Participant from employment or
discontinue any consulting relationship, free from any liability or any claim
under the Plan, unless otherwise expressly provided in the Plan or in any Award
Agreement.
(h) No Rights as Stockholder. Subject to the provisions of
the applicable Award, no Participant or holder or beneficiary of any Award shall
have
17
any rights as a stockholder with respect to any Shares to be distributed under
the Plan until he or she has become the holder of such Shares. Notwithstanding
the foregoing, in connection with each grant of Restricted Stock hereunder, the
applicable Award shall specify if and to what extent the Participant shall not
be entitled to the rights of a stockholder in respect of such Restricted Stock.
(i) Governing Law. The validity, construction, and effect of
the Plan and any rules and regulations relating to the Plan and any Award
Agreement shall be determined in accordance with the laws of the State of New
York.
(j) Severability. If any provision of the Plan or any Award is
or becomes or is deemed to be invalid, illegal, or unenforceable in any
jurisdiction or as to any Person or Award, or would disqualify the Plan or any
Award under any law deemed applicable by the Committee, such provision shall be
construed or deemed amended to conform the applicable laws, or if it cannot be
construed or deemed amended without, in the determination of the Committee,
materially altering the intent of the Plan or the Award, such provision shall be
stricken as to such jurisdiction, Person or Award and the remainder of the Plan
and any such Award shall remain in full force and effect.
(k) Other Laws. The Committee may refuse to issue or transfer
any Shares or other consideration under an Award if, acting in its sole
discretion, it determines that the issuance or transfer of such Shares or such
other consideration might violate any applicable law or regulation or entitle
the Company to recover the same under Section 16(b) of the Exchange Act, and any
payment tendered to the Company by a Participant, other holder or beneficiary in
connection with the exercise of such Award shall be promptly refunded to the
relevant Participant, holder or beneficiary. Without limiting the generality of
the foregoing, no Award granted hereunder shall be construed as an offer to sell
securities of the Company, and no such offer shall be outstanding, unless and
until the Committee in its sole discretion has determined that any such offer,
if made, would be in compliance with all applicable requirements of the U.S.
federal securities laws.
(l) No Trust or Fund Created. Neither the Plan nor any Award
shall create or be construed to create a trust or separate fund of any kind or a
fiduciary relationship between the Company or any Affiliate and a Participant or
any other Person. To the extent that any Person acquires a right to receive
payments from the Company or any Affiliate pursuant to an Award, such right
shall be no greater than the right of any unsecured general creditor of the
Company or any Affiliate.
(m) No Fractional Shares. No fractional Shares shall be issued
or delivered pursuant to the Plan or any Award, and the Committee shall
determine whether cash, other securities, or other property shall be paid or
transferred in lieu of any fractional Shares or whether such fractional Shares
or any rights thereto shall be canceled, terminated, or otherwise eliminated.
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(n) Headings. Headings are given to the Sections and
subsections of the Plan solely as a convenience to facilitate reference. Such
headings shall not be deemed in any way material or relevant to the construction
or interpretation of the Plan or any provision thereof.
SECTION 16. Term of the Plan.
(a) Effective Date. The Plan shall be effective as of the date
of its approval by the Board.
(b) Expiration Date. No Award shall be granted under the Plan
after December 31, 2006. Unless otherwise expressly provided in the Plan or in
an applicable Award Agreement, any Award granted hereunder may, and the
authority of the Board or the Committee to amend, alter, adjust, suspend,
discontinue, or terminate any such Award or to waive any conditions or rights
under any such Award shall, continue after December 31, 2006.
1997 Long-Term Stock Incentive Plan - Polo Ralph Lauren Corp.
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