EX-10.3 4 y85876exv10w3.htm EX-10.3 exv10w3
EXHIBIT 10.3
 
THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS
COVERING SECURITIES THAT HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED
 
(POLO RALPH LAUREN LOGO)
Stock Option
Fiscal 2011 — Overview
 
July 16, 2010


 

THIS OVERVIEW IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MEMORANDUM TO PARTICIPANTS IN THE POLO RALPH LAUREN CORPORATION 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.
 
OVERVIEW
 
The Polo Ralph Lauren Corporation (the “Company”) 1997 Long-Term Stock Incentive Plan (the “Plan”) authorizes the Compensation & Organizational Development Committee of the Board of Directors (the “Compensation Committee”) to grant equity awards to officers and other employees of the Company and its Subsidiaries and Affiliates.
 
This Overview explains the Company’s current Stock Option program under the Plan, describes its benefits to you as a participant, and outlines the various steps needed to be taken in regard to your Stock Option grant.
 
  •  A Stock Option granted under the Plan provides a participant the opportunity to purchase, within a specified period of time, a stated number of shares of the Company’s Class A Common Stock (traded on the New York Stock Exchange under the symbol RL) at a fixed price (the option grant price)
 
  •  The option grant price equals the Fair Market Value (the average of the high and the low trading prices) of a share of the Company’s Class A Common Stock on the grant date
 
  •  Stock Options increase in value when the price of the Company’s Class A Common stock moves above the option grant price
 
  •  Unlike actual share ownership, Stock Options do not provide voting rights or earn dividends
 
AWARD OBJECTIVES
 
Objectives of the Stock Option program are to:
 
1. Motivate key contributors to continuously improve the Company’s performance, which should ultimately result in increased stock value
 
2. Attract and retain individuals of superior talent
 
3. Enable individuals to participate in the long-term growth and financial success of the Company
 
PLAN ADMINISTRATION
 
The Company’s Human Resources Department administers the program and Merrill Lynch is the recordkeeper. Participants must have an open brokerage account at Merrill Lynch in order to exercise vested stock options. To open a brokerage account, or for questions regarding your account and account transactions, please contact Merrill Lynch at (609) 818-8908 or (877) 765-POLO (7656).
 
The Company’s 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.
 
Nothing contained herein may be construed as creating a promise of future benefits or a binding contract with the Company. Further, an individual’s employment continues to be at will.
 
For questions regarding the Plan and its provisions, please contact Human Resources.
 
ELIGIBILITY FOR STOCK OPTION GRANT
 
Equity awards, including Stock Option grants, may be made annually to designated, key executives who have a significant impact on the strategic direction and business results of the Company, and who are actively employed on April 1 of the fiscal year for which the grant is being made.


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Guidelines have been established for the number and types of equity awards eligible participants may receive. The guidelines reflect a position’s scope, accountability and impact on the organization, and may also reflect changes in the value of the Company’s Class A Common Stock.
 
Please note that these guidelines do not constitute a guarantee that any specific individual will receive an equity award in any given year, or guarantee the type or size of any grant, if a grant is made.
 
An eligible employee who receives a Below Expectations (B) or Unsatisfactory (U) rating on his
or her annual performance appraisal is not eligible for an equity award in the fiscal year
following that performance appraisal period.
 
OPTION PRICE
 
The option grant price, which is equal to the Fair Market Value on the date of grant, is provided in your on-line Total Rewards statement and on your Merrill Lynch statement. Though the stock price may fluctuate over the term of the option, the option grant price does not change, except in the event of a stock split or other similar event.
 
VESTING PERIOD AND EXPIRATION OF OPTIONS
 
Stock Options vest in three equal, annual installments beginning on the first anniversary of the grant, and are 100% vested after three years. Vested Stock Options must be exercised by the end of their “contractual term.” Currently, Stock Options have a seven-year contractual term. Stock Options granted prior to June 2006 have a ten-year contractual term.
 
VESTING/EXPIRATION SCHEDULE(1)
 
(TABLE)
 
Although participants have the right to exercise Stock Options once they have vested, they may choose to hold vested options in anticipation of future gains from an increase in the stock price.
 
VALUE OF STOCK OPTIONS
 
Stock Options increase in value when the market price of the Company’s Class A Common Stock rises above the Stock Option grant price. Upon exercise, the difference between the market price and the option grant price is considered the gain received from the exercise.
 
This example demonstrates how the value of the award increases as stock price increases.
 
 
 (1) Vesting contingent upon continuous service to the respective vesting dates. In addition, option expiration dates may be accelerated based on certain employment events such as Retirement. Refer to the If You Leave The Company chart on page 7.


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EXAMPLE: POTENTIAL VALUE
 
AWARD OF 1,000 STOCK OPTIONS
 
                                 
    Grant Price   If Future Stock Price Reaches:
    $75   $85   $90   $100
 
Gain per Share (assumes all shares granted have vested)
  $ 0     $ 10     $ 15     $ 25  
Gain per Share x 1000 Shares
  $ 0     $ 10,000     $ 15,000     $ 25,000  
 
Example is hypothetical and is not a forecast of growth in the Company’s Class A Common Stock price
 
STOCK OPTION EXERCISE
 
All Stock Option exercise transactions and recordkeeping are performed for the Company by Merrill Lynch. Participants must have an open brokerage account at Merrill Lynch in order to exercise Stock Options.
 
The exercise of vested Stock Options has tax consequences in most jurisdictions. Contact your financial advisor for important information about how Stock Option exercise impacts you.
 
For employees at the Vice President level or above (“Officers”) and all employees in the Finance, Legal and Human Resources departments, all transactions in the Company’s securities (including, but not limited to purchases, sales, transfers, etc.) must be pre-cleared with the Corporate Counsel. If contemplating a transaction, please provide a written request via e-mail to the Corporate Counsel, specifying the number of Stock Options you wish to exercise and/or the number of shares you wish to purchase or sell before contacting Merrill Lynch or taking any other step to initiate a transaction.
 
  •  Once you receive pre-clearance from the Corporate Counsel, Officers and all employees in the Finance Legal and Human Resources departments must indicate your intent to exercise by contacting the Executive Advisory Team at Merrill Lynch at (800) 937-0526 between 8:30 a.m. and 6:00 p.m. (ET) on any day the New York Stock Exchange is open. Outside the U.S., Puerto Rico or Canada, call (212) 236-5574.
 
  •  All transactions in the Company’s securities, including cash or cashless exercise of Stock Options and sales and purchases of the Company’s Class A Common Stock as described below, are prohibited during a Company trading blackout period as defined in the Company’s Securities Trading policy which is included in this Overview beginning on page 8.
 
METHODS OF EXERCISING STOCK OPTION
 
When exercising Stock Options, participants purchase shares of the Company’s Class A Common Stock at the grant price set at the time the option was granted. Stock Options may be exercised in three ways:
 
1. Cash Exercise: Paying cash for the shares exercised
 
2. Cashless Exercise: Exercising a number of Stock Options and paying for the exercise by simultaneously selling the stock and retaining the net gain
 
3. Stock-for-Stock Exchange: Delivering shares of the Company’s Class A Common Stock owned for at least six months and that are not subject to any pledge or other security interest, to pay for the shares exercised
 
SALE OF SHARES SUBSEQUENT TO EXERCISE
 
When shares acquired from the exercise of Stock Options are sold at a later date, participants benefit from any price appreciation that may have occurred since the date the shares were acquired. As noted above, shares realized from a Stock Option exercise may be sold at any time, except when such sale would be considered insider trading or during blackout periods as described in more detail by the Company’s Securities Trading policy beginning on page 8.


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IF YOU LEAVE THE COMPANY
 
This chart explains what happens to your Stock Options if you leave Polo Ralph Lauren.
 
         
Event   Vested Options   Unvested Options
 
         
Normal Retirement (Age 65)  
•   Up to three years to exercise any vested stock options after retirement, provided they do not expire sooner. If not exercised within the three years following retirement, the options expire.
 
•   All unvested stock options are forfeited
         
Early Retirement (Age 55 through Age 64, with seven or more years of service)  
•   Up to one year to exercise any vested stock options after early retirement, provided they do not expire sooner. If not exercised within one year following retirement, the options expire. However, any vested options are forfeited if a participant goes to work for a competitor(1).
 
•   All unvested stock options are forfeited
         
Disability
 
•   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 following onset of LTD.
 
•   Options continue to vest according to the original vesting schedule (1/3 each year for 3 years). If vested options are not exercised within three years of the date of disability, the options expire.
         
Death
 
•   The optionee’s estate has up to three years to exercise any vested stock options, provided they do not expire sooner. Options expire if not exercised within the three years.
 
•   Options continue to vest according to the original vesting schedule (1/3 each year for 3 years). If vested options are not exercised within three years of the date of death, the options expire.
         
Dismissal for Cause (as defined by the Company and if applicable, the participant’s employment agreement), or Voluntary Resignation  
•   All vested stock options are forfeited as of the date of termination
 
•   All unvested stock options are forfeited
         
Involuntary Termination(2)
 
•   Up to three months to exercise any vested stock options, provided they do not expire sooner
 
•   All unvested stock options are forfeited
 
 
(1) For purposes hereof, a “competitor” shall mean any business engaged in the designing, marketing or distribution of premium lifestyle products, including but not limited to apparel, home, accessories and fragrance products, which competes in any material respect with the Company or any of its Subsidiaries, Affiliates or Licensees
 
(2) Refers to termination by Polo without cause, and when the employee has executed a general release with terms satisfactory to the Company


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SECURITIES TRADING POLICY
 
INSIDER TRADING
 
As provided in the Polo Ralph Lauren (the Company) Employee Handbook, employees are prohibited by law from buying or selling securities if an employee has or is aware of any material, non-public information about the Company and its subsidiaries. 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 the Company’s Common Stock — either positively or negatively — or affect a person’s decision to buy, hold or sell securities. The prohibition on insider trading applies to all transactions in the Company’s securities, including cash exercises, cashless exercises of Stock Options and sales and purchases of the Company’s 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
 
  •  Changes in management
 
These insider-trading rules are applicable to employees of Polo Ralph Lauren and its Subsidiaries and Affiliates worldwide.
 
COMPANY BLACKOUT PERIODS
 
To avoid even the appearance of “insider trading,” our Company’s Securities Trading policy prohibits members of the Board of Directors, all employees and their “Related Parties” (as such term is defined in the Company’s policy) from making trades involving stock of the Company during certain “blackout periods.” This prohibition covers all transactions in the Company’s securities, including buying or selling shares, cashless exercise of Stock Options and cash exercises 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. The Company may prohibit trading of the Company’s stock at any time it deems such trading to be inappropriate, even outside the regular blackout periods. Individuals who receive a specific notification prohibiting them from trading the Company’s stock should note that such notification takes precedence over pre-announced blackout periods. In addition, members of the Board of Directors, Officers (any employee who is a Vice President or above), and all employees in the Finance, Legal and Human Resources departments must clear all trades with the Corporate Counsel, whether they occur within a blackout period or not.
 
ADDITIONAL PROHIBITED TRANSACTIONS
 
Because we believe it is inappropriate for any Company personnel to engage in short-term or speculative transactions involving the Company’s 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


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  extended this prohibition to all employees. The receipt of shares pursuant to the exercise of Stock Options is not considered a purchase under the SEC’s 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 (any employee who is a Vice President or above), and all personnel in the Finance, Legal and Human Resources departments must be pre-cleared by the Corporate Counsel. If you contemplate a transaction, please provide a written request via e-mail to the Corporate Counsel, specifying the number of shares that you wish to purchase or sell before contacting Merrill Lynch or taking any other step to initiate a transaction.
 
COMPLIANCE WITH SECTION 409A
 
To the extent applicable, the Plan shall be interpreted in accordance with Section 409A of the Internal Revenue Code of 1986 and the Department of Treasury Regulations and other interpretive guidance issued hereunder (“Section 409A”). Notwithstanding any provision of the Plan to the contrary, it is intended that this Plan comply with Section 409A, and all provision of this Plan shall be construed and interpreted in a manner consistent with the requirements for avoiding taxes or penalties under Section 409A.. Each Participant is solely responsible and liable for the satisfaction of all taxes and penalties that may be imposed on or in respect of such Participant in connection with this Plan or any other plan maintained by the Company (including any taxes and penalties under Section 409A), and neither the Company nor any Affiliate shall have any obligation to indemnify or otherwise hold such Participant (or any beneficiary) harmless from any or all of such taxes or penalties.
 
 
In the event of any discrepancy between this Stock Option Overview, and either the terms of the Plan or the provisions under which the Plan is administered and governed by the Compensation Committee, the Plan and the determination of the Compensation Committee will govern, as applicable. This Overview is qualified in its entirety based on the determinations, interpretations and other decisions made within the sole discretion of the Compensation Committee.


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