exv10w2



 






Exhibit 10.2


 

 


Corporate Leadership Team




Incentive Plan


 

 

 

 



As adopted effective March 2, 2005




 









 








Wilsons Leather




Corporate Leadership Team Incentive Plan




A.       INTRODUCTION AND PURPOSE




     This Plan has been developed to provide opportunities for Wilsons The
Leather Experts Inc. (hereinafter “Wilsons Leather”) to motivate and reward
associates through annual incentive awards. Eligible participants include the
Executive Officers, all Vice Presidents, Directors and all associates below the
Director level that are designated by the Incentive Committee. Cash awards are
based on actual results measured against pre-established corporate financial
objectives (the “Annual Corporate Financial Objectives”). In addition to the
Annual Corporate Financial Objectives, all Executive Officers and eligible
associates on the merchant staff (“Merchant Associates”) also will be subject
to position-specific measures (“Annual Individual Performance Measures”) and
eligible participants other than Executive Officers and Merchant Associates
also may be subject to Annual Individual Performance Measures. Awards are paid
in cash to provide an immediate reward and supplement the Wilsons Leather base
compensation program. Generally, payments are made in March or April following
the end of each Plan Year.



     This plan is intended to be as simple as possible so that the goals are
very clear to all parties. Important features of the Plan are described in
this document. Any questions regarding the interpretation of this Plan, or any
details not covered in this document, will be determined by the Incentive
Committee in its sole discretion.



B.       INCENTIVE PLAN PROVISIONS




     1.       ADMINISTRATION




     The Human Resources group administers the Plan. An Incentive
Committee, consisting of the Vice President-Human Resources and the Chief
Executive Officer, selects the participants in the Plan, establishes
Targeted Award Amounts, as defined below, for participants who are not
Executive Officers, resolves disputes on interpretation and application
of the Plan except as otherwise provided in the Plan, and determines
which participants, in addition to Executive Officers and Merchant
Associates, shall have Annual Individual Performance Measures. The Chief
Executive Officer shall determine the Annual Individual Performance
Measures for each participant (other than the Chief Executive Officer)
subject to Annual Individual Performance Measures. The Compensation
Committee establishes Targeted Award Amounts for participants at the
Executive Officer level and shall determine the Annual Individual
Performance Measures for the Chief Executive Officer. The Annual
Corporate Financial Objectives for each Plan Year will be established by
the Compensation Committee.



 









 





     2.       TERMS OF PARTICIPATION AND PRORATIONS




     Incentive-eligible positions, Targeted Award Amounts, the Annual
Corporate Financial Objectives and any applicable Annual Individual
Performance Measures will be established and communicated, as early as
practicable after the beginning of each Plan Year.




     a.       Eligibility Requirements.




     You must be actively employed by Wilsons Leather or one of
its direct or indirect subsidiaries as of the last day of the Plan
Year (not the calendar year) in order to receive an incentive
award payment (“Incentive Award Payment”) for that year. In
addition, in order to receive an Incentive Award Payment for a
Plan Year, you must be in an incentive eligible position as of the
last day of the Plan Year, so that associates who transfer during
a Plan Year from an incentive eligible position to an ineligible
position will receive no Incentive Award Payment for that year.
Incentive Award Payments generally will be distributed in March or
April following the close of financial records for the Plan Year.




     Associates on written warning status either at the end of the
Plan Year or on the date the Incentive Award Payment otherwise
would be made will receive no Incentive Award Payment for that
Plan Year. Further, associates terminated on or after the last
day of a Plan Year but prior to the date of the Incentive Award
Payment for such Plan Year for a reason that Wilsons Leather
determines to be for cause will receive no Incentive Award Payment
for that Plan Year.




     b.       Pro-rated Awards.




     Part-time associates designated by Wilsons Leather as
eligible participants will be eligible to receive a pro-rata
Incentive Award Payment reflecting their part-time status.




     Associates who become participants during a Plan Year will be
eligible to receive a pro-rated Incentive Award Payment for that
year reflecting their time as an eligible participant.




     Associates who transfer from an eligible position to another
eligible position during a Plan Year will receive a pro-rata
Incentive Award Payment based on the time spent in each of the
eligible positions. In this situation, and any other situation
where adjustments in base salary occur throughout the year, the
base salary in, and Targeted Award Amount for, each position will
be used to calculate the pro-rata Incentive Award Payment
reflecting time and pay in each situation.





     In each case, a pro-rated Incentive Award Payment will be
paid for a Plan Year only if all the requirements of Section
B.2.a. are satisfied for that year. For purposes of pro-rating
Incentive Award Payments under the preceding two paragraphs, a
transfer or other event that occurs prior to the 15th day of a
month will be deemed to have occurred on the first


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day of that month, and a transfer or other event that occurs
on or after the 15th day of a month will be deemed to occur on the
first day of the following month.




     A Company—paid leave-of-absence which exceeds eight weeks
will result in the Incentive Award Payment being pro-rated to
reflect time on leave which is greater than eight weeks. An
unpaid leave-of-absence will result in the Incentive Award Payment
being pro-rated for time on unpaid-leave status.



     3.       PERFORMANCE MEASURES




     a.       The Annual Corporate Financial Objectives




     The Annual Corporate Financial Objectives shall be established by
the Compensation Committee after the beginning of each Plan Year and
shall be based on operating profit as determined in accordance with
generally accepted accounting principles (after reduction for bonus
expense and related taxes) or on such alternative performance measures as
the Compensation Committee shall determine after the beginning of the
Plan Year.




     b.       Annual Individual Performance Measures.




     The Chief Executive Officer shall establish Annual Individual
Performance Measures after the beginning of the Plan Year for each other
Executive Officer and each eligible Merchant Associate and, in addition,
for each eligible participant other than an Executive Officer or Merchant
Associate that the Incentive Committee determines should be subject to
Annual Individual Performance Measures. The Compensation Committee shall
establish Annual Individual Performance Measures after the beginning of
the Plan Year for the Chief Executive Officer. The Annual Individual
Performance Measures may be objective, subjective or a combination of
objective and subjective Annual Individual Performance Measures that
shall be weighted in such manner as shall be determined by the Chief
Executive Officer (or, with respect to Annual Individual Performance
Measures for the Chief Executive Officer, as shall be determined by the
Compensation Committee), provided that Annual Individual Performance
Measures for Merchant Associates shall be based on performance against
Wilsons Leather’s gross margin plan (as described in Section B.4.d.).




     c.       Purpose of Performance Measures




     The performance measures will be established with the intent to
motivate and reward our associates for contributions that successfully
drive Wilsons Leather’s businesses.




     d.       Communication




     A personalized award sheet will be provided to each participant,
which outlines the basis upon which incentives will be awarded.



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     4.       INCENTIVE AWARD PAYMENTS




     a.       Targeted Award Amount




     A targeted award amount (“Targeted Award Amount”) shall be
established as provided in Section B.1. for each participant each Plan
Year, expressed as a percentage of base salary, as early as practicable
after the beginning of the Plan Year. While your Targeted Award Amount
communicated to you as early as practicable after the beginning of each
Plan Year is based on your base salary established during the annual
review process conducted by Wilsons Leather as early as practicable after
the beginning of the Plan Year, your actual Incentive Award Payment will
reflect any changes in your base salary during the Plan Year (subject to
the pro-ration provisions set forth in Section B.2.b).




     Your Targeted Award Amount is the amount of your Incentive Award
Payment which will be earned by you with respect to a Plan Year (assuming
no change in your base salary and no transfer between positions during
the year) if 100% of the Annual Corporate Financial Objectives are
achieved, 100% of your Annual Individual Performance Measures, if any,
are met, and if the other conditions to your receipt of your Incentive
Award Payment set forth in or established pursuant to this Plan are
satisfied.




     b.       Effect on Incentive Award Payments if Annual
Corporate Financial Objectives are Not Achieved




     If less than 90% of the Annual Corporate Financial Objectives are
achieved, no Incentive Award Payment will be made under the Plan to any
participant other than eligible Merchant Associates, whose Incentive
Award Payment shall be determined pursuant to Section B.4.d. If 90% or
more, but less than 100%, of the Annual Corporate Financial Objectives
are achieved, the percentage of the Targeted Award Amount that an
eligible participant will receive for that Plan Year as an Incentive
Award Payment shall be determined on a sliding scale established by the
Chief Executive Officer and approved by the Compensation Committee as
early as practicable after the beginning of the Plan Year, subject to
reduction as provided in Section B.4.c. and, with respect to Merchant
Associates, subject to reduction or addition as provided in Section
B.4.d. If 100% or more of the Annual Corporate Financial Objectives are
achieved, an eligible participant will receive as an Incentive Award
Payment 100% of the Targeted Award Amount, subject to reduction as
provided in Section B.4.c. and, with respect to Merchant Associates,
subject to reduction or addition as provided in Section B.4.d. In no
event will the Incentive Award Payment to a participant for a Plan Year
exceed the Participant’s Targeted Award Amount for the Plan Year (except
as otherwise provided in Section B.4.d. with respect to Merchant
Associates) and all Incentive Award Payments shall be subject to
reduction as provided in Section B.4.c. if the Annual Individual
Performance Measures of the applicable participant, if any, are not
achieved, or to reduction or addition as provided in Section B.4.d. with
respect to Merchant Associates, and to Section B.2. The Compensation
Committee shall determine the percentage of the Annual Corporate
Financial Objectives that have been achieved for a Plan Year, which
determination shall be final and binding.



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     c.       Reductions if Annual Individual Performance
Measures Are Not Achieved




     This Section B.4.c. applies only to Executive Officers and any other
eligible participant (except Merchant Associates) who is subject to
Annual Individual Performance Measures. With respect to each Executive
Officer (other than the Chief Executive Officer) and each other eligible
participant (other than a Merchant Associate) that the Incentive
Committee determines should be subject to Annual Individual Performance
Measures, the Chief Executive Officer after the beginning of each Plan
Year shall establish Annual Individual Performance Measures and a
weighting of the Annual Individual Performance Measures. After the end
of the Plan Year, the Chief Executive Officer shall determine the
composite percentage of the Annual Individual Performance Measures that a
participant achieved, which determination shall be final and binding.
The Chief Executive Officer’s Annual Individual Performance Measures
shall be established by the Compensation Committee after the beginning of
each Plan Year and weighted by the Compensation Committee. After the end
of the Plan Year, the Compensation Committee shall determine the
composite percentage of the Annual Individual Performance Measures that
the Chief Executive Officer achieved, which determination shall be final
and binding. That percentage so determined by the Chief Executive
Officer (or, with respect to the Annual Individual Performance Measures
for the Chief Executive Officer, by the Compensation Committee) shall be
multiplied by 40% of the Incentive Award Payment that participant would
have received under Section B.4.b. (i.e., based upon the extent to which
the Annual Corporate Financial Objectives were achieved) if 100% of the
Annual Individual Performance Measures had been achieved, and the product
of such multiplication shall be added to 60% of the Incentive Award
Payment that participant would have received under Section B.4.b. (i.e.,
based upon the extent to which the Annual Corporate Financial Objectives
were achieved) if 100% of the Annual Individual Performance Measures had
been achieved (subject to further pro-ration or elimination, if any,
provided for in Section B.2.) to determine the participant’s Incentive
Award Payment for that Plan Year.




     d.       Modification of Incentive Award Payments for Merchant Associates




     This Section B.4.d. applies only to Merchant Associates. With
respect to eligible Merchant Associates, the Incentive Award Payment
shall be determined pursuant to this Section B.4.d., and Section B.4.c.
shall not be applicable notwithstanding anything to the contrary provided
in any other Section or Subsection of this Plan. The Chief Executive
Officer after the beginning of the Plan Year shall establish Annual
Individual Performance Measures for the Merchant Associates based on
performance against Wilsons Leather’s gross margin plan, which gross
margin plan may be based on gross margin dollars, gross margin return on
inventory or such other gross margin objectives as the Compensation
Committee may determine and may be a Company gross margin plan or a
business unit gross margin plan applicable to Merchant Associates in that
unit, as determined by the Compensation Committee. As soon as practical
after the beginning of the Plan Year, the Incentive Committee shall
determine the


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percentage of the Incentive Award Payment for Merchant Associates
that shall be based on the achievement of Annual Corporate Financial
Objectives (the “Corporate Objectives Percentage”) and the percentage of
the Incentive Award Payment for Merchant Associates that shall be based
on the achievement of the Annual Individual Performance Measures (the
“Gross Margin Percentage”). The sum of the Corporate Objectives
Percentage and the Gross Margin Percentage shall equal 100%. The
Incentive Award Payment for each eligible Merchant Associate for a Plan
Year shall consist of two components: (i) the Corporate Objectives
Percentage multiplied by 100% of the Incentive Award Payment the Merchant
Associate would have received pursuant to Section B.4.b. (i.e., based
upon the extent to which the Annual Corporate Financial Objectives were
achieved) if the Merchant Associate had not been subject to Annual
Individual Performance Measures, and (ii) the Gross Margin Percentage
multiplied by the Merchant Specific Amount. For this purpose, the
Merchant Specific Amount shall be 0 if Wilsons Leather’s gross margin
plan is not achieved for the Plan Year, 100% of the participant’s
Targeted Award Amount if Wilsons Leather’s gross margin plan is achieved
but not exceeded for the Plan Year and a percentage of the Targeted Award
Amount determined pursuant to the sliding scale established by the Chief
Executive Officer and approved by the Compensation Committee as early as
practical after the beginning of the Plan Year (not less than 100% of the
participant’s Targeted Award Amount and not to exceed 150% of the
participant’s Targeted Award Amount) if Wilsons Leather’s gross margin
plan is exceeded for the Plan Year. Notwithstanding the foregoing, the
Merchant Specific Amount may be reduced in the discretion of the
Incentive Committee after the end of the Plan Year to the extent
determined by the Incentive Committee if Wilsons Leather’s inventory
levels exceed those provided in Wilsons Leather’s plan.




     e.       Incentive Award Payments in Addition to Pool Payments




     The Incentive Award Payments made pursuant to this Section B.4. are
in addition to the Incentive Pool payments to be made pursuant to Section
B.5.




     5.       Pool Payments




     a.       Total Pool




     To the extent that more than 100% of the Annual Corporate Financial
Objectives are achieved in a Plan Year, 20% of the excess shall
constitute the incentive pool (the “Incentive Pool”). Not more than the
amount of the Incentive Pool shall be distributed among the eligible
participants pursuant to this Section B.5. For purposes of this Section
B.5.a., the amount of the distributions among the eligible participants
shall be deemed to include all payroll taxes of Wilsons Leather. The
only participants who shall receive distributions from the Incentive Pool
for a Plan Year are participants who also receive Incentive Award
Payments for that Plan Year under Section B.4.




     b.       Distribution Among Participants




     As soon as practicable after the later of beginning of the Plan Year
or the date a person becomes an eligible participant, the Incentive
Committee shall establish an amount in dollars that the eligible
participant shall be entitled to


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receive from the Incentive Pool for that Plan Year for each $1,000,000 in
excess of Annual Corporate Financial Objectives for that Plan Year
(pro-rated for amounts that are less than $1,000,000). With respect to
Executive Officers, such amounts shall be approved by the Compensation
Committee. The Incentive Committee shall have discretion to adjust such
dollar amounts in the event of promotions, changes from part-time status
to full-time status, from full-time status to part-time status or changes
in part-time status, but shall not be required to do so. The initial
dollar amounts for distribution from the Incentive Pool to each eligible
participant in the event the Annual Corporate Financial Objectives are
exceeded shall be included in the personalized award sheet provided to
each participant. Notwithstanding anything herein stated, (i) no
participant will be entitled to any distribution from the Incentive Pool
for a Plan Year in which the participant does not receive an Incentive
Award Payment, (ii) if the total distributions to be made pursuant to
this Section B.5. would otherwise exceed the amount of the Incentive
Pool, the distributions will be pro-rated among the eligible participants
based on ratios equal to what they would have received if the Incentive
Pool had not been capped at 20% of the amount in excess of 100% of the
Annual Corporate Financial Objectives, and (iii) distributions to a
participant from the Incentive Pool shall be limited by Section B.6.
Total distributions pursuant to this Section B.5. may be less than, but
not more than, the total amount of the Incentive Pool.




     6.       Maximum Payment




     Notwithstanding anything to the contrary provided in this Plan, the
total payment for any Plan Year to any participant under this Plan (the
sum of the participant’s Incentive Plan Award and the payment to the
participant from the Incentive Pool) shall not exceed 200% of the
participant’s base salary established during the annual review process
conducted by Wilsons Leather as early as practicable after the beginning
of the year, adjusted to reflect any changes in a participant’s base
salary during the Plan Year (subject to the pro-ration provisions set
forth in Section B.2.b.).




     7.       General Provisions




     a.       Plan Year




     This Plan operates on a “Plan Year” that ends on the Saturday
nearest January 31st of each year.




     b.       Tax Withholding




     Wilsons Leather may withhold from any payment to a participant under
this Plan an amount sufficient to cover any required withholding taxes,
including the participant’s social security and Medicare taxes (FICA) and
federal, state and local income taxes with respect to income arising from
the payment. All amounts withheld shall be treated for purposes of this
Plan as payments or distributions to the participant with respect to whom
the withholding was made by Wilsons Leather.



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C.       RIGHTS OF THE PARTICIPANT




     This Plan is not an employment agreement and does not ensure or evidence
to any degree the continued employment of any participant for any time, period
or position. If a participant is covered by a written employment agreement
that specifically refers to this Plan, the participant’s rights and benefits
shall be governed by the terms of the employment agreement to the extent
inconsistent with this Plan.



     No participant shall, by virtue of this Plan, have any interest in any
specific asset or assets of Wilsons Leather or any of its direct or indirect
subsidiaries. A participant has only an unsecured right to receive an
Incentive Award Payment and payment from the Incentive Pool, if any, in
accordance with, and at the time specified by, the Plan.



D.       RIGHTS OF WILSONS LEATHER




     Wilsons Leather reserves the right to change, amend, or terminate this
Plan at any time, with or without notice to participants. Any changes,
amendments or Plan termination may be made only by the Board of Directors of
Wilsons Leather (the “Board”) or delegated by the Board by express delegation
to the Compensation Committee.




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