exv10w3



 





Exhibit 10.3




STAY BONUS AGREEMENT



     This Agreement is made as of April 5, 2004 by and between Wilsons The
Leather Experts Inc., a Minnesota corporation (hereinafter, “Wilsons”) and
Peter G. Michielutti (hereinafter, the “Executive”).



RECITALS



     A. Wilsons has determined that it is in the best interests of Wilsons to
retain the services of the Executive, and



     B. Wilsons has determined to increase the likelihood of retaining the
Executive and to provide further incentives for the Executive to assist Wilsons
in achieving its objectives by agreeing to make certain bonus payments to the
Executive if certain conditions are satisfied, and



     C. Wilsons desires to set out in writing the terms and conditions under
which those bonuses will be paid, and



     D. By signing this Agreement, the Executive is accepting the terms and
conditions of those bonuses.



     NOW, THEREFORE, the parties agree as follows:




	1.	 	Total Bonus Payment. The total amount of bonuses that are potentially
payable to the Executive under this Agreement is $212,000 (hereinafter,
the “Bonus Amount”). Each payment of any portion of the Bonus Amount
under this Agreement will be reduced by applicable withholdings for taxes
and other legally required items.
	 
	2.	 	Payment of Bonuses. The Executive will receive the following payments
with respect to the Bonus Amount, provided the conditions specified for
each payment are satisfied.





	 	a.	 	The Executive will be entitled to payment of $100,000 if (i)
both of the performance criteria contained in subparagraphs 2(a)(i)
and 2(a)(ii) below (the “June Performance Criteria”) are achieved on
or before June 15, 2004 and Executive is employed by Wilsons on the
day on which the June Performance Criteria are achieved or (ii) the
Executive is terminated by Wilsons without Cause prior to June 15,
2004. For purposes of this Agreement, the June Performance Criteria
are:





	 	(i)	 	at least $25.0 million in principal amount of the
11 1/4% senior notes due August 15, 2004 (the “Senior
Notes”) shall have been paid in full, including all accrued
interest thereon, or shall have been refunded, renewed,
refinanced or extended for other securities, provided that (A)
any refunding, renewal, refinancing or extension of the Senior
Notes with debt or equity securities shall have terms
providing for no mandatory payment or repayment of principal
or mandatory redemption in whole or in part prior to January
28, 2006, and (B) of the remaining $5.6 million or less in
principal amount of the Senior Notes, no default shall exist
thereunder, the payment when due of all principal and accrued
interest thereon would not, with or without notice or lapse of
time or both, constitute a default under any other
indebtedness of Wilsons, and the Board of Directors shall have
determined, in good faith, that Wilsons will be able to make
such repayment of such remaining Senior Notes in full when
due; and




 









 










	 	(ii)	 	the Fourth Amended and Restated Credit Agreement
dated as of April 23, 2002 among Wilsons Leather Holding Inc.,
the Lenders signatory thereto from time to time, General
Electric Capital Corporation, GECC Capital Markets Group,
Inc., The CIT Group/Business Credit, Inc. and Wells Fargo
Retail Finance LLC, as amended by amendments prior to and
after the date of this Agreement (the “Credit Agreement”), or
any revolving credit agreement entered into by Wilsons in
substitution therefor, (A) shall be in full force and effect,
and no defaults shall exist thereunder that have not been
waived, (B) shall permit Wilsons to finance all of its
projected borrowing and letter of credit needs throughout the
remainder of the fiscal year ending January 29, 2005 and all
of the fiscal year ending January 28, 2006 without further
amendments or waivers, as determined by the Board of Directors
of Wilsons in good faith, and (C) shall permit the payments,
refundings, renewals, refinancings or extensions referred to
in subparagraph 2(a)(i) above without the occurrence of any
event that, with or without notice or lapse of time or both,
would constitute a default under the Credit Agreement or
substitute therefor;





	 	 	 	provided, however, that nothing stated herein shall require the
Board of Directors to authorize any refundings, renewals,
refinancings or extensions, agreements or amendments of the nature
referred to in subparagraphs 2(a)(i) or 2(a)(ii) above that the
Board, in good faith, does not deem to be in the best interests of
Wilsons.
	 
	 	 	 	Any payment due to Executive under the provisions of this
subparagraph 2(a) will be made as soon as administratively feasible
following the attainment of the June Performance Criteria.
	 
	 	b.	 	The Executive will be entitled to payment of $112,000 if (i)
the performance criteria contained in subparagraph 2(b)(i) below and
the specific position performance criteria contained in subparagraph
2(b)(ii) below (collectively, the “Year-End Performance Criteria”)
are achieved on or before January 29, 2005, as determined by the
Chief Executive Officer and the President of Wilsons, and Executive
is employed by Wilsons on January 29, 2005 or (ii) the Executive is
terminated by Wilsons without Cause prior to January 29, 2005.





	 	(i)	 	For purposes of this subparagraph 2(b), the
performance criteria are:





	 	(a)	 	Executive shall demonstrate effective
leadership in a difficult environment;
	 
	 	(b)	 	Executive shall collaborate
effectively with others on the leadership team;
	 
	 	(c)	 	Executive shall proactively engage in
the strategies and tactical plans to deliver results;
	 
	 	(d)	 	Executive shall model appropriate
behavior and require the same of direct reports; and
	 
	 	(e)	 	Executive shall prepare regular
status reports identifying progress toward goals and
objectives.





	 	(ii)	 	For purposes of this subparagraph 2(b), the
specific position performance criteria are:





	 	(a)	 	Executive shall maximize cash flow,
capital and selling, general and administrative expense
initiatives;




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	 	(b)	 	Executive shall develop measurable,
predictive business performance metrics to enable
Wilsons to better manage results for the fiscal year
ending January 29, 2005 and to be used for fiscal year
2005 objectives;
	 
	 	(c)	 	Executive shall develop analyses to
enable Wilsons to better understand fall merchandising
risk and incorporate into receipt mix;
	 
	 	(d)	 	Executive shall track reverse
cannibalization of store closures; and
	 
	 	(e)	 	Executive shall proactively meet with
the Chairman and President of Wilsons on a regularly
scheduled basis to identify specific approaches to
enhance Wilsons’ performance during the fiscal year
ending January 29, 2005.





	 	 	 	Any payment due to the Executive under the provisions of this
subparagraph 2(b) will be made as soon as administratively feasible
following January 29, 2005.
	 
	 	c.	 	If the Executive becomes disabled while employed by Wilsons
after the date hereof and remains so disabled until the date a bonus
is payable under either subparagraph 2(a) or 2(b), the Executive
will be deemed to be employed by Wilsons on the applicable date
solely for purposes of applying subparagraph 2(a) and/or 2(b), as
the case may be, and the June Performance Criteria and/or the
Year-End Performance Criteria, as the case may be, shall be deemed
to have been achieved. To be “disabled” for purposes of this
subparagraph 2(c), the Executive must be prevented from engaging in
active employment by an illness or injury that meets the
requirements for receiving benefits under the short term disability
program sponsored by Wilsons during the period that program applies,
and thereafter must meet the requirements for receiving disability
benefits under the Social Security Act.
	 
	 	d.	 	If the Executive dies while employed by Wilsons during the
period commencing on the date hereof through and including January
29, 2005, the Executive will be deemed to have survived and
continued in the employ of Wilsons solely for purposes of applying
subparagraph 2(a) and/or 2(b), as the case may be, and the June
Performance Criteria and/or the Year-End Performance Criteria, as
the case may be, shall be deemed to have been achieved, but any
bonus payable under such subparagraphs shall be paid to the
Executive’s estate.





	3.	 	Incentive Plan. Any Bonus Amount payable to Executive pursuant to this
Agreement shall be in addition to, and not in lieu of, any incentive award
payable to Executive for the fiscal year ending January 29, 2005 under
Wilsons’ Executive and Key Management Incentive Plan.
	 
	4.	 	Not an Employment Contract. This Agreement does not constitute a
contract of employment with Wilsons or guarantee that the Executive will
remain employed by Wilsons for any particular period of time. Nothing in
this Agreement changes the Executive’s status as an “at will” employee of
Wilsons or interferes in any way with the right of Wilsons to terminate
the Executive’s employment at any time, with or without Cause and with or
without notice.
	 
	5.	 	Cause Definition. “Cause” shall mean:





	 	a.	 	the commission by the Executive of any act of embezzlement
against Wilsons or any of its subsidiaries;
	 
	 	b.	 	the conviction of the Executive for, or entry by the
Executive of a guilty plea to, any felony which has a material
adverse effect upon the business, operating results, financial
condition or employee, supplier or customer relations generally of
Wilsons and its



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	 	 	 	subsidiaries, taken as a whole, or which precludes the Executive
from performing his duties for at least 90 days;
	 
	 	c.	 	the conviction of the Executive for any crime involving
dishonesty with respect to Wilsons (i) intended by the Executive to
result in personal enrichment of the Executive at the expense of
Wilsons or its subsidiaries or (ii) which has a material adverse
effect upon the business, operating results, financial condition or
employee, supplier or customer relations generally of Wilsons and
its subsidiaries, taken as a whole;
	 
	 	d.	 	the absence by the Executive from employment with Wilsons for
a period of more than 90 days after the date of this Agreement
without the approval of the Board of Directors of Wilsons other than
for vacations, illness, injury or disability; or
	 
	 	e.	 	willful misconduct by the Executive, which misconduct has not
been cured within 20 days following notification thereof to the
Executive (or if such misconduct is cured within 20 days after such
notice of misconduct is received, but the same misconduct occurs
again at any time thereafter).





	6.	 	Assignment. Wilsons may in its sole discretion assign this Agreement to
any entity or individual which succeeds to some or all of the business of
Wilsons through merger, consolidation, a sale of some or all of the assets
of Wilsons, or any similar transaction. The Executive acknowledges that
the services to be rendered by Executive to Wilsons are unique and
personal, and that the Executive therefore may not assign any of
Executive’s rights or obligations under this Agreement to anyone.
	 
	7.	 	Successors. Subject to Paragraph 6, the provisions of this Agreement
shall be binding on the parties hereto, on any successor or assign of
Wilsons, and on the Executive’s heirs or any personal representative of
the Executive or the Executive’s estate.
	 
	8.	 	Governing Law. This Agreement shall be interpreted and enforced in
accordance with the laws of the State of Minnesota, without giving effect
to conflict of law principles.
	 
	9.	 	Amendment. This Agreement may be amended only in writing, signed by both
parties.




     IN WITNESS HEREOF, the parties have executed this Agreement effective as
of the date set forth above.





	 	 	 	 	 	 	 	 	 
	EXECUTIVE	 	WILSONS THE LEATHER EXPERTS INC.
	 
	/s/ Peter G. Michielutti	 	By 	/s/ David L. Rogers
	
 	 	 	
 
	

	 	Peter G. Michielutti
	 	 	 	 	Its 	President
	

	 	 	 	 	 	 	 	










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