Document:

EX-10.2

 

Exhibit 10.2

ACCELERATED SHARE REPURCHASE AGREEMENT

August 11, 2005

NRG Energy, Inc.

211 Carnegie Center

Princeton, NJ 08540

Credit Suisse First Boston Capital LLC

Eleven Madison Avenue

New York, NY 10010

	 	 	 
	External ID:

	 	– Risk ID:
	 

     THIS AGREEMENT (this “Agreement”) is made as of this 11th day of August, 2005,
among CREDIT SUISSE FIRST BOSTON CAPITAL LLC (“Seller”), NRG Energy, Inc., a Delaware corporation
(Symbol: “NRG”) (“Buyer”), and CREDIT SUISSE FIRST BOSTON LLC, as agent (in such capacity, the
“Agent”) hereunder.

     WHEREAS, Buyer wishes to purchase, and Seller wishes to sell, shares of common stock, par
value U.S. $ 0.01 per share, of Buyer (including any security entitlements in respect thereof,
“Shares”) on the terms set forth herein (the “Transaction”);

     WHEREAS, certain terms used herein have the meanings set forth in Article 3;

     NOW, THEREFORE, in consideration of their mutual covenants herein contained, the parties
hereto, intending to be legally bound, hereby mutually covenant and agree as follows:

ARTICLE 1

Sale and Purchase

	 	 	 
	Sale and Purchase:

	 	On the Trade Date, Seller will deliver to Buyer a number of Shares (the
“Purchased Shares”) equal to 6,346,788 (the “Number of Shares”) and Buyer will pay Seller cash
in immediately available funds in an amount equal to USD 250,000,000 (the product of USD 39.39
per Share (the “Initial Price”) and the Number of Shares) on a delivery-versus-payment basis.

ARTICLE 2

Purchase Price Adjustment

	 	 	 
	Buyer Delivery:

	 	If Buyer has not elected Cash Settlement in accordance with the provisions opposite
“Settlement Method” below, Buyer will deliver to Seller on the Settlement Date a number of
Shares equal to 100.7% of the Final Settlement Amount if the Final Settlement Amount is
positive; provided that Buyer shall

 

 

	 	 	 
	 

	 	not be required to deliver more than the Maximum Deliverable Number of Shares.
	 
	 	 
	Buyer Payment:

	 	If Buyer has elected Cash Settlement in accordance with the provisions opposite
“Settlement Method” below and the Final Settlement Amount is positive, Buyer will pay to
Seller on the Cash Settlement Date an amount in cash equal to the product of (x) the Final
Settlement Amount and (y) the Cash Settlement Price.
	 
	 	 
	Seller Delivery:

	 	If Buyer has not elected Cash Settlement in accordance with the provisions opposite
“Settlement Method” below, Seller will deliver to Buyer on the Settlement Date a number of
shares equal to the absolute value of the Final Settlement Amount if the Final Settlement
Amount is negative.
	 
	 	 
	Seller Payment:

	 	If Buyer has elected Cash Settlement in accordance with the provisions opposite
“Settlement Method” below and the Final Settlement Amount is negative, Seller will pay to
Buyer on the Cash Settlement Date an amount in cash equal to the product of (x) the
absolute value of the Final Settlement Amount and (y) the Cash Settlement Price.
	 
	 	 
	Settlement Method:

	 	Buyer or Seller shall make the Buyer Delivery or Seller Delivery, as the case may be,
pursuant to Article 2 on the Settlement Date unless Buyer has notified Seller no later
than the 5th Scheduled Trading Day immediately preceding the Scheduled Final
Valuation Date that “Cash Settlement” shall apply, in which case Buyer shall be deemed to
have represented to Seller that Buyer is not aware of any material non-public information
regarding Buyer or the Shares at the time of such notice, and which notice shall be
irrevocable.

ARTICLE 3

Certain Terms and Definitions

     Section 3.01. As used herein, the following words and phrases shall have the following
meanings:

	 	 	 
	Trade Date:

	 	August 11, 2005
	 
	 	 
	Settlement Date:

	 	The date that immediately follows the last Valuation Date by 3 Clearance System Business Days.
	 
	 	 
	Clearance System Business Day:

	 	Any day on which the Clearance System is open (or, but for an event beyond the control of the
parties as a result of which the Clearance System cannot clear the transfer of the Shares, would
have been open) for the acceptance and execution of settlement instructions.
	 
	 	 
	Clearance System:

	 	The Depository Trust Company, New York, New York, and any successor thereto.
	 
	 	 
	Final Settlement Amount:

	 	The sum of all Daily Net Share Amounts for all Valuation Dates.

 

 

	 	 	 
	Valuation Dates:

	 	Each of the Scheduled Trading Days commencing on the Trade Date to and including the date on
which the sum of all Daily Reference Share Amounts for such date and all previous Valuation Dates
equals the Number of Shares (which is currently expected, in the absence of suspensions or
reductions of the Daily Reference Share Amount, to occur on February 13, 2006 (the “Scheduled
Final Valuation Date”)).
	 
	 	 
	Scheduled Trading Day:

	 	Any day on which the Exchange and each Related Exchange are scheduled to be open for their
respective regular trading sessions.
	 
	 	 
	Exchange:

	 	New York Stock Exchange
	 
	 	 
	Related Exchange:

	 	Each exchange or quotation system where trading has a material effect (as determined by the
Calculation Agent) on the overall market for futures or options contracts relating to the Shares.
	 
	 	 
	Daily Reference Share Amount:

	 	For any Valuation Date, 49,584, except that for the first Valuation Day the Daily Reference Share
Amount shall be 49,620.
	 
	 	 
	Daily Net Share Amount:

	 	For any Valuation Date, the quotient obtained by dividing the Daily Difference for such Valuation
Date by the Daily Reference Price for such Valuation Date. For the avoidance of doubt, the Daily
Net Share Amount may be a positive or negative amount.
	 
	 	 
	Daily Difference:

	 	For any Valuation Date, the product of (i) (A) the Daily Reference Price for such Valuation Date
minus (B) the Initial Price, multiplied by (ii) the Daily Reference Share Amount for such
Valuation Date. For the avoidance of doubt, the Daily Difference may be a positive or negative
amount.
	 
	 	 
	Daily Reference Price:

	 	For any Valuation Date, (i) the VWAP Price on such Valuation Date, or, if such VWAP Price would
be greater than the Maximum Price, the Maximum Price, or, if such VWAP Price would be less than
the Minimum Price, the Minimum Price, plus (ii) USD 0.03 per Share.
	 
	 	 
	VWAP Price:

	 	For any Valuation Date or Cash Settlement Averaging Date, the volume-weighted average price per
Share at which the Shares trade on any exchange on which the Shares are traded on such day,
excluding trades (i) that do not settle regular way, (ii) opening trades (regular way) reported
in the consolidated system, (iii) trades effected during the 10 minutes before the scheduled
close of trading on the Exchange and 10 minutes before the scheduled close of the primary trading
session in the market where the trade is effected and (iv) trades on such day that do not satisfy
the requirements of Rule 10b-18(b)(3) under the Exchange Act, as determined by the Calculation
Agent by reference to Bloomberg Page [“AQR”] (or any successor thereto) for Buyer.

 

 

	 	 	 
	Maximum Price:

	 	USD 40.5717 per Share
	 
	 	 
	Minimum Price:

	 	USD 38.2083 per Share
	 
	 	 
	Maximum Deliverable Number:

	 	670,000, subject to adjustment pursuant to Section 7.01.
	 
	 	 
	Valuation Period:

	 	The period starting on the first Valuation Date and ending on the last Valuation Date.
	 
	 	 
	Cash Settlement Date:

	 	The date that immediately follows the last Cash Settlement Averaging Date by 3 Business Days.
	 
	 	 
	Business Day:

	 	Any day that is not a Saturday, a Sunday or a day on which banking institutions or trust
companies in The City of New York are authorized or obligated by law or executive order to close.
	 
	 	 
	Cash Settlement Averaging Dates:

	 	Each of the 10 Scheduled Trading Days immediately following the Valuation Period.
	 
	 	 
	Cash Settlement Price:

	 	With respect to a Buyer Payment, the average of the VWAP Price for each Cash Settlement Averaging
Date; and, with respect to a Seller Payment, the average of the “Volume Weighted Average Price”
per Share on each Cash Settlement Averaging Date as determined by the Calculation Agent by
reference to Bloomberg Page “AQR” (or any successor thereto) for the Buyer with respect to the
period from 9:30 a.m. to 4:00 p.m. (New York City time) on each such day.
	 
	 	 
	Cash Settlement Averaging Period:

	 	The period starting on the first Cash Settlement Averaging Date and ending on the last Cash Settlement Averaging Date.
	 
	 	 
	Calculation Agent:

	 	Credit Suisse First Boston Capital LLC.
	 
	 	 
	Exchange Act:

	 	The Securities Exchange Act of 1934, as amended.
	 
	 	 
	Guarantee:

	 	The Guarantee, dated May 16, 2001, made by Credit Suisse First Boston Capital (USA), Inc. in
favor of each and every Buyer to financial transactions with its wholly-owned subsidiary, Credit
Suisse First Boston Capital LLC.
	 
	 	 
	Rule 10b-18:

	 	Rule 10b-18 under the Exchange Act.
	 
	 	 
	Securities Act:

	 	The Securities Act of 1933, as amended.

     Section 3.02. In addition, the following terms shall have the meanings set forth in the
Sections indicated below:

	 	 	 
	“Bankruptcy Code”

	 	Section 8.04
	 
	 	 
	“Hedging Disruption”

	 	Section 7.02(h)
	 
	 	 
	“Regulation M”

	 	Section 5.02(k)

 

 

	 	 	 
	“Relevant CSFB Personnel”

	 	Section 6.01(e)
	 
	 	 
	“Seller Hedging”

	 	Section 4.01(b)
	 
	 	 
	“Seller Purchases”

	 	Section 4.01(a)
	 
	 	 
	“Termination Amount”

	 	Section 7.02
	 
	 	 
	“Termination Date”

	 	Section 7.02
	 
	 	 
	“Termination Event”

	 	Section 7.02
	 
	 	 
	“Termination Value”

	 	Section 7.02

ARTICLE 4

Purchases And Hedging by Seller

     Section 4.01. Seller Purchases and Hedging. (a) The parties acknowledge that the Purchased
Shares may be sold short to Buyer and that during the Valuation Period and, if the Final Settlement
Amount is positive and Buyer has elected Cash Settlement in accordance with Article 2, during the
Cash Settlement Averaging Period, Seller may purchase Shares in connection with the Transaction,
which Shares may be used to cover all or a portion of such short sale (any such purchases,
collectively, “Seller Purchases” (it being understood that such term does not include any purchases
made by Seller in connection with hedging of Seller’s exposure to any optionality arising under the
Transaction)).

     (b)     Any Seller Purchases and any other hedging or trading by Seller or its affiliates in
connection with the Transaction (“Seller Hedging”) will be conducted independently of Buyer. The
timing of any Seller Purchases or Seller Hedging, the number of Shares thus purchased or sold on
any day, the price paid or received per Share for any Seller Purchases or relating to any Seller
Hedging and the manner in which any Seller Purchases are made or Seller Hedging is conducted,
including without limitation whether such purchases or transactions are made on any securities
exchange or privately, shall be within the sole discretion of Seller.

     Section 4.02. Suspension of Seller Purchases or Seller Hedging. (a) Without limiting the
generality of the foregoing, if at any time Seller determines in good faith and a commercially
reasonable manner that (i) any Seller Purchases or Seller Hedging may raise material risks under
applicable securities laws, (ii) it is necessary or advisable to limit Seller Purchases or Seller
Hedging in light of market conditions or a market disruption at such time or (iii) a Hedging
Disruption has occurred, Seller (or its agent or affiliate) may, in its discretion, (x) if such
event occurs during the Valuation Period, suspend any or all of such Seller Purchases or Seller
Hedging, as the case may be, and may elect that the Daily Reference Share Amount on the affected
Valuation Date or Valuation Dates for such day be reduced to zero or any other amount determined by
Seller, or (y) if such event occurs during the Cash Settlement Averaging Period, suspend any or all
of such Seller Purchases or Seller Hedging, as the case may be, and may elect that the affected
Cash Settlement Averaging Date or Cash Settlement Averaging Dates be postponed, in each case as
appropriate with regard to the relevant securities laws, market conditions or disruptions, and
Seller shall notify Buyer of such suspension of Seller Purchases or Seller Hedging. Upon resuming
Seller Purchases during the Valuation Period, Seller may adjust the Daily Reference Share Amount
for any subsequent Valuation Date.

ARTICLE 5

Representations and Warranties 

     Section 5.01. Representations and Warranties of Buyer and Seller. Each party hereto makes
to the other party hereto the representations and warranties contained in Sections 3(a) and

 

 

3(c) of the 1992 ISDA Master Agreement (Multicurrency – Cross Border), as published by the
International Swap Dealers Association, Inc., and each reference therein to “a Transaction” shall
be deemed to be a reference to the Transaction, each reference therein to “this Agreement” shall be
deemed to be a reference to this Agreement and any reference therein to any “Credit Support
Document” shall be deemed to have been deleted with respect to Buyer and shall be deemed to be a
reference to the Guarantee with respect to Seller.

     Section 5.02. Representations, Warranties and Agreements of Buyer. Buyer represents and
warrants to Seller that:

     (a)     No Termination Event has occurred and is continuing and no such event or circumstance
would occur as a result of its entering into or performing its obligations under this Agreement.

     (b)     All reports and other documents filed by Buyer with the Securities and Exchange Commission
pursuant to the Exchange Act, when considered as a whole (with the most recent such reports and
documents deemed to amend inconsistent statements contained in any earlier such reports and
documents), do not contain any untrue statement of a material fact or any omission of a material
fact required to be stated herein or necessary to make the statements therein, in the light of the
circumstances in which they were made, not misleading.

     (c)     Buyer has publicly announced its entry into the Transaction, and Buyer agrees to comply
with all applicable disclosure requirements relating to the Transaction including, without
limitation, Item 703 of Regulation S-K under the Securities Act.

     (d)     Any Shares, when issued and delivered by Buyer in accordance with the terms of the
Transaction, will be duly authorized and validly issued, fully paid and nonassessable, and the
issuance thereof will not be subject to any preemptive or similar rights.

     (e)     Buyer has reserved and will keep available, free from preemptive rights, out of its
authorized but unissued Shares, solely for the purpose of issuance upon settlement of the
Transaction as herein provided, the full number of Shares as shall then be issuable upon settlement
of the Transaction; subject to the limitation set forth in Article 2.

     (f)     Prior to the Settlement Date, any Shares to be delivered on the Settlement Date by Buyer
shall have been approved for listing on the Exchange, subject to official notice of issuance (it
being understood that nothing herein shall create any obligation of Buyer to register any Shares
under the Securities Act).

     (g)     Buyer is not entering into this Agreement to create actual or apparent trading activity in
the Shares (or any security convertible into or exchangeable for Shares), to raise or depress or
otherwise manipulate the price of the Shares (or any security convertible into or exchangeable for
Shares), to facilitate a distribution of the Shares (or any security convertible into or
exchangeable for Shares) or in connection with a future issuance of securities.

     (h)     Before and after giving effect to the Transaction, Buyer has complied with all applicable
law, rules and regulations in connection with disclosure of all material information with respect
to its business, operations or condition (financial or otherwise); and as of the date hereof and as
of each day hereon forth until the Settlement Date, Buyer is not and will not be prohibited by law,
contract or otherwise from purchasing Shares.

     (i)     Buyer is entering into this Agreement in good faith and not as part of plan or scheme to
evade compliance with the federal securities laws including, without limitation, Rule 10b-5 of the
Exchange Act. Buyer has not entered into or altered any hedging transaction relating to the Shares
corresponding to or offsetting the Transaction.

 

 

     (j)     During the Valuation Period and the Cash Settlement Averaging Period, if any, Buyer does
not have, and shall not attempt to exert, any influence over how, when, whether or at what price to
effect any purchase or sale of Shares by Seller (or its agent or affiliate).

     (k)     Buyer is not engaged in a “distribution”, as such term is used in Regulation M, that would
preclude purchases by Buyer of Shares.

     (l)     Buyer is an “eligible contract participant” as such term is defined in Section 1(a)(12) of
the Commodity Exchange Act, as amended.

     (m)     Buyer is not and, after giving effect to the Transaction, will not be an “investment
company” as such term is defined in the Investment Company Act of 1940, as amended.

     (n)     Buyer is, and shall be as of the date of any payment or delivery by Buyer hereunder,
solvent and able to pay its debts as they come due, with assets having a fair value greater than
liabilities and with capital sufficient to carry on the businesses in which it engages.

     (o)     Buyer (i) has timely filed, caused to be timely filed or will timely file or cause to be
timely filed all material tax returns that are required to be filed by it as of the date hereof and
(ii) has paid all material taxes shown to be due and payable on said returns or on any assessment
made against it or any of its property and all other material taxes, assessments, fees, liabilities
or other charges imposed on it or any of its property by any governmental authority, unless in each
case the same are being contested in good faith. For purposes of determining whether a tax return
has been timely filed, any extensions shall be taken into account.

     (p)     The public disclosure of all material information relating to Buyer is within Buyer’s
control.

ARTICLE 6

Covenants of Buyer

     Section 6.01. Covenants of Buyer. Buyer hereby agrees with Seller to the following:

     (a)     Without the prior written consent of Seller, Buyer shall not, and shall cause its
affiliates or affiliated purchasers (as defined in Rule 10b-18) not to, directly or indirectly
(including by means of a derivative instrument) enter into any transaction to purchase any Shares,
other than purchases from employees of Buyer that are not “Rule 10b-18 purchases” as such term is
defined in Rule 10b-18, until its obligations under the Transaction have been satisfied in full.

     (b)     Buyer shall, at least one day prior to the first day of the Valuation Period, notify
Seller of the total number of Shares purchased in Rule 10b-18 purchases of blocks pursuant to the
once-a-week block exception contained in Rule 10b-18(b)(4) by or for Buyer or any of its affiliated
purchasers during each of the four calendar weeks preceding the first day of the Valuation Period
and during the calendar week in which the first day of the Valuation Period occurs (“Rule 10b-18
purchase”, “blocks” and “affiliated purchaser” each being used as defined in Rule 10b-18), which
notice shall be substantially in the form set forth as Annex A hereto.

     (c)     Neither Buyer nor any of its affiliates shall take any action that would cause any Seller
Purchases not to meet the requirements of the safe harbor provided by Rule 10b-18 under the
Exchange Act if such purchases were made by Buyer.

     (d)     On any day prior to the second Business Day immediately following the last day of the
Valuation Period, or, if the Final Settlement Amount is positive and Buyer has elected Cash
Settlement in accordance with Article 2, the last day of the Cash Settlement Averaging Period,
neither Buyer nor any of its affiliates or agents shall make a distribution (as defined in
Regulation M) of Shares, or any security for which the Shares are a reference security (as defined
in

 

 

Regulation M) that would, in the view of Seller, preclude Buyer from purchasing Shares or
cause any such purchases to violate any law, rule or regulation, unless Buyer notifies Seller of
such distribution 5 Business Days prior to the beginning of the restricted period applicable to
such distribution under Regulation M, in which case Buyer shall be deemed to have represented to
Seller that Buyer is not aware of any material non-public information regarding Buyer or the Shares
at the time of such notice. Buyer acknowledges that any such notice may (x) cause the Daily
Reference Share Amount on any Valuation Date to be reduced or (y) if provided during the Cash
Settlement Averaging Period if the Final Settlement Amount is positive, cause one or more Cash
Settlement Averaging Date to be postponed, in each case as a result of the provisions of Section
4.02. Accordingly, Buyer acknowledges that its actions in relation to any such notice must comply
with the standards set forth in Section 6.01(f).

     (e)     Buyer shall not, at any time during any of the Valuation Period or the Cash Settlement
Averaging Period, if any, communicate, directly or indirectly, any material nonpublic information
concerning itself or the Shares or purchases or sales of Shares by Seller (or its agent or
affiliate) to any Relevant CSFB Personnel (as defined below). “Relevant CSFB Personnel” means any
employee of Seller or any affiliate, except employees that Seller has notified Buyer in writing are
not “Relevant CSFB Personnel”.

     (f)     Buyer agrees that Buyer shall not enter into or alter any hedging transaction relating to
the Shares corresponding to or offsetting the Transaction. Buyer also acknowledges and agrees that
any amendment, modification, waiver or termination of this Agreement must be effected in accordance
with the requirements for the amendment or termination of a “plan” as defined in Rule 10b5-1(c)
under the Exchange Act. Without limiting the generality of the foregoing, any such amendment,
modification, waiver or termination shall be made in good faith and not as part of a plan or scheme
to evade the prohibitions of Rule 10b-5 under the Exchange Act, and no such amendment,
modification, waiver or termination shall be made at any time at which Buyer or any officer,
director, manager or similar person of Buyer is aware of any material non-public information
regarding Buyer or the Shares.

     (g)     Buyer shall (i) notify Seller prior to the opening of trading in the Shares on any day on
which Buyer makes, or expects to be made, any public announcement (as defined in Rule 165(f) under
the Securities Act) of any merger, acquisition, or similar transaction involving a recapitalization
relating to Buyer (other than any such transaction in which the consideration consists solely of
cash and there is no valuation period), (ii) promptly notify Seller following any such announcement
that such announcement has been made, and (iii) promptly deliver to Seller following the making of
any such announcement a certificate indicating (A) Buyer’s average daily Rule 10b-18 purchases (as
defined in Rule 10b-18) during the three full calendar months preceding the date of the
announcement of such transaction and (B) Buyer’s block purchases (as defined in Rule 10b-18)
effected pursuant to paragraph (b)(4) of Rule 10b-18 during the three full calendar months
preceding the date of the announcement of such transaction. In addition, Buyer shall promptly
notify Seller of the earlier to occur of the completion of such transaction and the completion of
the vote by target shareholders. Buyer acknowledges that any such public announcement may (x)
cause the Daily Reference Share Amount on any Valuation Date to be reduced or (y) if made during
the Cash Settlement Averaging Period if the Final Settlement Amount is positive, cause one or more
Cash Settlement Averaging Date to be postponed, in each case as a result of the provisions of
Section 4.02. Accordingly, Buyer acknowledges that its actions in relation to any such
announcement or transaction must comply with the standards set forth in Section 6.01(f).

ARTICLE 7

Adjustment and Termination Events

     Section 7.01. Calculation Agent Adjustments. (a) In the event of any corporate event
involving Buyer or the Shares (including, without limitation, a stock split, stock dividend,

 

 

bankruptcy, insolvency, reorganization, merger, offer to tender Shares (whether such offer is
made by the Company or a third party, and whether the consideration for such offer is cash or
non-cash), rights offering, recapitalization, spin-off or issuance of any securities convertible or
exchangeable into Shares) or the announcement of any such corporate event, the Calculation Agent
may adjust the terms of the Transaction (including, without limitation, the number of Valuation
Dates in the Valuation Period, any Daily Adjustment Price, any Daily Reference Share Amount, the
Maximum Price, the Minimum Price and any Daily Difference) as it deems appropriate under the
circumstances to preserve the economic value of the Transaction (including, without limitation,
adjustments to account for changes in the price of the Shares or changes in volatility, expected
dividends, stock loan rate or liquidity relevant to the Shares as a result of any such corporate
event).

     (a)     Notwithstanding the authority provided to the Calculation Agent in subsection (a) of this
Section 7.01, in the event of a corporate event (such as certain reorganizations, mergers, or other
similar events) in which all holders of Shares may receive consideration other than the common
equity securities of the continuing or surviving entity, the adjustments referred to in such
subsection shall permit Buyer or Seller to satisfy its settlement obligations hereunder by
delivering the consideration received by holders of Shares upon such corporate event, in such
proportions as in the exercise of its good faith judgment the Calculation Agent deems appropriate
under the circumstances.

     Section 7.02. Termination Events. If one or more of the following events (each, a
“Termination Event”) shall occur:

     (a)     any legal proceeding shall have been instituted or any other event shall have occurred or
condition shall exist that in Seller’s commercially reasonable judgment is likely to have a
material adverse effect on the ability of Buyer or Seller to perform its obligations hereunder, or
calls into question the validity or binding effect of any agreement of Buyer or Seller, as the case
may be, hereunder;

     (b)     Buyer is (i) dissolved (other than pursuant to a consolidation, amalgamation or merger);
(ii) becomes insolvent or is unable to pay its debts or fails or admits in writing its inability
generally to pay its debts as they become due; (iii) makes a general assignment, arrangement or
composition with, or for the benefit of, its creditors; (iv) institutes or has instituted against
it by a regulator, supervisor or any similar official with primary insolvency, rehabilitative or
regulatory jurisdiction over it in the jurisdiction of its incorporation or organization or the
jurisdiction of its head or home office, or it consents to a proceeding seeking a judgment of
insolvency or bankruptcy or any other relief under any bankruptcy or insolvency law or other
similar law affecting creditors’ rights, or a petition is presented for its winding-up or
liquidation by it or such regulator, supervisor or similar official or it consents to such a
petition; (v) institutes or has instituted against it a proceeding seeking a judgment of insolvency
or bankruptcy or any other relief under any bankruptcy or insolvency law or other similar law
affecting creditors’ rights, or a petition is presented for its winding-up or liquidation (other
than any such proceeding or petition covered under clause (iv) immediately above), and, in the case
of any such proceeding or petition instituted or presented against it, such proceeding or petition
(A) results in a judgment of insolvency or bankruptcy or the entry of an order for relief or the
making of an order for its winding-up or liquidation or (B) is not dismissed, discharged, stayed or
restrained in each case within 15 days of the institution or presentation thereof; (vi) has a
resolution passed for its winding-up, official management or liquidation (other than pursuant to a
consolidation, amalgamation or merger); (vii) seeks or becomes subject to the appointment of a
Custodian for it or for all or substantially all its assets; (viii) has a secured party take
possession of all or substantially all its assets or has a distress, execution, attachment,
sequestration or other legal process levied, enforced or sued on or against all or substantially
all its assets and such secured party maintains possession, or any such process is not dismissed,
discharged, stayed or restrained, in each case within 30 days thereafter; (ix) is subject to any
voluntary or involuntary liquidation, bankruptcy, insolvency, dissolution or winding-up of or any
analogous proceeding as a result of

 

 

which (A) all of the shares of Common Stock are required to be transferred to a Custodian or
(B) holders of the shares of Common Stock become legally prohibited from transferring them; (x)
causes or is subject to any event with respect to it which, under the applicable laws of any
jurisdiction, has an analogous effect to any of the events specified in clauses (i) to (ix)
(inclusive); or (xi) takes any action in furtherance of, or indicating its consent to, approval of,
or acquiescence in, any of the foregoing acts.

     (c)     (i) any representation or warranty made by Buyer under this Agreement is incorrect or
misleading in any material respect or (ii) any certificate delivered by Buyer pursuant to this
Agreement is incorrect or misleading in any material respect;

     (d)     Buyer fails to fulfill or discharge when due any of Buyer’s obligations, covenants or
agreements under or relating to this Agreement, and such failure remains unremedied for 10 days
following notice from Seller;

     (e)     all of the Shares or all or substantially all the assets of Buyer are nationalized,
expropriated or are otherwise required to be transferred to any governmental agency, authority,
entity or instrumentality thereof;

     (f)     by reason of the voluntary or involuntary liquidation, bankruptcy, insolvency, dissolution
or winding-up of or any analogous proceeding affecting Buyer, (i) all the Shares of Buyer are
required to be transferred to a trustee, liquidator or other similar official or (ii) holders of
the Shares of Buyer become legally prohibited from transferring them;

     (g)     the Exchange announces that pursuant to the rules of such Exchange, the Shares cease (or
will cease) to be listed, traded or publicly quoted on the Exchange for any reason (other than a
Merger Event or Tender Offer, as each such term is defined under the 2002 ISDA Equity Derivatives
Definitions, as published by the International Swaps and Derivatives Association, Inc.) and will
not be re-listed, re-traded or re-quoted on an exchange or quotation system located in the same
country as the Exchange (or, where the Exchange is within the European Union, in any member state
of the European Union) within five Scheduled Trading Days of so ceasing to be so listed, traded or
quoted;

     (h)     Seller is unable, after using commercially reasonable efforts, to (A) acquire, establish,
re-establish, substitute, maintain, unwind or dispose of any transaction(s) or asset(s) it deems
necessary to hedge the equity price risk of entering into and performing its obligations with
respect to the Transaction, or (B) realize, recover or remit the proceeds of any such
transaction(s) or asset(s) (a “Hedging Disruption”);

     (i)     due to the adoption of, or any change in, any applicable law after the date hereof, or due
to the promulgation of, or any change in, the interpretation by any court, tribunal or regulatory
authority with competent jurisdiction of any applicable law after the date hereof, (i) it becomes
unlawful for Buyer or Seller to perform any absolute or contingent obligation to make payment or
delivery hereunder or to comply with any other material provision of this Agreement or (ii) Buyer
or Seller determines in good faith that (A) it has become illegal to hold, acquire or dispose of
Shares or (B) it would incur a materially increased cost in performing its obligations hereunder
(including, without limitation, due to any increase in tax liability, decrease in tax benefit or
other adverse effect on its tax position); or

     (j)     Buyer declares or pays any dividend or distribution on the Shares in cash or other
property (other than additional Shares);

then, in the absolute discretion of Seller upon notice to Seller from Buyer at any time following
such event, a “Termination Date” shall occur, and Buyer or Seller, as the case may be, shall become
obligated to make the payments or deliveries that would be made if the final Valuation Date in the
Valuation Period were the Termination Date, the Final Settlement Amount were the Termination Amount
and Cash Settlement did not apply.

 

 

The “Termination Value” means an amount Seller reasonably determines in good faith to be
appropriate to compensate Seller for its total losses and costs (or gain, in which case expressed
as a negative number) in connection with this Agreement, including any loss of bargain, loss of
funding or, at the election of Seller but without duplication, loss or cost incurred as a result of
its terminating, liquidating, obtaining or reestablishing any hedge or related trading position (or
any gain resulting from any of them), including losses and costs (or gains) in respect of any
payment or delivery required to have been made (assuming satisfaction of each applicable condition
precedent) on or before the relevant Termination Date and not made; provided that if the
Termination Event giving rise to the relevant Termination Date is of the type described in clause
(a) of this Section 7.02 and the relevant legal proceeding arises primarily out of an act or
omission by Seller, then the “Termination Value” will mean an amount Buyer reasonably determines in
good faith to be appropriate to compensate Buyer for its total losses and costs (or gain, in which
case expressed as a negative number) in connection with this Agreement, including any loss of
bargain, loss of funding or, at the election of Buyer but without duplication, loss or cost
incurred as a result of its terminating, liquidating, obtaining or reestablishing any hedge or
related trading position (or any gain resulting from any of them), including losses and costs (or
gains) in respect of any payment or delivery required to have been made (assuming satisfaction of
each applicable condition precedent) on or before the relevant Termination Date and not made.

The “Termination Amount” means a number of Shares with a value, as determined by the Calculation
Agent, as of the Termination Date equal the Termination Value.

ARTICLE 8

Miscellaneous

     Section 8.01. U.S. Private Placement Representations. Each party hereby represents and
warrants to the other party as of the date hereof that:

     (a)     It is an “accredited investor” (as defined in Regulation D under the Securities Act) and
has such knowledge and experience in financial and business matters as to be capable of evaluating
the merits and risks of the Transaction, and it is able to bear the economic risk of the
Transaction.

     (b)     It is entering into the Transaction for its own account and not with a view to the
distribution or resale of the Transaction or its rights thereunder except pursuant to a
registration statement declared effective under, or an exemption from the registration requirements
of, the Securities Act.

     Section 8.02. Bankruptcy of Buyer. Seller agrees that in the event of the bankruptcy of
Buyer, Seller shall not have rights or assert a claim that is senior in priority to the rights and
claims available to the shareholders of the common stock of Buyer.

     Section 8.03. 10b5-1. The parties intend for the Transaction to comply with the
requirements of Rule 10b5-1(c)(1)(i)(B) under the Exchange Act and this Agreement to constitute a
binding contract, instruction or plan satisfying the requirements of 10b5-1(c) and to be
interpreted to comply with the requirements of Rule 10b5-1(c).

     Section 8.04. Securities Contract. The parties hereto acknowledge and agree that each of
Seller and the Agent is a “stockbroker” within the meaning of Section 101 (53A) of Title 11 of the
United States Code (the “Bankruptcy Code”) and the Agent is acting as agent for Seller and that
Seller is a “customer” of the Agent within the meaning of Section 741(2) of the Bankruptcy Code.
The parties hereto further recognize that the Transaction is a “securities contract”, as such term
is defined in Section 741(7) of the Bankruptcy Code, entitled to the protection of, among other
provisions, Sections 555 and 362(b)(6) of the Bankruptcy Code, and that each payment or delivery of
cash, Shares or other property or assets hereunder is a “settlement payment” within the meaning of
Section 741(8) of the Bankruptcy Code.

 

 

     Section 8.05. No Collateral. The parties hereto acknowledge that the Transaction is not
secured by any collateral that would otherwise secure the obligations of Buyer hereunder.

     Section 8.06. Agreements to Deliver Documents. (a) Seller and Buyer agree to deliver the
following documents, as applicable:

     (i)     Buyer will deliver to Seller, upon execution of this Agreement,

     (A)     evidence reasonably satisfactory to the other party as to the names,
true signatures and authority of the officers or officials signing this
Agreement on its behalf,

     (B)     certified resolutions evidencing necessary corporate authority and
approvals with respect to the execution, delivery and performance by Buyer of
this Agreement,

     (C)     a certified copy of each of the current Certificate of Incorporation
and By-laws of Buyer,

     (D)     an opinion of nationally recognized counsel acceptable to Seller to the
effect set forth in Annex B hereto, and

     (E)     an opinion of the General Counsel for Buyer to the effect set forth in
Annex C hereto.

     (ii)     Seller will deliver to Buyer, upon execution of this Agreement, a duly executed
copy of the Guarantee.

     Section 8.07. Assignment. The rights and duties under this Agreement may not be assigned or
transferred by any party hereto without the prior written consent of the other parties hereto, such
consent not to be unreasonably withheld; provided that (i) Seller may assign or transfer any of its
rights or duties hereunder to any of its affiliates without the prior written consent of Buyer and
(ii) the Agent may assign or transfer any of its rights or duties hereunder without the prior
written consent of the other parties hereto to any affiliate of Credit Suisse First Boston, so long
as such affiliate is a broker-dealer registered with the SEC.

     Section 8.08. Non-Confidentiality. The parties hereby agree that (i) effective from the
date of commencement of discussions concerning the Transaction, Buyer and each of its employees,
representatives, or other agents may disclose to any and all persons, without limitation of any
kind, the tax treatment and tax structure of the Transaction and all materials of any kind,
including opinions or other tax analyses, provided by Seller and its affiliates to Buyer relating
to such tax treatment and tax structure; provided that the foregoing does not constitute an
authorization to disclose the identity of Seller or its affiliates, agents or advisers, or, except
to the extent relating to such tax structure or tax treatment, any specific pricing terms or
commercial or financial information, and (ii) Seller does not assert any claim of proprietary
ownership in respect of any description contained herein or therein relating to the use of any
entities, plans or arrangements to give rise to a particular United States federal income tax
treatment for Buyer.

     Section 8.09. Indemnification. Buyer agrees to indemnify and hold harmless Seller, its
affiliates, their respective directors, officers, employees, agents, advisors, brokers and
representatives and each person who controls Seller or its affiliates within the meaning of either
the Securities Act or the Exchange Act against, and Buyer agrees that no indemnified party shall
have any liability to Buyer or any of its affiliates, officers, directors, or employees for, any
losses, claims, damages, liabilities (whether direct or indirect, in contract, tort or otherwise)
or expenses, joint or several, to which any indemnified party may become subject under the
Securities Act, the Exchange Act or other federal or state statutory law or regulation, at common
law or otherwise, insofar as such losses, claims, damages, liabilities or expenses (or actions,
claims, investigations

 

 

or proceedings in respect thereof, whether commenced or threatened) (i) arise out of or relate
to (A) actions or failures to act by Buyer or (B) actions or failures to act by an indemnified
party with the consent of, upon the direction of, or with the knowledge of Buyer or (ii) otherwise
arise out of or relate to the Transaction or any related transactions, provided that this clause
(ii) shall not apply to the extent, but only to the extent, that any losses, claims, damages,
liabilities or expenses of an indemnified party have resulted primarily from the gross negligence
or willful misconduct of such indemnified party in which case Seller shall indemnify Buyer for any
losses, claims, damages, liabilities (whether direct or indirect, in contract, tort or otherwise)
or expenses which Buyer may suffer as a result of such indemnified party’s gross negligence or
willful misconduct. Buyer agrees to reimburse promptly each such indemnified party for any legal
or other expenses reasonably incurred by them in connection with investigating or defending any
such loss, claim, damages, liability, expense or action. This indemnity agreement will be in
addition to any liability which Buyer may otherwise have.

     Section 8.10. Legal Proceedings. Buyer shall not, without the prior written consent of
Seller, effect any settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been sought hereunder by
such indemnified party, unless such settlement includes an unconditional release of such
indemnified party from all liability arising from such proceeding.

     Section 8.11. Contribution. If the indemnification provided for above is unavailable to an
indemnified party in respect of any losses, claims, damages, liabilities or expenses referred to
herein, then each applicable indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as a result of such
losses, claims, damages, liabilities or expenses, in such proportion as is appropriate to reflect
not only the relative fault of Buyer on the one hand and of Seller on the other in connection with
the statements or omissions which resulted in such losses, claims, damages, expenses or
liabilities, but also any other relevant equitable considerations. The amount paid or payable by a
party as a result of the losses, claims, damages, liabilities and expenses referred to above shall
be deemed to include any legal or other fees or expenses reasonably incurred by such party in
connection with investigating or defending any action or claim. The parties agree that it would
not be just and equitable if contribution pursuant to this paragraph were determined by a method of
allocation that does not take account of the equitable considerations referred to in this
paragraph. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f)
of the Securities Act) shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.

     Section 8.12. Notices.

     Notices to Seller shall be directed to it care of:

Address for notices or communications to Seller (other than by facsimile) (for
all purposes):

	 	 	 	 	 
	 

	 	Address:
	 	Credit Suisse First Boston Capital LLC
	 

	 	 	 	c/o Credit Suisse First Boston LLC
	 

	 	 	 	11 Madison Avenue
	 

	 	 	 	New York, NY 10010
	 

	 	 	 	Attn:     Senior Legal Officer
	 

	 	 	 	Tel: (212) 538-4488
	 

	 	 	 	Fax: (212) 325-4585
	 
	 	 	 	 
	 

	 	With a copy to:
	 	Credit Suisse First Boston LLC
	 

	 	 	 	1 Madison Avenue, 3rd Floor
	 

	 	 	 	New York, New York 10010
	 
	 	 	 	 
	 

	 	 	 	For payments and deliveries:
	 

	 	 	 	Attn:     Ricardo Harewood

 

 

	 	 	 	 	 
	 

	 	 	 	Tel: (212) 325-8678
	 

	 	 	 	Fax: (212) 325-8175
	 
	 	 	 	 
	 

	 	 	 	For all other communications:
	 

	 	 	 	Attn:     Carlos Moscoso / John Ryan
	 

	 	 	 	Tel.: (212) 538-1872 / (212) 325-8681
	 

	 	 	 	Fax: (212) 538-8898

     Notices to Buyer shall be directed to Buyer at:

211 Carnegie Center

Princeton, New Jersey

Attn:     General Counsel and Chief Financial Officer

Tel:       (609) 524-4500

     Section 8.13. Governing Law; Submission to Jurisdiction; Severability; Waiver of Jury Trial;
Service of Process. (a) This Agreement shall be governed by and construed in accordance with the
laws of the State of New York without reference to choice of law doctrine and each party hereto
submits to the jurisdiction of the Courts of the State of New York and the United States District
Court located in the Borough of Manhattan in New York City.

     (b)     To the extent permitted by law, the unenforceability or invalidity of any provision or
provisions of this Agreement shall not render any other provision or provisions herein contained
unenforceable or invalid.

     (c)    Seller and Buyer hereby irrevocably and unconditionally waive any and all right to trial
by jury in any legal proceeding arising out of or related to this Agreement or the transactions
contemplated hereby. Each party (i) certifies that no representative, agent or attorney of the
other party has represented, expressly or otherwise, that such other party would not, in the event
of such a suit, action or proceeding, seek to enforce the foregoing waiver and (ii) acknowledges
that it and the other party have been induced to enter into this Agreement by, among other things,
the mutual waivers and certifications in this Section.

     (d)     The parties irrevocably consent to service of process given in the manner provided for
notices in Section 8.12. Nothing in this Agreement will affect the right of either party to serve
process in any other manner permitted by law.

     Section 8.14. Entire Agreement. This constitutes the entire agreement and understanding
among the parties with respect to the subject matter hereof and supersedes all oral communications
and prior writings with respect thereto.

     Section 8.15. Amendments, Waivers. Any provision of this Agreement may be amended or waived
if, and only if, such amendment or waiver is in writing and signed, in the case of an amendment, by
Buyer and Seller or, in the case of a waiver, by the party against whom the waiver is to be
effective. No failure or delay by either party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any
rights or remedies provided by law.

     Section 8.16. No Third Party Rights, Successors and Assigns. This Agreement is not intended
and shall not be construed to create any rights in any person other than Seller, Buyer and their
respective successors and assigns and no other person shall assert any rights as third party
beneficiary hereunder. Whenever any of the parties hereto is referred to, such reference shall be
deemed to include the successors and assigns of such party. All the covenants and agreements
herein contained by or on behalf of Seller and Buyer shall bind, and inure to the benefit of, their
respective successors and assigns whether so expressed or not, and shall be enforceable by and

 

 

inure to the benefit of Buyer and its successors and assigns. The rights and duties under
this Agreement may not be assigned or transferred by any party hereto without the prior written
consent of the other parties hereto, such consent not to be unreasonably withheld; provided that
(i) Buyer may assign or transfer any of its rights or duties hereunder without the prior written
consent of Seller and (ii) the Agent may assign or transfer any of its rights or duties hereunder
without the prior written consent of the other parties hereto to any affiliate of Credit Suisse
First Boston, so long as such affiliate is a broker-dealer registered with the Securities and
Exchange Commission.

     Section 8.17. Calculation Agent. The determinations and calculations of the Calculation
Agent shall be made in good faith and in a commercially reasonable manner and shall be binding in
the absence of manifest error. The Calculation Agent will have no responsibility for good faith
errors or omissions in any determination or calculation under this Agreement. The parties
acknowledge that the foregoing does not preclude the parties from disputing that any determination
or calculation of the Calculation Agent was made in good faith or in a commercially reasonable
manner.

     Section 8.18. Limitation of Setoff. For purposes of the Transaction and for the avoidance
of doubt, Seller waives any right of set-off, recoupment or close-out netting that it may be
entitled to under any agreement relating to the Transaction or any applicable law.

     Section 8.19. Non-Reliance; Agreements and Acknowledgments Regarding Hedging Activities;
Additional Acknowledgments. Each party hereto makes to the other party hereto the representations,
agreements and acknowledgements contained in Sections 13.1, 13.2 and 13.4 of the 2002 ISDA Equity
Derivatives Definitions, as published by the International Swaps and Derivatives Association, Inc.,
and each reference therein to “the related Confirmation” shall be deemed to be a reference to this
Agreement and each reference therein to “a Transaction”, “such Transaction” and “any Transaction”
shall be deemed to be a reference to the Transaction.

     Section 8.20. Matters Related to Credit Suisse First Boston LLC and Credit Suisse First
Boston Capital LLC. (a) Credit Suisse First Boston LLC shall act as “agent” for Buyer and Seller
in connection with the Transaction.

     (b)     Agent will furnish to Buyer upon written request a statement as to the source and amount
of any remuneration received or to be received by Agent in connection herewith.

     (c)     Agent has no obligation hereunder, by guaranty, endorsement or otherwise, with respect to
performance of Seller’s obligations hereunder.

     (d)     Credit Suisse First Boston Capital LLC is an “OTC derivatives dealer” as such term is
defined in the Exchange Act and is an affiliate of Agent.

     (e)     Credit Suisse First Boston Capital LLC is not a member of the Securities Investor
Protection Corporation.

     Section 8.21. Counterparts. This Agreement may be executed in any number of counterparts,
and all such counterparts taken together shall be deemed to constitute one and the same agreement.

 

 

     IN WITNESS WHEREOF, the parties have signed this Agreement as of the date and year first above
written.

	 	 	 	 	 
	 	BUYER:

NRG ENERGY, INC.

 	 
	 	By:  	/s/ ROBERT C. FLEXON
 	 
	 	 	Name:  	Robert C. Flexon 	 
	 	 	Title:  	Chief Financial Officer 	 
	 
	 	SELLER:

CREDIT SUISSE FIRST BOSTON CAPITAL LLC

 	 
	 	By:  	/s/ CHRISTY GRANT
 	 
	 	 	Name:  	Christy Grant 	 
	 	 	Title:  	Assistant Vice President Operations 	 
	 
	 	AGENT:

CREDIT SUISSE FIRST BOSTON LLC

 	 
	 	By:  	/s/ JOHN RYAN
 	 
	 	 	Name:  	John Ryan 	 
	 	 	Title:  	Assistant Vice President Operations 	 

 

 

ANNEX A

Form of Notice

A-1

 

Annex B

Form of Opinion of Kirkland & Ellis LLPEX-10.1

 

EXHIBIT 10.1

POLO RALPH LAUREN CORPORATION

EMPLOYMENT AGREEMENT

     AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the “Agreement”), is made effective as of the
3rd day of April, 2005 (the “Effective Date”), by and between POLO RALPH LAUREN
CORPORATION, a Delaware corporation (the “Corporation”), and Mitchell Kosh (the “Executive”).

     WHEREAS, the Executive has been employed with the Corporation pursuant to an Employment
Agreement dated September 8, 2003 (the “2003 Employment Agreement”); and

     WHEREAS, the Corporation and Executive wish to amend and restate such 2003 Employment
Agreement effective as of the date hereof;

     NOW THEREFORE, in consideration of the mutual covenants and premises contained herein, the
parties hereby agree as follows:

ARTICLE I

EMPLOYMENT

     1.1 Employment Term. The Corporation hereby agrees to employ the Executive, and the
Executive hereby agrees to serve the Corporation, on the terms and conditions set forth herein.
The employment of the Executive by the Corporation shall be effective as of the date hereof and
continue until the close of business on the third anniversary of the Effective Date of this
Agreement (the “Term”), unless terminated earlier in accordance with Article II hereof.

     1.2 Position and Duties. During the Term the Executive shall faithfully, and in
conformity with the directions of the Board of Directors of the Corporation (the “Board”) or the
management of the Corporation (“Management”), perform the duties of his employment, and shall
devote to the performance of such duties his full time and attention. During the Term the
Executive shall serve in such position as the Board or Management may from time to time direct.
During the Term, the Executive may engage in outside activities provided those activities do not
conflict with the duties and responsibilities enumerated hereunder, and provided further that the
Executive gives written notice to the Board of any outside business activity that may require
significant expenditure of the Executive’s time in which the Executive plans to become involved,
whether or not such activity is pursued for profit. The Executive shall be excused from performing
any services hereunder during periods of temporary incapacity and during vacations in accordance
with the Corporation’s disability and vacation policies.

     1.3 Place of Performance. The Executive shall be employed at the principal offices of
the Corporation located in New York, New York, except for required travel on the Corporation’s
business. 

 

 

     1.4 Compensation and Related Matters.

          (a) Base Compensation. In consideration of his services during the Term, the
Corporation shall pay the Executive cash compensation at an annual rate not less than $600,000
(“Base Compensation”) upon the Effective Date. Executive’s Base Compensation shall be subject to
such increases as may be approved by the Board or Management. The Base Compensation shall be
payable as current salary, in installments not less frequently than monthly, and at the same rate
for any fraction of a month unexpired at the end of the Term.

          (b) Bonus. During the Term, the Executive shall have the opportunity to earn an
annual bonus in accordance with any annual bonus program the Corporation maintains that would be
applicable to the Executive as specified in Executive’s Terms of Employment Sheet dated April 14,
2005 (“Term Sheet”).

          (c) Stock Awards. During the Term, the Executive shall be eligible to participate in
the Polo Ralph Lauren Long-Term Stock Incentive Plan (the “Incentive Plan”). Stock awards are
normally granted annually in June of each year. All grants of stock options and Restricted
Performance Share Units (“RPSU”) are governed by the terms of the Incentive Plan and subject to
approval by the Compensation Committee of the Board of Directors.

          (d) Car Allowance. During the Term, the Corporation shall pay Executive a car
allowance of $1,500 per month.

          (e) Expenses. During the Term, the Executive shall be entitled to receive prompt
reimbursement for all reasonable expenses incurred by the Executive in performing services
hereunder, including all reasonable expenses of travel and living while away from home,
provided that such expenses are incurred and accounted for in accordance with the policies
and procedures established by the Corporation.

          (f) Vacations. During the Term, the Executive shall be entitled to the number of
vacation days in each calendar year, and to compensation in respect of earned but unused vacation
days, determined in accordance with the Corporation’s vacation program. The Executive shall also
be entitled to all paid holidays given by the Corporation to its employees.

          (g) Other Benefits. The Executive shall be entitled to participate in all of the
Corporation’s employee benefit plans and programs in effect during the Term as would by their terms
be applicable to the Executive, including, without limitation, any pension and retirement plan,
supplemental pension and retirement plan, deferred compensation plan, incentive plan, stock option
plan, life insurance plan, medical insurance plan, dental care plan, accidental death and
disability plan, and vacation, sick leave or personal leave program. After the Executive becomes
employed, the Corporation shall not make any changes in such plans or programs that would adversely
affect the Executive’s benefits thereunder, unless such change occurs pursuant to a program
applicable to other similarly situated employees of the Corporation and does not result in a
proportionately greater reduction in the rights or benefits of the Executive as compared with other
similarly situated employees of the Corporation. Except as otherwise specifically provided herein, nothing paid to the Executive under any plan or
program

2

 

presently in effect or made available in the future shall be in lieu of the Base
Compensation or any bonus payable under Sections 1.4(a) and 1.4(b) hereof.

ARTICLE II

TERMINATION OF EMPLOYMENT

     2.1 Termination of Employment. The Executive’s employment may terminate prior to the
expiration of the Term under the following circumstances:

          (a) Without Cause. The Executive’s employment shall terminate upon the Corporation’s
notifying the Executive that his services will no longer be required.

          (b) Death. The Executive’s employment shall terminate upon the Executive’s death.

          (c) Disability. If, as a result of the Executive’s incapacity due to physical or
mental illness, the Executive shall have been absent and unable to perform the duties hereunder on
a full-time basis for an entire period of six consecutive months, the Executive’s employment may be
terminated by the Corporation following such six-month period.

          (d) Cause. The Corporation may terminate the Executive’s employment for Cause. For
purposes hereof, “Cause” shall mean:

               (i) deliberate or intentional failure by the Executive to substantially perform the material
duties of the Executive hereunder (other than due to Disability);

               (ii) an intentional act of fraud, embezzlement, theft or any other material violation of law;

               (iii) intentional wrongful damage to material assets of the Corporation;

               (iv) intentional wrongful disclosure of material confidential information of the Corporation;

               (v) intentional wrongful engagement in any competitive activity which would constitute a
breach of this Agreement and/or of the Executive’s duty of loyalty; or

               (vi) intentional breach of any material employment policy of the Corporation.

No act, or failure to act, on the part of the Executive shall be deemed “intentional” if it was due
primarily to an error in judgment or negligence, but shall be deemed “intentional” only if done, or
omitted to be done, by the Executive not in good faith and without reasonable belief that his
action or omission was in, or not opposed to, the best interest of the Corporation. Failure to meet

3

 

performance standards or objectives of the Corporation shall not constitute Cause for purposes
hereof.

          (e) Voluntary Termination. The Executive may voluntarily terminate the Executive’s employment
with the Corporation at any time, with or without Good Reason. For purposes of this Agreement,
“Good Reason” shall mean (A) a material diminution in or adverse alteration to Executive’s title,
position or duties, including no longer reporting to Ralph Lauren, Chief Executive Officer, or
Roger Farah, Chief Operating Officer, (B) the relocation of the Executive’s principal office
outside the area which comprises a fifty (50) mile radius from New York City, or (C) a failure of
the Corporation to comply with any material provision of this Agreement provided that the events
described in clauses (A), (B), and (C) above shall not constitute Good Reason unless and until such
diminution, change, reduction or failure (as applicable) has not been cured within thirty (30) days
after notice of such noncompliance has been given by the Executive to the Corporation.

     2.2 Date of Termination. The date of termination shall be:

          (a) if the Executive’s employment is terminated by the Executive’s death, the date of the
Executive’s death;

          (b) if the Executive’s employment is terminated by reason of Executive’s Disability or by the
Corporation pursuant to Sections 2.1(a) or 2.1(d), the date specified by the Corporation; and

          (c) if the Executive’s employment is terminated by the Executive, the date on which the
Executive notifies the Corporation of his termination.

     2.3 Effect of Termination of Employment.

          (a) If the Executive’s employment is terminated by the Corporation, pursuant to Section
2.1(a), or if the Executive resigns for Good Reason pursuant to Section 2.1(e), the Executive shall
only be entitled to the following:

               (i) Severance. Subject to Section 4.1(a) hereof, the Corporation shall: (a) continue
to pay the Executive, in accordance with the Corporation’s normal payroll practice, his Base
Compensation, as in effect immediately prior to such termination of employment, for the longer of
the balance of the Term or the one-year period commencing on the date of such termination
(whichever period is applicable shall be referred to herein as the “Severance Period”); and (b) pay
to the Executive, on the last business day of the Severance Period, an amount equal to the bonus
paid to the Executive for the calendar year prior to the year in which his employment is
terminated. Notwithstanding the foregoing, in order to receive any severance benefits under this
Section 2.3(a)(i), the Executive must sign and not timely revoke a release and waiver of claims
against the Corporation, its successors, affiliates, and assigns, in a form acceptable to the
Corporation.

               (ii) Stock Awards. The Executive’s rights with respect to any stock awards provided
to the Executive by the Corporation shall be governed by the provisions

4

 

of the Corporation’s Incentive Plan and the respective award agreements, if any, under which
such stock options were granted, except as provided in Section 4.1(a).

               (iii) Welfare Plan Coverages. The Executive shall continue to participate during the
Severance Period in any group medical, dental or life insurance plan he participated in prior to
the date of his termination, under substantially similar terms and conditions as an active
employee; provided that participation in such group medical, dental and life insurance plan
shall correspondingly cease at such time as the Executive (a) becomes eligible for a future
employer’s medical, dental and/or life insurance coverage (or would become eligible if the
Executive did not waive coverage) or (b) violates any of the provisions of Article III as
determined by the Corporation. Notwithstanding the foregoing, the Executive may not continue to
participate in such plans on a pre-tax or tax-favored basis.

               (iv) Retirement Plans. Without limiting the generality of the foregoing, it is
specifically provided that the Executive shall not accrue additional benefits under any pension
plan of the Corporation (whether or not qualified under Section 401(a) of the Internal Revenue Code
of 1986, as amended) during the Severance Period.

          (b) If the Executive’s employment is terminated by reason of the Executive’s death or
Disability, pursuant to Sections 2.1(b) and 2.1(c), the Executive (or the Executive’s designee or
estate) shall only be entitled to whatever welfare plans benefits are available to the Executive
pursuant to the welfare plans the Executive participated in prior to such termination, and whatever
stock awards may have been provided to the Executive by the Corporation the terms of which shall be
governed by the provisions of the Corporation’s Incentive Plan and the respective award agreements,
if any, under which such stock awards were provided.

          (c) If the Executive’s employment is terminated by either the Corporation for Cause or by the
Executive for other than Good Reason pursuant to Section 2.1(e) hereof, the Executive shall receive
only that portion of the Executive’s then current Base Compensation payable through the Executive’s
termination date. The Executive’s rights with respect to any stock awards provided to the
Executive by the Corporation shall be governed by the provisions of the Corporation’s Incentive
Plan and the respective award agreements, if any, under which such stock awards were provided. The
Corporation shall have no further obligations to the Executive as a result of the termination of
the Executive’s employment.

ARTICLE III

COVENANTS OF THE EXECUTIVE 

     3.1 Non-Compete.

          (a) The Corporation and the Executive acknowledge that: (i) the Corporation has a special
interest in and derives significant benefit from the unique skills and experience of the Executive;
(ii) the Executive will use and have access to proprietary and valuable Confidential Information
(as defined in Section 3.2 hereof) during the course of the Executive’s employment; and (iii) the
agreements and covenants contained herein are essential to protect the business and goodwill of the
Corporation or any of its subsidiaries, affiliates or

5

 

licensees. Accordingly, except as hereinafter noted, the Executive covenants and agrees that
during the Term, and for the remainder of such Term following the termination of Executive’s
employment, the Executive shall not provide any labor, work, services or assistance (whether as an
officer, director, employee, partner, agent, owner, independent contractor, stockholder or
otherwise) to a “Competing Business.” For purposes hereof, “Competing Business” 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 respects with the Corporation or any of its subsidiaries, affiliates or licensees, and
shall include, without limitation, those brands and companies that the Corporation and the
Executive have jointly designated in writing on the date hereof, which is incorporated herein by
reference and which is attached as Schedule A, as being in competition with the Corporation as of
the date hereof. Thus, Executive specifically acknowledges that Executive understands that, except
as provided in Section 3.1(b) he may not become employed by any Competing Business in any capacity
during the Term.

          (b) The non-compete provisions of this Section shall no longer be applicable to Executive if
he has been notified pursuant to Section 2.1(a) hereof that his services will no longer be required
during the Term or if the Executive has terminated his employment for Good Reason pursuant to
Section 2.1(e).

          (c) It is acknowledged by the Executive that the Corporation has determined to relieve the
Executive from any obligation of non-competition for periods after the Term, and/or if the
Corporation terminates the Executive’s employment under Section 2.1(a) or if the Executive has
terminated his employment for Good Reason pursuant to Section 2.1(e). In consideration of that,
and in consideration of all of the compensation provisions in this Agreement (including the
potential for the award of stock options that may be made to the Executive), Executive agrees to
the provisions of Section 3.1 and also agrees that the non-competition obligations imposed herein,
are fair and reasonable under all the circumstances.

     3.2 Confidential Information.

          (a) The Corporation owns and has developed and compiled, and will own, develop and compile,
certain proprietary techniques and confidential information as described below which have great
value to its business (referred to in this Agreement, collectively, as “Confidential Information”).
Confidential Information includes not only information disclosed by the Corporation and/or its
affiliates and licensees to Executive, but also information developed or learned by Executive
during the course of, or as a result of, employment hereunder, which information Executive
acknowledges is and shall be the sole and exclusive property of the Corporation. Confidential
Information includes all proprietary information that has or could have commercial value or other
utility in the business in which the Corporation is engaged or contemplates engaging, and all
proprietary information the unauthorized disclosure of which could be detrimental to the interests
of the Corporation. Whether or not such information is specifically labeled as Confidential
Information by the Corporation is not determinative. By way of example and without limitation,
Confidential Information includes any and all information developed, obtained or owned by the
Corporation and/or its affiliates and licensees concerning trade secrets, techniques, know-how
(including designs, plans, procedures, processes and research records), software, computer
programs, innovations, discoveries, improvements,

6

 

research, development, test results, reports, specifications, data, formats, marketing data
and plans, business plans, strategies, forecasts, unpublished financial information, orders,
agreements and other forms of documents, price and cost information, merchandising opportunities,
expansion plans, designs, store plans, budgets, projections, customer, supplier and subcontractor
identities, characteristics and agreements, and salary, staffing and employment information.
Notwithstanding the foregoing, Confidential Information shall not in any event include (A)
Executive’s personal knowledge and know-how relating to merchandising and business techniques which
Executive has developed over his career in the apparel business and of which Executive was aware
prior to his employment, or (B) information which (i) was generally known or generally available to
the public prior to its disclosure to Executive; (ii) becomes generally known or generally
available to the public subsequent to disclosure to Executive through no wrongful act of any person
or (iii) which Executive is required to disclose by applicable law or regulation (provided that
Executive provides the Corporation with prior notice of the contemplated disclosure and reasonably
cooperates with the Corporation at the Corporation’s expense in seeking a protective order or other
appropriate protection of such information).

          (b) Executive acknowledges and agrees that in the performance of his duties hereunder the
Corporation will from time to time disclose to Executive and entrust Executive with Confidential
Information. Executive also acknowledges and agrees that the unauthorized disclosure of
Confidential Information, among other things, may be prejudicial to the Corporation’s interests,
and an improper disclosure of trade secrets. Executive agrees that he shall not, directly or
indirectly, use, make available, sell, disclose or otherwise communicate to any corporation,
partnership, individual or other third party, other than in the course of his assigned duties and
for the benefit of the Corporation, any Confidential Information, either during his term of
employment or thereafter.

          (c) The Executive agrees that upon leaving the Corporation’s employ, the Executive shall not
take with the Executive any software, computer programs, disks, tapes, research, development,
strategies, designs, reports, study, memoranda, books, papers, plans, information, letters,
e-mails, or other documents or data reflecting any Confidential Information of the Corporation, its
subsidiaries, affiliates or licensees.

          (d) During Executive’s term of employment, Executive will disclose to the Corporation all
designs, inventions and business strategies or plans developed for the Corporation, including
without limitation any process, operation, product or improvement. Executive agrees that all of
the foregoing are and will be the sole and exclusive property of the Corporation and that Executive
will at the Corporation’s request and cost do whatever is necessary to secure the rights thereto,
by patent, copyright or otherwise, to the Corporation

     3.3 Non-Solicitation of Employees. The Executive covenants and agrees that during the
Term, and for the remainder of such Term following the termination of Executive’s employment for
any reason whatsoever hereunder, the Executive shall not directly or indirectly solicit or
influence any other employee of the Corporation, or any of its subsidiaries, affiliates or
licensees, to terminate such employee’s employment with the Corporation, or any of its
subsidiaries, affiliates or licensees, as the case may be, or to become employed by a Competing
Business.

7

 

     3.4 Nondisparagement. The Executive agrees that during the Term and thereafter whether
or not he is receiving any amounts pursuant to Sections 2.3 and 4.1, the Executive shall not make
any statements or comments that reasonably could be considered to shed an adverse light on the
business or reputation of the Corporation or any of its subsidiaries, affiliates or licensees, the
Board or any officer of the Corporation or any of its subsidiaries, affiliates or licensees;
provided, however, the foregoing limitation shall not apply to (i) compliance with legal process or
subpoena, or (ii) statements in response to inquiry from a court or regulatory body.

     3.5 Remedies.

          (a) The Executive acknowledges and agrees that in the event the Corporation reasonably
determines that the Executive has breached any provision of this Article III, that such conduct
will constitute a failure of the consideration for which stock options had been awarded, and
notwithstanding the terms of any stock option award agreement, plan document, or other provision of
this Agreement to the contrary, the Corporation may notify the Executive that he may not exercise
any unexercised stock options and the Executive shall immediately forfeit the right to exercise any
stock option of the Corporation that remains unexercised at the time of such notice and Executive
waives any right to assert that any such conduct by the Corporation violates any federal or state
statute, case law or policy.

          (b) If the Corporation reasonably determines that the Executive has breached any provision
contained in this Article III, the Corporation shall have no further obligation to make any payment
or provide any benefit whatsoever to the Executive pursuant to this Agreement, and may also recover
from the Executive all such damages as it may be entitled to at law or in equity. In addition, the
Executive acknowledges that any such breach is likely to result in immediate and irreparable harm
to the Corporation for which money damages are likely to be inadequate. Accordingly, the Executive
consents to injunctive and other appropriate equitable relief upon the institution of proceedings
therefor by the Corporation in order to protect the Corporation’s rights hereunder. Such relief
may include, without limitation, an injunction to prevent: (i) the breach or continuation of
Executive’s breach; (ii) the Executive from disclosing any trade secrets or Confidential
Information (as defined in Section 3.2); (iii) any Competing Business from receiving from the
Executive or using any such trade secrets or Confidential Information; and/or (iv) any such
Competing Business from retaining or seeking to retain any employees of the Corporation.

     3.6 The provisions of this Article III shall survive the termination of this Agreement and
Executive’s Term of employment.

ARTICLE IV

CHANGE IN CONTROL

     4.1 Change in Control.

          (a) Effect of a Change in Control. Notwithstanding anything contained herein to the
contrary, if the Executive’s employment is terminated within 12 months following a

8

 

Change in Control (as defined in Section 4.1(b) hereof) during the Term by the Corporation for
any reason other than Cause, then:

               (i) Severance. The Corporation shall pay to the Executive, in lieu of any amounts
otherwise due him under Section 2.3(a) hereof, within 15 days of the Executive’s termination of
employment, a lump sum amount equal to two times the sum of: (A) the Executive’s Base Compensation,
as in effect immediately prior to such termination of employment; and (B) the bonus actually paid
to the Executive during the year prior to the Executive’s termination.

               (ii) Stock Awards. The Executive shall immediately become vested in any unvested
stock options granted to the Executive by the Corporation prior to the Change in Control and
Executive will have six (6) months from the date of termination under this circumstance to exercise
all vested options. Any RPSU awards which are unvested shall be deemed vested immediately prior to
such Change in Control.

          (b) Definition. For purposes hereof, a “Change in 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 Corporation to
any “person” or “group” (as such terms are used in Sections 13(d)(3) and 14(d)(2) of the Securities
Exchange Act of 1934 (“Act”)) other than Permitted Holders; (ii) any person or group, other than
Permitted Holders, is or becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under
the 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 percent of the total voting power of
the voting stock of the Corporation, including by way of merger, consolidation or otherwise; (iii)
during any period of two consecutive years, Present and/or New Directors cease for any reason to
constitute a majority of the Board; or (iv) the Permitted Holders’ beneficial ownership of the
total voting power of the voting stock of the Corporation falls below 30 percent and either Ralph
Lauren is not nominated for a position on the Board of Directors, or he stands for election to the
Board of Directors and is not elected. For purposes of this Section 4.1(b), the following terms
have the meanings indicated: “Permitted Holders” shall mean, as of the date of determination: (A)
any and all of Ralph Lauren, his spouse, his siblings and their spouses, and descendants of them
(whether natural or adopted) (collectively, the “Lauren Group”); and (B) 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. “Present Directors” shall mean individuals who at the beginning of
any such two consecutive year period were members of the Board. “New Directors” shall mean any
directors whose election by the Board or whose nomination for election by the shareholders of the
Corporation was approved by a vote of a majority of the directors of the Corporation who, at the
time of such vote, were either Present Directors or New Directors.

          (c) Excise Tax Gross-Up. If the Executive becomes entitled to one or more payments
(with a “payment” including the vesting of restricted stock, a stock option, or other non-cash
benefit or property), whether pursuant to the terms of this Agreement or any other plan or
agreement with the Corporation or any affiliated company (collectively, “Change of Control
Payments”), which are or become subject to the tax (“Excise Tax”) imposed by Section

9

 

4999 of the Internal Revenue Code of 1986, as amended (the “Code”), the Corporation shall pay
to the Executive at the time specified below such amount (the “Gross-up Payment”) as may be
necessary to place the Executive in the same after-tax position as if no portion of the Change of
Control Payments and any amounts paid to the Executive pursuant to this paragraph 4(c) had been
subject to the Excise Tax. The Gross-up Payment shall include, without limitation, reimbursement
for any penalties and interest that may accrue in respect of such Excise Tax. For purposes of
determining the amount of the Gross-up Payment, the Executive shall be deemed: (A) to pay federal
income taxes at the highest marginal rate of federal income taxation for the year in which the
Gross-up Payment is to be made; and (B) to pay any applicable state and local income taxes at the
highest marginal rate of taxation for the calendar year in which the Gross-up Payment is to be
made, net of the maximum reduction in federal income taxes which could be obtained from deduction
of such state and local taxes if paid in such year. If the Excise Tax is subsequently determined
to be less than the amount taken into account hereunder at the time the Gross-up Payment is made,
the Executive shall repay to the Corporation at the time that the amount of such reduction in
Excise Tax is finally determined (but, if previously paid to the taxing authorities, not prior to
the time the amount of such reduction is refunded to the Executive or otherwise realized as a
benefit by the Executive) the portion of the Gross-up Payment that would not have been paid if such
Excise Tax had been used in initially calculating the Gross-up Payment, plus interest on the amount
of such repayment at the rate provided in Section 1274(b)(2)(B) of the Code. In the event that the
Excise Tax is determined to exceed the amount taken into account hereunder at the time the Gross-up
Payment is made, the Corporation shall make an additional Gross-up Payment in respect of such
excess (plus any interest and penalties payable with respect to such excess) at the time that the
amount of such excess is finally determined.

     The Gross-up Payment provided for above shall be paid on the 30th day (or such
earlier date as the Excise Tax becomes due and payable to the taxing authorities) after it has been
determined that the Change of Control Payments (or any portion thereof) are subject to the Excise
Tax; provided, however, that if the amount of such Gross-up Payment or portion
thereof cannot be finally determined on or before such day, the Corporation shall pay to the
Executive on such day an estimate, as determined by counsel or auditors selected by the Corporation
and reasonably acceptable to the Executive, of the minimum amount of such payments. The
Corporation shall pay to the Executive the remainder of such payments (together with interest at
the rate provided in Section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be
determined. In the event that the amount of the estimated payments exceeds the amount subsequently
determined to have been due, such excess shall constitute a loan by the Corporation to the
Executive, payable on the fifth day after demand by the Corporation (together with interest at the
rate provided in Section 1274(b)(2)(B) of the Code). The Corporation shall have the right to
control all proceedings with the Internal Revenue Service that may arise in connection with the
determination and assessment of any Excise Tax and, at its sole option, the Corporation may pursue
or forego any and all administrative appeals, proceedings, hearings, and conferences with any
taxing authority in respect of such Excise Tax (including any interest or penalties thereon);
provided, however, that the Corporation’s control over any such proceedings shall
be limited to issues with respect to which a Gross-up Payment would be payable hereunder, and the
Executive shall be entitled to settle or contest any other issue raised by the Internal Revenue
Service or any other taxing authority. The Executive shall cooperate with the Corporation in any
proceedings relating to the determination and assessment of any Excise Tax and shall not take any
position or

10

 

action that would materially increase the amount of any Gross-up Payment hereunder.

ARTICLE V

MISCELLANEOUS

     5.1 Notice. For the purposes of this Agreement, notices, demands and all other
communications provided for in the Agreement shall be in writing and shall be deemed to have been
duly given when delivered by hand or by facsimile or mailed by United States registered mail,
return receipt requested, postage prepaid, addressed as follows:

	 	 	 	 
	 	If to the Executive:

	 	Mitchell Kosh
	 	 

	 	14 Hemmelskamp Road
	 	 

	 	Wilton, CT 06897
	 	 
	 	 
	 	If to the Corporation:

	 	Polo Ralph Lauren Corporation
	 	 

	 	650 Madison Avenue
	 	 

	 	New York, New York 10022
	 	 

	 	Attn: Roger Farah
	 	 

	 	President & Chief Operating Officer
	 	 

	 	Fax: (212) 318-7529

or to such other address as any party may have furnished to the other in writing in accordance
herewith, except that notices of change of address shall be effective only upon receipt.

     5.2 Modification or Waiver; Entire Agreement. No provision of this Agreement may be
modified or waived except in a document signed by the Executive and the Corporation. This
Agreement, along with any documents incorporated herein by reference, including Executive’s Term
Sheet, constitute the entire agreement between the parties regarding their employment relationship
and supersede all prior agreements, promises, covenants, representations or warranties, including
the Executive’s 2003 Employment Agreement with the Corporation. To the extent that this Agreement
is in any way inconsistent with any prior or contemporaneous stock option agreements between the
parties, this Agreement shall control. No agreements or representations, oral or otherwise, with
respect to the subject matter hereof have been made by either party that are not set forth
expressly in this Agreement.

     5.3 Governing Law. The validity, interpretation, construction, performance, and
enforcement of this Agreement shall be governed by the laws of the State of New York without
reference to New York’s choice of law rules. In the event of any dispute, the Executive agrees to
submit to the jurisdiction of any court sitting in New York State.

     5.4 No Mitigation or Offset. In the event the Executive’s employment with the
Corporation terminates for any reason, the Executive shall not be obligated to seek other
employment following such termination and there shall be no offset of the payments or benefits set
forth herein.

     5.5 Withholding. All payments required to be made by the Corporation hereunder to the
Executive or the Executive’s estate or beneficiaries shall be subject to the withholding of

11

 

such amounts as the Corporation may reasonably determine it should withhold pursuant to any
applicable law.

     5.6 Attorney’s Fees. Each party shall bear its own attorney’s fees and costs incurred
in any action or dispute arising out of this Agreement and/or the employment relationship.

     5.7 No Conflict. Executive represents and warrants that he is not party to any
agreement, contract, understanding, covenant, judgment or decree or under any obligation,
contractual or otherwise, in any way restricting or adversely affecting his ability to act for the
Corporation in all of the respects contemplated hereby.

     5.8 Enforceability. Each of the covenants and agreements set forth in this Agreement
are separate and independent covenants, each of which has been separately bargained for and the
parties hereto intend that the provisions of each such covenant shall be enforced to the fullest
extent permissible. Should the whole or any part or provision of any such separate covenant be
held or declared invalid, such invalidity shall not in any way affect the validity of any other
such covenant or of any part or provision of the same covenant not also held or declared invalid.
If any covenant shall be found to be invalid but would be valid if some part thereof were deleted
or the period or area of application reduced, then such covenant shall apply with such minimum
modification as may be necessary to make it valid and effective. The failure of either party at
any time to require performance by the other party of any provision hereunder will in no way affect
the right of that party thereafter to enforce the same, nor will it affect any other party’s right
to enforce the same, or to enforce any of the other provisions in this Agreement; nor will the
waiver by either party of the breach of any provision hereof be taken or held to be a waiver of any
prior or subsequent breach of such provision or as a waiver of the provision itself.

     5.9 Miscellaneous. No right or interest to, or in, any payments shall be assignable by
the Executive; provided, however, that this provision shall not preclude the
Executive from designating in writing one or more beneficiaries to receive any amount that may be
payable after the Executive’s death and shall not preclude the legal representative of the
Executive’s estate from assigning any right hereunder to the person or persons entitled thereto.
If the Executive should die while any amounts would still be payable to the Executive hereunder,
all such amounts shall be paid in accordance with the terms of this Agreement to the Executive’s
written designee or, if there be no such designee, to the Executive’s estate. This Agreement shall
be binding upon and shall inure to the benefit of, and shall be enforceable by, the Executive, the
Executive’s heirs and legal representatives and the Corporation and its successors. The section
headings shall not be taken into account for purposes of the construction of any provision of this
Agreement.

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     IN WITNESS WHEREOF, the parties have executed this Agreement effective as of the date and year
first above written.

POLO RALPH LAUREN CORPORATION

	 	 	 
	 /s/ Roger Farah

	 	/s/ Mitchell Kosh
	 

	 	 
	By: Roger Farah

	 	Mitchell Kosh
	 
	 	 
	Title: President & Chief Operating Officer
	 	 

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