Document:

exv10w1

 

Exhibit 10.1

TRANSITION AGREEMENT

     This agreement is being entered into between Myrtle Potter (“Potter”) and Genentech,
Inc., One DNA Way, South San Francisco, CA 94080 (“Genentech”) and becomes effective seven days
after the signing of this agreement by Potter (the “Effective Date”).

     Potter has served Genentech for over five years, most recently as President, Commercial
Operations. Potter has been very instrumental in building the commercial organization and the
company. Potter and Genentech have decided it is in their mutual interest to enter into this
Transition Agreement.

     1.          Change in Status. Upon the Effective Date, Potter’s employment with and position as
President of Commercial Operations with Genentech will automatically terminate, and commencing upon
the Effective Date, Potter will become a consultant to Genentech in accordance with the terms and
conditions contained herein. Upon the Effective Date, Potter shall resign from the Genentech
Foundation and she shall no longer serve as Genentech’s representative with respect to any other
organization that she is currently serves as a representative from Genentech. Potter’s status as a
consultant to Genentech will continue until September 30, 2006 unless her consultant status
terminates prior to that date in accordance with the terms herein. During the term of her
consultant status, Potter agrees to provide up to 20 hours per month in consulting services on
matters or projects identified to her in writing by an officer of Genentech. Such matters or
projects shall be consistent with the level of input provided by a senior executive of Genentech
and consistent with Potter’s skills and professional background.

     Potter’s consultant status shall automatically terminate and all ongoing consulting status
payments and stock option vesting shall cease at any point at which (1) she initiates any
employment or relationship with any other organization or group of affiliated or related
organizations for which she receives cash and/or equity compensation of $500,000 or more on an
annualized basis or (2) she provides employment or consulting services to a Competitive Business (a
“Competitive Business” shall mean any biotechnology, pharmaceutical, or generics company that is
engaged in, or proposes to engage in, research, development or commercialization of products in the
fields of thrombolytics or cystic fibrosis, or which has programs or products in the fields of
cancer, immunology or tissue growth and repair, where the program or product involves or acts in
the same pathway as any program or product that, as of the Effective Date, is in research or
development or is being commercialized by Genentech. Potter shall have the opportunity to request
in writing that Art Levinson (or his successor as CEO) advise her as to whether any proposed
employment or consulting arrangements would cause Genentech to trigger the provisions of this
paragraph. Potter shall promptly advise Art

 

 

Levinson (or his successor as CEO) upon the occurrence of any of the conditions which give rise to
the termination of her consultant status as set forth above.

     Nothing in this Section 1 shall restrict Potter from making an investment in any Competitive
Business if such investment does not represent more than 5% of market value of the outstanding
capital stock or debt (as applicable) of such Competitive Business, provided that Potter does not
have any right or ability or does not exercise any control or influence over the policies, business
or operations of such Competitive Business other than by means of voting as a shareholder. Further,
this Section 1 shall not preclude Potter from (i) being an employee of, or consultant to, any
business unit of a Competitive Business if (A) such business unit does not qualify as a Competitive
Business in its own right and (B) Potter does not have any direct or indirect involvement in,
oversight or management of, or responsibility for, any operations of such Competitive Business that
cause it to qualify as a Competitive Business, or (ii) regardless of compensation, being a
non-employee member of the board of directors or a non-employee member of an advisory council or
engaging in self employment with respect to a business that Potter is the sole proprietor of and is
not a Competitive Business.

     Potter may terminate her consultancy at any time, by written notice to Art Levinson (or his
successor as CEO) with a copy to Genentech’s Corporate Secretary on account of a Substantial Breach
of this agreement provided that prior written notice of such Substantial Breach is provided to Art
Levinson (or his successor as CEO) with a copy to Genentech’s Corporate Secretary and that such
Substantial Breach is not cured within 30 days of receipt of such notice. In such event Potter
shall be entitled to (i) receive from Genentech an amount equal to $1,216,000, reduced by the
aggregate amount of monthly payments of $101,333 already made, less appropriate deductions for
federal and state withholding, (ii) have all then outstanding unvested options which would vest by
September 15, 2006 become vested subject to their being exercised within three months of such
vesting at which time any such unexercised options will expire or the right to receive the
equivalent value of such options in cash and (iii) have all other obligations hereunder remain in
effect for the remaining term of this agreement as though the consultancy had not ended.
“Substantial Breach” shall mean (x) a willful and deliberate failure by Genentech to provide to
Potter the payments or benefits set forth in Section 5 that are due and owing and not in dispute or
(y) a willful and deliberate breach by Genentech of the non-disparagement provisions in Section 6
of this agreement.

     Notwithstanding anything to the contrary in this agreement, if Potter initiates any employment
or relationship with any other organization or group of affiliated or related organizations after
March 31, 2006 for which she receives cash and/or equity compensation of $500,000 or more on an
annualized basis, then (i) Genentech will pay to Potter within ten days of notice from Potter of
such employment or relationship an amount equal to $1,216,000, reduced by the aggregate number of
monthly payments of $101,333 already made, less appropriate deductions for federal and state
withholding, and

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(ii) all then outstanding unvested stock options will be
immediately cancelled and forfeited.

     2.          Release Of Claims By Potter. In exchange for the promises contained in this agreement and
to the extent permitted by law, Potter hereby waives, releases and forever discharges, and agrees
that she will not in any manner institute, prosecute or pursue, any and all complaints, claims,
charges, or causes of action, whether in law or in equity, which she asserts or could assert, at
common law or under any statute, rule, regulation, order or law, whether federal, state, or local,
or on any grounds whatsoever, including but not limited to, any claims under Title VII of the 1964
Civil Rights Act, the Age Discrimination in Employment Act, the California Fair Employment and
Housing Act, Government Code §12900 et seq., the California Labor Code, the
Americans with Disabilities Act, the California Family Leave Act, and the Employment Retirement
Income Security Act of 1974 against Genentech and any of its or their current or former, owners,
shareholders, agents, employee benefit plans, representatives, servants, employees, attorneys,
successors, predecessors, and assigns (collectively referred to as “Released Parties”) with respect
to any event, matter, claim, damage or injury arising out of Potter’s employment relationship with
Genentech, and the termination of such employment relationship, and with respect to any other
claim, matter, or event arising prior to execution of this agreement by Potter.

     Notwithstanding the foregoing provisions of this Section 2, it is understood and agreed that
Potter is not hereby releasing or waiving any right or claim (i) for indemnification under and
subject to the provisions of any agreement with or policy of Genentech or its affiliates relating
to indemnification of directors and officers or under any provision of Genentech’s articles or
by-laws relating to indemnification of directors and officers; (ii) under any applicable policy of
directors’ and officers’ liability insurance; (iii) to obtain payments and benefits and exercise
any rights under this agreement; (iv) to obtain any post-employment payments and benefits and
exercise any rights provided for under any stock plan or employee benefit plan (as defined in
ERISA), including but not limited to any 401(k) plan or SERP, available to Potter as a result of
her employment with, or termination of employment from, Genentech; (v) that arises against
Genentech as a consequence of actions or events occurring after the date this release becomes
effective; or (vi) to obtain contribution as permitted by law in the event of entry of judgment
against Potter and Genentech as a result of any act or failure to act for which Potter and
Genentech are jointly liable.

     3.          Release of Claims by Genentech. In exchange for the promises contained in this agreement
and to the extent permitted by law, Genentech, on behalf of itself and the Released Parties, hereby
waives, releases, and forever discharges, and agrees that in any manner will not institute,
prosecute or pursue, any and all complaints, claims, charges or causes of action, whether in law or
in equity, which it asserts or could assert, at common law or under any statute, rule, regulation,
order or law, whether federal, state or local, or on any grounds whatsoever, against Potter with
respect to any event, matter,

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claim damage or injury arising out of Potter’s employment relationship with Genentech, and the
termination of such employment relationship, and with respect to any other claim, matter or event
arising prior to execution of this agreement by Potter.

     4.          Civil Code § 1542 Waiver. As a further consideration and inducement for this agreement,
the parties hereby waive any and all rights under Section 1542 of the California Civil Code or any
similar state, local, or federal law, statute, rule, order or regulation each may have with respect
to the other.

      Section 1542 provides:

     A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN her FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN
BY HIM MUST HAVE MATERIALLY AFFECTED her SETTLEMENT WITH THE DEBTOR.

     The parties expressly agree that this agreement shall extend and apply to all unknown,
unsuspected and unanticipated injuries and damages as well as those that are now disclosed.

     5.          Payments and Benefits. In consideration of the promises made herein, Genentech will pay
Potter the lump sum of $1,216,000 within five days of the Effective Date less any appropriate
deductions for federal and state withholding taxes. During the term of her consultancy, Genentech
will pay Potter within ten days of the beginning of each month the amount of $101,333 subject to
any appropriate deductions for federal and state withholding taxes. In addition, for any consulting
services provided at Genentech’s request where the amount of consulting time in a month exceeds,
with Genentech’s prior agreement, 20 hours for that month, Genentech will pay Potter the sum of
$500 per hour of consulting time spent prorated for portions of hours spent. All expenses which
are incurred in the course of consulting for Genentech will be submitted at cost for reimbursement
by Genentech. These expenses will be reimbursed in a manner consistent with Genentech’s policy for
expense reimbursements. Potter will provide Art Levinson (or his successor as CEO) with a copy to
Genentech’s Corporate Secretary with written notice of where payments to be made to her are to be
directed and of any subsequent changes thereto.

     Potter’s currently outstanding stock options granted to her under Genentech’s 1999 Stock Plan
during the course of her employment will continue to vest and be exercisable during her term as a
consultant in the same manner as they were during her employment. The stock options will cease to
vest when her consultancy ends either at its term as set forth in Section 1 above or upon its
earlier termination as set forth in Section 1 above and at such time she shall have three months to
exercise the then vested options in accordance with their terms at which time any unexercised
options will expire.

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     Genentech will make COBRA medical and dental insurance coverage available to Potter for her
and her current dependents and will reimburse her on a monthly basis for the costs of the premiums
she incurs to maintain such insurance coverage. Such coverage will extend through July 31, 2007
unless prior to that date she is provided medical or dental insurance coverage in connection with
another employment or consulting arrangement with another company or organization in which case
medical coverage will cease at the time such other medical coverage is provided and dental coverage
will cease at such time as other dental coverage is provided.

     In addition, Genentech will pay or provide Potter (i) all vested and/or accrued payments and
benefits pursuant to Genentech’s employee benefit plans (as defined under ERISA), including but not
limited to any 401(k) plan or SERP, as provided under the terms of such plans (except as may
otherwise be provided in this agreement), (ii) indemnification as provided under any agreement with
or policy of Genentech or its affiliates relating to indemnification of directors or officers, and
(iii) coverage under any policy of directors’ and officers’ liability for a period of six (6) years
commencing on the Effective Date to the same extent as current or former officers, employees or
directors, as applicable, are covered by insurance pursuant to the applicable insurance policy or
policies as they may exist from time to time.

     6.          Additional Support. During the term of her consulting relationship, Genentech will provide
reasonable information technology support to Potter in the same manner such support is provided to
Genentech’s Executive Committee under its Platinum support program although Potter will not have
access to Genentech’s internal website or email or other proprietary systems. Genentech will
provide security services for Potter’s residence under the direction of Genentech’s Director of
Security under its security principles operational as of the Effective Date (e.g., if an
identifiable security risk escalates, more intense security services may be provided as
appropriate).

     It is the intent of the parties that none of the payments or benefits provided hereunder shall
be subject to any tax or other penalties under Section 409A of the Internal Revenue Code of 1986,
as amended (“409A Penalties”). Accordingly, to the extent that Potter and her counsel conclude at
any time prior to September 15, 2006 that 409A Penalties are reasonably likely to apply to any such
payment or benefit, then the parties will cooperate diligently and in good faith to take action to
prevent 409A Penalties from applying or to provide a payment or benefit to Potter of equivalent
value that would not be subject to 409A Penalties; provided, however, that any such action,
amendment or change to the terms of this agreement, as a result of this Section 4, shall not
materially increase the cost to (including any financial statement expense required to be
recognized by) or liability of Genentech hereunder, or (ii) override the provisions set forth in
Section 1 of this agreement which effect a termination of the consulting period as a result of
certain actions taken by Potter during such period (and a related termination of any obligation to
provide further benefits hereunder).

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     Potter shall be responsible for all tax obligations she may incur, including interest and
penalties, that apply to any payment made or benefit conferred hereunder, and any sums owed to her
hereunder shall be reduced to satisfy all withholding or similar obligations that apply thereto.
Nothing in this agreement shall require Genentech to be responsible for or gross Potter up for any
tax obligation she may incur by virtue of this agreement.

     7.          Public Announcements. The parties agree that the announcements (internal and external) of
the change in leadership of the Commercial Organization, attached hereto as Exhibit A and Exhibit
A-1, shall be distributed on or after the Effective Date. Potter agrees that she will not make any
derogatory remarks about Genentech or any of the Released Parties at any time. Potter agrees that
if she determines to direct any future inquiries from prospective employers to Genentech, she will
direct them to members of Genentech’s Executive Committee or current officers of Genentech who were
Potter’s direct reports during the period Potter was President of Commercial Operations. Genentech
agrees that the personnel to whom such inquiries are directed as well as members of its Board of
Directors will not make any derogatory comments about Potter at any time. Potter and Genentech
further agree that in any public communications about the subject matter of this agreement neither
will say anything that is inconsistent with Exhibit A.

     8.          Confidentiality Of Agreement. The parties acknowledge that this agreement will be filed
with the Securities and Exchange Commission in accordance with the rules and regulations of that
agency and as such will become a public document.

     9.          Time to Consider and Revoke. Potter understands that she has twenty one (21) days from the
date she receives this agreement to consider its terms and, that after she signs this agreement,
she has seven (7) days to revoke it. Potter understands that this agreement shall not become
effective until this seven (7) day period has expired.

     10.          No Admission Of Liability. By entering into this agreement, neither party admits any
liability whatsoever to the other or to any other person arising out of any claims heretofore or
hereafter asserted by Potter and Genentech, and each party and all Released Parties, expressly deny
any and all such liability.

     11.          Joint Participation In Preparation Of Agreement. The parties hereto participated jointly
in the negotiation and preparation of this agreement, and each party has had the opportunity to
obtain the advice of legal counsel and to review, comment upon, and redraft this agreement.
Accordingly, it is agreed that no rule of construction shall apply against any party or in favor of
any party. This agreement shall be construed as if the parties jointly prepared this agreement,
and any uncertainty or ambiguity shall not be interpreted against any one party and in favor of the
other.

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     12.          Attorneys’ Fees And Costs. As further mutual consideration of the promises set forth
herein, Genentech agrees to reimburse Potter, upon presentation of an invoice therefor, for all
attorneys’ fees and related costs incurred by Potter in connection with the negotiation and
preparation of this agreement, or any subsequent or related agreements, up to a maximum of $50,000.
Except as provided in the foregoing sentence, the parties agree that they will not seek from the
other reimbursement for attorneys’ fees and/or costs incurred in this action or relating to any
matters addressed in this agreement.

     13.          Section Headings. Section headings in this agreement are included for convenience of
reference only and shall not be considered a part of this agreement for any other purpose.

     14.          Counterparts. This Agreement may be executed in counterparts, each of which shall be
deemed an original for all purposes, but all of which taken together shall constitute one and the
same instrument.

     15.          Scope Of Agreement. Potter hereby affirms and acknowledges that she has read the
foregoing agreement, that she has had sufficient time and opportunity to review or discuss it with
the counsel of her choice, and that she fully understands and appreciates the meaning of each of
its terms, and that it is a voluntary, full and final compromise, release and settlement of all
claims, known or unknown, with respect to the claims identified and referred to herein. The
parties to this agreement represent that this agreement may be used as evidence in any subsequent
proceeding in which any of the parties alleges a breach of this agreement or seeks to enforce its
terms, provisions or obligations.

     16.          Entire Agreement. This agreement constitutes the complete understanding between Potter
and Genentech and supersedes any and all prior agreements, promises, representations, or
inducements, no matter its or their form, concerning its subject matter.

//

//

//

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//

No promises or agreements made subsequent to the execution of this agreement by these parties shall
be binding unless reduced to writing and signed by authorized representatives of these parties.

	 	 	 	 	 
	 	 	 
	Dated: August 3, 2005 	/s/ Myrtle Potter
 	 
	 	Myrtle Potter 	 
	 	 	 
	 

	 	 	 	 	 
	Dated:  August 3, 2005 	Genentech, Inc.

 	 
	 	By:  	/s/ Arthur Levinson
 	 
	 	 	Arthur Levinson, CEO and Chairman 	 
	 	 	 	 
	 

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Exhibit A

ALL EMPLOYEE ANNOUNCEMENT

I would like to provide an update on the Commercial organization. As many of you know, Myrtle has
been out of the office for the last several months, attending to her health.

Myrtle and I have discussed that given Genentech’s rapid growth, the Commercial organization needs
full-time leadership. To that end, Myrtle is transitioning from her current role and will continue
with the company as a consultant. Effective immediately, Ian Clark is being appointed SVP,
Commercial Operations. Ian, who has been the head of the Commercial organization for the past few
months, will report to me and join the Executive Committee. I have every confidence that he will
continue to provide excellent leadership, both as head of Commercial and as an EC member.

Myrtle has been very instrumental in building the Commercial organization and the company. Under
her leadership the Commercial organization successfully launched 6 new products including Avastin,
Raptiva, Xolair, Nutropin AQ Pen, , Cathflo Activase, and TNKase. In addition, Genentech’s product
revenue stream has grown more than three-fold, resulting in record sales and earnings growth.

Myrtle has provided invaluable insight and guidance to me personally, as well as to the entire
Executive Committee, during the last five years. I would like to take this opportunity to thank
Myrtle for her dedication, inspiration and her many contributions. Please join me in thanking
Myrtle. We look forward to her continued contributions as a consultant.

Art

 

Exhibit A-1

GENENTECH ANNOUNCES ORGANIZATIONAL CHANGES

SOUTH
SAN FRANCISCO, Calif. — August 16, 2005 - Genentech, Inc. (NYSE: DNA) today announced that
Myrtle Potter, President of Commercial Operations is transitioning from her current role and will
continue with the company as a consultant. Effective immediately, Ian Clark, Senior Vice
President and General Manager of BioOncology is being appointed SVP, Commercial Operations
reporting to CEO Art Levinson. Clark will be the head of the Commercial organization and will join
Genentech’s Executive Committee.

“Myrtle has been very instrumental in building the Commercial organization and the company, said
CEO Arthur Levinson. She has provided valuable insight and guidance to me personally as well as the
entire Executive Committee during the last five years. We look forward to her continued
involvement in a consulting role”.

Potter joined Genentech in 2000 as executive vice president and chief operating officer and has
overseen the successful launch of six new products including, Avastin, Raptiva, Xolair, Nutropin
AQ Pen, Cathflo Activase, and TNKase. In addition, Genentech’s product revenue stream has grown
more than three-fold under her leadership, resulting in record sales and earnings growth. In March
2004 she was promoted to President of Commercial Operations.

Clark joined Genentech in January 2003. Prior to joining Genentech, he served as president
Novartis Canada. Before assuming his post in Canada, Clark served as chief operating officer for
Novartis United Kingdom. Prior to joining Novartis in 1999, Clark worked in positions of increasing
strategic importance in sales, marketing and business development at Ivax Pharma and
Sanofi-Synthelabo in the United Kingdom. Clark started his career at Pharmacia, holding positions
in both sales and marketing.

“Ian has provided excellent management of the BioOncology franchise over the past two years
and interim leadership of the entire Commercial organization during the past six months”, said
Levinson. “ I am confident that he will continue to contribute to the success of our commercial
organization and the company overall”.

About Genentech

Genentech is a leading biotechnology company that discovers, develops, manufactures and
commercializes biotherapeutics for significant unmet medical needs. A considerable number of the
currently approved biotechnology products originated from or are based on Genentech science.
Genentech manufactures and commercializes multiple biotechnology products directly in the United States and licenses several additional
products to other companies. The company has headquarters in South San Francisco, California and is
traded on the New York Stock Exchange under the symbol DNA. For additional information about the
company, please visit http://www.gene.com.exv10w1

 

SEPARATION AGREEMENT

     THIS SEPARATION AGREEMENT (this “Agreement”) is made and entered into by and between Arthur J.
Padovese, a resident of Minnesota (“Executive”), and River Hills Wilsons, Inc., a Minnesota
corporation (the “Company”).

BACKGROUND

     A. Executive was employed by the Company, most recently as its Vice President, Store Sales.

     B. Executive and the Company have mutually agreed to terminate their employment relationship,
on the terms and conditions set forth in this Agreement.

     C. The parties are concluding their employment relationship amicably, but mutually recognize
that such a relationship and its termination may give rise to potential claims or liabilities.

     D. The parties expressly deny that they may be liable to each other on any basis or that they
have engaged in any unlawful or improper conduct toward each other or treated each other unfairly.

     E. The parties desire to resolve all issues now between them and have agreed to a full
settlement of such issues.

     NOW THEREFORE, in consideration of the mutual promises and provisions contained in this
Agreement and the Release referred to below, the parties, intending to be legally bound, agree as
follows:

AGREEMENTS

     1. Resignation. Executive confirms his resignation of all positions held by him as an
employee or officer of the Company or any Affiliate of the Company, effective

 

 

October 1, 2005 (the “Separation Date”). From the date of this Agreement through October 1,
2005, Executive shall have no further duties, responsibilities or authority to act for the Company
or any Affiliate, except to assist as requested by the Company’s Chief Executive Officer in the
transition of his responsibilities as Vice President, Store Sales, or as requested pursuant to
paragraph 8 below. For purposes of this Agreement, “Affiliate” shall mean any entity related to
the Company in the present or past, including without limitation its predecessors, parent (Wilsons
The Leather Experts Inc.), subsidiaries, joint venture partners, and any entities under common
control with the Company, and any successors of any of them.

     2. Final Pay/Benefits Continuation. Executive shall be paid his base salary and any
accrued and unused vacation time through the Separation Date, in accordance with the regular
payroll practices of the Company. Executive will have the right to continue his group health,
dental and vision insurance coverage after the Separation Date under such terms as are made
available to similarly-situated former employees of the Company, pursuant to the terms of the
applicable plan documents and laws regarding continuation coverage. Except as provided in
subparagraph 5.c. of this Agreement, such continuation coverage shall be at Executive’s own
expense. To the extent that Executive is currently a participant in any retirement, pension, or
profit sharing plans of the Company, Executive will be entitled to his rights and benefits under
these plans at the times and under the terms and conditions set forth in any such plan.

     3. Expense Reimbursement. The Company will reimburse Executive for his regular and
necessary business expenses incurred through the Separation Date in accordance

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with the Company’s regular policies and practices. Executive will submit all requests for
reimbursement to the Company no later than October 1, 2005.

     4. Release by Executive. At the same time that Executive executes this Agreement, he
shall execute a Release in the form attached to this Agreement as Exhibit A (the “Release”). This
Agreement will not be interpreted or construed to limit the Release in any manner.

     5. Severance Arrangements. The Company will make the severance payments set forth in
subparagraphs 5.a., 5.b. and 5.c. below in lieu of any further payments or compensation that
Executive would otherwise be entitled to receive under any other agreement with the Company or any
Affiliate or as an employee of the Company. The Company will make such payments only if (i)
Executive has signed this Agreement and the Release and has not rescinded this Agreement or the
Release within the rescission period set forth in paragraph 21 below (the “Rescission Period”),
(ii) the Company has received written confirmation from Executive, dated not earlier than the day
after the expiration of the Rescission Period, that Executive has not rescinded and will not
rescind this Agreement or the Release, and (iii) Executive has not breached his obligations
pursuant to this Agreement or the Release.

          a. Salary Continuation. The Company shall pay Executive as salary continuation an
amount equal to Executive’s base salary as of the Separation Date for a period of up to twelve (12)
months. Payment will be made in accordance with the Company’s regular payroll schedule for the
period commencing October 2, 2005 and continuing on the Company’s regular bi-weekly payroll dates
through October 1, 2006; provided, however, that if the Rescission Period has not expired prior to
October 2, 2005,

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then the Company shall delay any payments hereunder until expiration of the Rescission Period.
If during the period commencing on the Separation Date and ending on the first anniversary of the
Separation Date, Executive obtains other full-time employment with any other employer, or if
Executive’s gross earnings from employment or self-employment during such period exceed $10,000 per
month, then the Company shall deduct from any salary continuation payable under this subparagraph
5.a. all amounts earned by Executive as income as a result of such self-employment or employment.

          b. Incentive Compensation. The Company shall pay to Executive a pro rata portion
equal to two-thirds (2/3) of any annual incentive award that would have been payable to him for the
Company’s fiscal year ending January 28, 2006 if Executive had been in the employ of the Company
for the full fiscal year. Any such amount shall be calculated pursuant to the Wilsons Leather
Corporate Leadership Team Incentive Plan in effect for executives of the Company for such fiscal
year (the “2005 Incentive Plan”) and shall be multiplied by two-thirds. The Company agrees that
the provisions of Section B.4.c. of the 2005 Incentive Plan shall not apply to calculation of
Executive’s incentive award payable hereunder. Executive acknowledges that any incentive award
payment is contingent upon the Company meeting certain financial performance criteria and that
there is no guarantee of any incentive award to Executive. Any incentive award payable under this
paragraph shall be paid on the same date and in the same manner that incentive awards for such
fiscal year are paid to the other participants in the 2005 Incentive Plan, based upon actual
Company performance of specified criteria under the 2005 Incentive Plan.

          c. Health Insurance. If Executive elects to continue his group health, dental and/or
vision insurances under the terms of paragraph 2 above and the terms of the

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applicable plans, Executive shall complete all paperwork necessary to carry out such election
effective November 1, 2005, as specified by the Company or its agents in accordance with the
applicable plans. Upon such election by Executive, the Company shall pay on Executive’s behalf a
portion of the cost of the premiums that he is required to pay to maintain such continuation
coverage for a period of up to twelve (12) months following the Separation Date, or, if earlier,
until such continuation coverage ceases in accordance with the terms and conditions of the
applicable plans and laws. The premium portion to be paid by the Company shall be equal to the
portion of the health, dental and/or vision insurance premiums that would be paid by the Company if
Executive was an employee of the Company, at the same level of coverage that was in effect on the
Separation Date. The Company shall deduct Executive’s portion of such premiums from payments to
Executive pursuant to subparagraph 5.a., provided, however, if payments owed to Executive pursuant
to subparagraph 5.a. are not sufficient to cover Executive’s portion of the premiums, Executive
shall pay such portion to the Company in accordance with the requirements of continuation coverage.

     d. Disclosure. Executive shall promptly and fully disclose to the Company in writing
(i) the nature and amount of any gross income in excess of $10,000 per month earned by Executive
from self-employment or employment with any other employer following the Separation Date and
continuing until the first anniversary of the Separation Date as described in subparagraph 5.a.
above, and (ii) whether he has become eligible for group health, dental and/or vision insurance
coverage from any other employer. At the Company’s request, Executive will provide the Company
with documentation of such earnings, including without limitation form W-2s and form 1099s.
Executive shall repay any

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amounts to the Company that should have been so mitigated or reduced but for Executive’s delay,
failure, or unwillingness to make such disclosures.

     6. Equity. 

          a. Stock Options. Executive acknowledges and agrees that the options listed in this
paragraph below are Executive’s only options to purchase shares of the common stock of the
Company’s parent, Wilsons The Leather Experts Inc., and that such options are exercisable only to
the extent reflected in the “Amount Exercisable” column below. Executive further agrees and
acknowledges that all of the options to purchase common stock of Wilsons The Leather Experts Inc.
will expire and cease to be outstanding on the dates listed in the “Expiration Date” column below,
unless previously exercised in accordance with the terms of the applicable Stock Option Agreement
and plan.

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Amount	 	 
	Plan	 	Date of Grant	 	Exercise Price	 	Number of Shares	 	Exercisable	 	Expiration Date
	1996 Plan
	 	11/16/2000
	 	$14.625
	 	21,000
	 	21,000
	 	12/30/05
	2000 Plan
	 	03/19/2003
	 	   4.000
	 	15,000
	 	15,000
	 	12/30/05
	1996 Plan
	 	03/17/2004
	 	   2.900
	 	12,000
	 	12,000
	 	12/30/05

          b. Restricted Stock. The Company and Executive acknowledge and agree that all
restricted stock awards granted to Executive during his employment with the Company are fully
vested.

     7. Confidential Information. Except as permitted by an officer of the Company,
Executive shall not at any time divulge, furnish or make accessible to anyone or use in any way
other than in the ordinary course of the business of the Company, any confidential, proprietary or
secret knowledge or information of the Company or any of its Affiliates that Executive has acquired
or will acquire about the Company or any of its

6

 

Affiliates, whether developed by himself or by others, concerning (i) any trade secrets, (ii) any
confidential, proprietary or secret designs, processes, formulae, plans, devices or material
(whether or not patented or patentable) directly or indirectly useful in any aspect of the business
of the Company or any of its Affiliates, (iii) any customer or supplier lists, (iv) any
confidential, proprietary or secret development or research work, (v) any strategic or other
business, marketing or sales plans, (vi) any financial data or plans, or (vii) any other
confidential or proprietary information or secret aspects of the business of the Company or any of
its Affiliates. Executive acknowledges that the above-described knowledge and information
constitutes a unique and valuable asset of the Company and its Affiliates and represents a
substantial investment of time and expense by the Company and its Affiliates, and that any
disclosure or other use of such knowledge or information other than for the sole benefit of the
Company and its Affiliates would be wrongful and would cause irreparable harm to the Company.
Executive will refrain from any acts or omissions that would reduce the value of such knowledge or
information to the Company. The foregoing obligations of confidentiality shall not apply to any
knowledge or information that (i) is now or subsequently becomes generally publicly known in the
form in which it was obtained from the Company or any of its Affiliates, other than as a direct or
indirect result of the breach of this Agreement by Executive, (ii) is independently made available
to Executive in good faith by a third party who has not violated a confidential relationship with
the Company or any of its Affiliates, or (iii) is required to be disclosed by law or legal process.
Executive understands and agrees that his obligations under this Agreement to maintain the
confidentiality of the confidential information are in addition to any obligations of Executive
under applicable statutory or common law.

7

 

     8. Cooperation. At the Company’s reasonable request and upon reasonable notice,
Executive will, during the period Executive is receiving severance benefits pursuant to paragraph
5, without further consideration but at no expense to Executive, timely execute and deliver such
acknowledgements, instruments, certificates, and other ministerial documents (including without
limitation, certification as to specific actions performed by Executive in his capacity for the
Company or any of its Affiliates) as may be necessary or appropriate to formalize and complete the
Company’s or any Affiliate’s corporate records; provided, however, that nothing in this paragraph 8
will require Executive to take any action that he reasonably believes to be unlawful or unethical
or to make any inaccurate statement of actual facts. In addition, at the Company’s reasonable
request and upon reasonable notice, Executive will, during the time the Company is making salary
continuation payments to him under paragraph 5 above and without further consideration, discuss and
consult with the Company regarding business matters that he was directly and substantially involved
with while employed by the Company.

     9. Claims Involving the Company. Executive will not recommend or suggest to any
potential claimants or plaintiffs or their attorneys or agents that they initiate claims or
lawsuits against the Company, any of its Affiliates, or any of its or their directors, officers,
employees, or agents, nor will Executive voluntarily aid, assist, or cooperate with any claimants
or plaintiffs or their attorneys or agents in any claims or lawsuits now pending or commenced in
the future against the Company, any of its Affiliates, or any of its or their directors, officers,
employees, or agents; provided, however, that this paragraph 9 will not be interpreted or construed
to prevent Executive from giving testimony in response to questions asked pursuant to a legally
enforceable subpoena, deposition notice, or other legal process,

8

 

during any legal proceedings or arbitrations involving the Company, any of its Affiliates, or any
of its or their directors, officers, employees, or agents.

     10. Records, Documents, and Property. On or before the Separation Date, Executive
will deliver to the Company any and all Company or Affiliate records and any and all Company or
Affiliate property in his possession or under his control, including without limitation, manuals,
books, blank forms, documents, letters, memoranda, notes, notebooks, reports, printouts, computer
disks, computer tapes, data, tables, or calculations and all copies thereof, documents that in
whole or in part contain any trade secrets or confidential, proprietary, or other secret
information of the Company or of any of its Affiliates, and all copies thereof, and keys, access
cards, access codes, source codes, passwords, credit cards, personal computers, telephones, and
other electronic equipment belonging to the Company or any of its Affiliates.

     11. Indemnification. Notwithstanding Executive’s separation from the Company, with
respect to events that occurred during his tenure as an employee or officer of the Company,
Executive will be entitled, as a former employee or officer of the Company, to the same rights that
are afforded to other current or former employees or officers of the Company, now or in the future,
to indemnification and advancement of expenses as provided in the charter documents of the Company
and under applicable law, and to indemnification and a legal defense to the extent provided from
time to time to current officers by any applicable general liability and/or directors’ and
officers’ liability insurance policies maintained by the Company.

9

 

     12. Confidentiality.

          a. General Standard. It is understood and agreed that this Agreement and summaries
thereof may be disclosed in filings with the Securities and Exchange Commission and summarized in
proxy statements disseminated to shareholders of Wilsons The Leather Experts, Inc. Notwithstanding
such public filings, in order to minimize disruption and distraction from on-going business
operations, it is the intent of the parties that the terms of Executive’s separation from the
Company, including the provisions of this Agreement and the Release (collectively “Confidential
Separation Information”), will be forever treated as confidential. Accordingly, except as provided
in subparagraph 12.b. below, Executive will not disclose Confidential Separation Information to
anyone at any time and will not comment on Confidential Separation Information if asked about it by
employees or former employees of the Company. Confidential Separation Information does not include
the fact that Executive resigned his employment with the Company or the compensation and benefits
he was receiving in connection with his employment with the Company immediately prior to the
Separation Date.

          b. Exceptions.

	 	i.	 	It will not be a violation of this Agreement
for Executive to disclose Confidential Separation Information in
reports to governmental agencies as required by law, including, but not
limited to, any federal or state tax authority.
	 
	 	ii.	 	It will not be a violation of this Agreement
for Executive to disclose Confidential Separation Information to his
wife, his immediate family, his attorneys, his accountants or tax
advisors.
	 
	 	iii.	 	It will not be a violation of this Agreement
for Executive to disclose Confidential Separation Information in
connection with any litigation proceeding involving the parties’ rights
or obligations under this Agreement or the Release.

10

 

	 	iv.	 	It will not be a violation of this Agreement
for Executive to disclose Confidential Separation Information in the
course of any job search, in response to questions from prospective
employers about Executive’s departure from the Company or the terms of
his departure.

     13. Full Compensation. Executive understands that the payments made and other
consideration provided by the Company under this Agreement will fully compensate Executive for and
extinguish any and all of the potential claims Executive is releasing in the Release, including
without limitation, his claims for attorneys’ fees and costs and any and all claims for any type of
legal or equitable relief.

     14. Withholding of Taxes. The Company shall withhold from payments and benefits
hereunder income and employment taxes and other amounts to the extent required by law. If there is
any dispute over the taxation of any such payment or benefit, the Company and Executive will cause
their respective tax advisors to cooperate in an effort to resolve such dispute.

     15. No Admission of Wrongdoing. Executive understands that this Agreement does not
constitute an admission that the Company, any of its Affiliates, or any of its or their directors,
officers, employees, or agents has violated any local ordinance, state or federal statute, or
principle of common law, or that the Company, any of its Affiliates, or any of its or their
directors, officers, employees, or agents has engaged in any unlawful or improper conduct toward
Executive. Executive will not characterize this Agreement or the payment of any money or other
consideration in accordance with this Agreement as an admission that the Company or any of its
Affiliates has engaged in any unlawful or improper conduct toward him or treated him unfairly.

11

 

     16. Authority. Executive represents and warrants that he has the authority to enter
into this Agreement and the Release, and that no causes of action, claims, or demands released
pursuant to this Agreement and the Release have been assigned to any person or entity not a party
to this Agreement and the Release.

     17. Legal Representation. Executive acknowledges that he has been advised by the
Company to consult with his own attorney before executing this Agreement and the Release, that he
has had a full opportunity to consider this Agreement and the Release, that he has had a full
opportunity to ask any questions that he may have concerning this Agreement, the Release, or the
settlement of his potential claims against the Company and others, and that he has not relied upon
any statements or representations made by the Company, its Affiliates or its or their attorneys,
written or oral, other than the statements and representations that are explicitly set forth in
this Agreement, the Release, and any qualified employee benefit plans sponsored by the Company in
which Executive is a participant.

     18. Assignment. This Agreement shall not be assignable, in whole or in part, by
Executive without the prior written consent of the Company. The Company may, without the consent
of Executive, assign its rights and obligations under this Agreement. In the event of Executive’s
death prior to October 1, 2006, any remaining payments to Executive pursuant to subparagraphs 5.a.
and 5.b. of this Agreement shall be payable to Executive’s estate, and any health, dental and/or
vision benefits provided pursuant to subparagraph 5.c. of this Agreement shall be continued for
Executive’s dependents, each in accordance with the terms and conditions of the applicable
subparagraphs.

     19. Entire Agreement. This Agreement, the Release, the Stock Option Agreements, and
any qualified employee benefit plans sponsored by the Company in which

12

 

Executive is a participant are intended to define the full extent of the legally enforceable
undertakings of the parties, and no promises or representations, written or oral, that are not set
forth explicitly in this Agreement, the Release, the Stock Option Agreements, or any qualified
employee benefit plans sponsored by the Company in which Executive is a participant are intended by
either party to be legally binding. All other agreements and understandings between Executive and
the Company or any of its Affiliates are hereby cancelled, terminated, and superseded.

     20. Period to Consider the Release and the Agreement. Executive understands that he
has 21 days to consider whether to sign this Agreement and the Release. If Executive signs this
Agreement and the Release before the end of the 21-day period, it will be his voluntary decision to
do so because he has decided he does not need any additional time to decide whether to sign this
Agreement and the Release.

     21. Right to Rescind or Revoke. Executive understands that he has the right to
rescind or revoke this Agreement and the Release for any reason within fifteen (15) calendar days
after he signs them. Executive understands that this Agreement will not become effective or
enforceable unless and until he has not rescinded this Agreement or the Release and the Rescission
Period has expired. Executive understands that if he wishes to rescind, the rescission must be in
writing and hand-delivered or mailed to the Company. If hand-delivered, the rescission must be (a)
addressed to Betty Goff, Vice President Human Resources, 7401 Boone Avenue North, Brooklyn Park,
Minnesota 55428, and (b) delivered to Betty Goff within the fifteen-day period. If mailed, the
rescission must be (a) postmarked within the fifteen-day period and (b) addressed to Betty Goff at
the address in the preceding sentence.

13

 

     22. Headings. The descriptive headings of the paragraphs and subparagraphs of this
Agreement are inserted for convenience only and do not constitute a part of this Agreement.

     23. Counterparts. This Agreement may be executed simultaneously in two or more
counterparts, each of which will be deemed an original, but all of which together will constitute
one and the same instrument.

     24. Governing Law. This Agreement and the Release will be interpreted and construed
in accordance with, and any dispute or controversy arising from any breach or asserted breach of
this Agreement or the Release will be governed by, the laws of the State of Minnesota.

     IN WITNESS WHEREOF, the parties have executed this Agreement on the date stated below.

	 	 	 	 	 
	Dated:  August 15, 2005	 	/s/ ARTHUR J. PADOVESE 
	 	 	 
	 	 	ARTHUR J. PADOVESE
	 
	 	 	 	 
	Dated:  August 15, 2005	 	RIVER HILLS WILSONS, INC.
	 
	 	 	 	 
	 

	 	BY:	 	/s/ MICHAEL M. SEARLES 
	 

	 	 	 	 
	 

	 	 	 	Michael M. Searles
	 

	 	 	 	Its Chief Executive Officer

14

 

RELEASE BY ARTHUR J. PADOVESE

Definitions. I intend all words used in this Release to have their plain meanings in
ordinary English. Specific terms that I use in this Release have the following meanings:

	 	A.	 	I, me, and my include both me and anyone who has or
obtains any legal rights or claims through me.
	 
	 	B.	 	Wilsons means River Hills Wilsons, Inc., Wilson The Leather Experts
Inc., any company related to River Hills Wilsons, Inc. or Wilson The Leather Experts
Inc. in the present or past (including without limitation any of their predecessors,
parents, subsidiaries, affiliates, and joint venture partners), and any successors of
River Hills Wilsons, Inc. or Wilson The Leather Experts Inc.
	 
	 	C.	 	Company means Wilsons; the present and past officers, directors,
committees, and employees of Wilsons; any company providing insurance to Wilsons in the
present or past; the present and past fiduciaries of any employee benefit plan
sponsored or maintained by Wilsons (other than multiemployer plans); the attorneys for
Wilsons; and anyone who acted on behalf of Wilsons or on instructions from Wilsons.
	 
	 	D.	 	Agreement means the Separation Agreement between Wilsons and me that I
have executed on the same date as I am executing this Release, including all of the
documents attached to the Agreement.
	 
	 	E.	 	My Claims mean all of my rights that I now have to any relief of any
kind from the Company, whether or not I now know about those rights, including without
limitation:

	 	1.	 	all claims arising out of or relating to my employment with
Wilsons or the termination of that employment;
	 
	 	2.	 	all claims arising out of or relating to the statements,
actions, or omissions of the Company;
	 
	 	3.	 	all claims for any alleged unlawful discrimination, harassment,
retaliation or reprisal, or other alleged unlawful practices arising under any
federal, state, or local statute, ordinance, or regulation, including without
limitation, claims under Title VII of the Civil Rights Act of 1964, the Age
Discrimination in Employment Act, the Americans with Disabilities Act, 42
U.S.C. § 1981, the Employee Retirement Income Security Act, the Equal Pay Act,
the Worker Adjustment and Retraining Notification Act, the Minnesota Human
Rights Act, the Fair Credit Reporting Act, and workers’ compensation
non-interference or non-retaliation statutes (such as Minn. Stat. § 176.82);
	 
	 	4.	 	all claims for alleged wrongful discharge; breach of contract;
breach of implied contract; failure to keep any promise; breach of a covenant of

EXHIBIT A

 

 

	 	 	 	good faith and fair dealing; breach of fiduciary duty; estoppel; my
activities, if any, as a “whistleblower”; defamation; infliction of emotional
distress; fraud; misrepresentation; negligence; harassment; retaliation or
reprisal; constructive discharge; assault; battery; false imprisonment;
invasion of privacy; interference with contractual or business
relationships; any other wrongful employment practices; and violation of any
other principle of common law;
	 
	 	5.	 	all claims for compensation of any kind, including without
limitation, bonuses, commissions, stock-based compensation or stock options,
vacation pay, and expense reimbursements;
	 
	 	6.	 	all claims for back pay, front pay, reinstatement, other
equitable relief, compensatory damages, damages for alleged personal injury,
liquidated damages, and punitive damages; and
	 
	 	7.	 	all claims for attorneys’ fees, costs, and interest.

	 	 	 	However, My Claims do not include any claims that the law does not allow to
be waived, any claims that may arise after the date on which I sign this Release, or
any claims for breach of the Agreement.

Agreement to Release My Claims. I will receive consideration from Wilsons as set forth in
the Agreement if I sign and do not rescind this Release as provided below. I understand and
acknowledge that the consideration is in addition to anything of value that I would be entitled to
receive from Wilsons if I did not sign this Release or if I rescinded this Release. In exchange
for that consideration I give up and release all of My Claims. I will not make any demands or
claims against the Company for compensation or damages relating to My Claims. The consideration
that I am receiving is a fair compromise for the release of My Claims.

Additional Agreements and Understandings. Even though Wilsons will provide consideration
for me to settle and release My Claims, the Company does not admit that it is responsible or
legally obligated to me. In fact, the Company denies that it is responsible or legally obligated
to me for My Claims, denies that it engaged in any unlawful or improper conduct toward me, and
denies that it treated me unfairly.

Confidentiality. I understand that the terms of this Release are confidential and that I
may not disclose those terms to any person except under the circumstances described in the
Agreement.

Advice to Consult with an Attorney. I understand and acknowledge that I am hereby being
advised by the Company to consult with an attorney prior to signing this Release and I have done
so. My decision whether to sign this Release is my own voluntary decision made with full knowledge
that the Company has advised me to consult with an attorney.

Period to Consider the Release. I understand that I have 21 days from the day that I
receive this Release, not counting the day upon which I receive it, to consider whether I wish to
sign this Release. If I sign this Release before the end of the 21-day period, it will be my
voluntary decision to do so because I have decided that I do not need any additional time to decide whether

A-2

 

to sign this Release. I also agree that any changes made to this Release or the Agreement
before I sign it, whether material or immaterial, will not restart the 21-day period.

My Right to Rescind this Release. I understand that I may rescind this Release at any time
within 15 days after I sign it, not counting the day upon which I sign it. This Release will not
become effective or enforceable unless and until the 15-day rescission period has expired without
my rescinding it.

Procedure for Accepting or Rescinding the Release. To accept the terms of this Release, I
must deliver the Release, after I have signed and dated it, to Wilsons by hand or by mail within
the 21-day period that I have to consider this Release. To rescind my acceptance, I must deliver a
written, signed statement that I rescind my acceptance to Wilsons by hand or by mail within the
15-day rescission period. All deliveries must be made to Wilsons at the following address:

Betty Goff

Vice President, Human Resources

Wilsons Leather

7401 Boone Avenue North

Brooklyn Park, Minnesota 55428

If I choose to deliver my acceptance or the rescission of my acceptance by mail, it must be
postmarked within the period stated above and properly addressed to Wilsons at the address stated
above.

Interpretation of the Release. This Release should be interpreted as broadly as possible
to achieve my intention to resolve all of My Claims against the Company. If this Release is held
by a court to be inadequate to release a particular claim encompassed within My Claims, this
Release will remain in full force and effect with respect to all the rest of My Claims.

My Representations. I am legally able and entitled to receive the consideration being
provided to me in settlement of My Claims. I have not been involved in any personal bankruptcy or
other insolvency proceedings at any time since I began my employment with Wilsons. No child
support orders, garnishment orders, or other orders requiring that money owed to me by Wilsons be
paid to any other person are now in effect.

I have read this Release carefully. I understand all of its terms. In signing this Release, I
have not relied on any statements or explanations made by the Company except as specifically set
forth in the Agreement and the Release signed by Wilsons. I am voluntarily releasing My Claims
against the Company. I intend this Release and the Agreement to be legally binding.

	 	 	 	 	 
	Dated:
	 	August 15, 2005 	 	/s/  ARTHUR J. PADOVESE
	 

	 	 
	 	 
	 

	 	 	 	Arthur J. Padovese

A-3

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