Document:

EX-10.20

 

Exhibit 10.20

POLO RALPH LAUREN CORPORATION

NONQUALIFIED STOCK OPTION AGREEMENT

     THIS AGREEMENT (the “Agreement”), is made effective as of the 23rd day of July, 2002,
(hereinafter called the “Date of Grant”), between Polo Ralph Lauren Corporation, a Delaware
corporation (hereinafter called the “Company”), and Roger N. Farah (hereinafter called the
“Participant”):

R E C I T A L S:

     WHEREAS, the Company has adopted the Polo Ralph Lauren Corporation 1997 Long-Term Stock
Incentive Plan (the “Plan”), which Plan is incorporated herein by reference and made a part of this
Agreement. Capitalized terms not otherwise defined herein shall have the same meanings as in the
Plan or, where specifically referenced, the Amended and Restated Employment Agreement between the
Company and the Participant effective as of the date hereof (the “Employment Agreement”); and

     WHEREAS, the Committee has determined that it would be in the best interests of the Company
and its stockholders to grant the option provided for herein (the “Option”) to the Participant
pursuant to the Plan and the terms set forth herein.

     NOW THEREFORE, in consideration of the mutual covenants hereinafter set forth, the parties
hereto agree as follows:

     1. Grant of the Option. The Company hereby grants to the Participant the right and option
(the “Option”) to purchase, on the terms and conditions hereinafter set forth, all or any part of
an aggregate of 400,000 Shares, subject to adjustment as set forth in the Plan. The purchase price
of the Shares subject to the Option shall be $18.22 per Share (the “Exercise Price”). The Option
is intended to be a non-qualified stock option, and is not intended to be treated as an option that
complies with Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”).

     2. Vesting.

          (a) Subject to the Participant’s continued employment with the Company, the Option shall vest
and become exercisable with respect to one third (1/3) of the Shares initially covered by the
Option on each of the second, third and fourth anniversaries of the Date of Grant (each, an “Option
Vesting Date”).

          At any given time, the portion of the Option which has become vested and exercisable as
described above (or pursuant to Sections 2(b) or (d) below) is hereinafter referred to as the
“Vested Portion.”

          (b) If the Participant’s employment with the Company is terminated due to the Participant’s
normal retirement at or after age 65, then the Option shall continue to vest on the

 

 

schedule provided in Section 2(a) above, subject to the Participant’s not engaging in any
“Competitive Activity” (as defined in Section 3(a) below).

          (c) If the Participant’s employment with the Company is terminated by the Participant for Good
Reason (as defined below) or by the Company without Cause (as defined below) (other than as a
result of the Company’s election not to extend the Term of the Employment Agreement as contemplated
by Section 2 of the Employment Agreement, or by reason of death or Disability (as defined below)),
the Option shall vest with respect to the greater of (x) the percentage of the Option that
otherwise would have vested on the next Option Vesting Date if no such termination had occurred and
(y) the percentage of the Option so that, in the aggregate, 200,000 Shares subject to the Option
would then be vested hereunder.

          (d) If the Participant’s employment with the Company is terminated for any reason other than
that expressly described in Section 2(b) or 2(c) above, the Option shall, to the extent not then
vested, be canceled by the Company without consideration and the Vested Portion of the Option shall
remain exercisable for the period set forth in Section 3(a).

          (e) Notwithstanding any other provision of this Agreement to the contrary, in the event of a
Change of Control (either as defined in the Employment Agreement or in the Plan) the Option shall,
to the extent not then vested and not previously canceled, immediately become fully vested and
exercisable as contemplated by Section 13 of the Plan.

     3. Exercise of Option.

          (a) Period of Exercise. Subject to the provisions of the Plan and this Agreement, the
Participant may exercise all or any part of the Vested Portion of the Option at any time prior to
the earliest to occur of:

               (i) the tenth anniversary of the Date of Grant;

               (ii) in the event of the Participant’s termination of employment due to death or Disability,
then the third anniversary of the date of the Participant’s termination of employment;

               (iii) in the event of the Participant’s termination of employment due to the Participant’s
normal retirement at or after age 65, then the third anniversary of the date of the Participant’s
termination of employment;

               (iv) in the event of the Participant’s termination of employment due to the Participant’s
early retirement at or after age 55 with at least 7 years of service with the Company and its
affiliates, then the earlier of (x) the first anniversary of the date of the Participant’s
termination of employment and (y) the Participant’s engagement in a Competitive Activity;

               (v) in the event of the Participant’s termination of employment by the Participant for Good
Reason (as defined below) or by the Company without Cause (as defined

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below) (other than as a result of the Company’s election not to extend the Term of the Employment
Agreement as contemplated by Section 2 of the Employment Agreement, or by reason of death or
Disability (as defined below)), then the later of (x) the expiration of the Term (as defined in the
Employment Agreement, determined without regard to any earlier termination or further extensions
thereof) or (y) the first anniversary of the Participant’s termination of employment;

               (vi) in the event of the Participant’s termination of employment by the Company for Cause or
due to the Participant’s voluntary resignation other than for Good Reason, then the date of the
Participant’s termination of employment; and

              (vii) notwithstanding paragraphs (ii), (iii), (iv), (v), and (vi), above, in the event a
Change of Control (either as defined in the Employment Agreement or in the Plan) shall have
occurred prior to the date of the Participant’s termination of employment, the Option shall be
exercisable until the later of (x) the applicable period set forth in paragraph (ii), (iii), (iv),
(v), or (vi), above, depending on the reason for termination, or (y) the later of (A) the
expiration of the remaining Term (as defined in the Employment Agreement, determined without regard
to any earlier termination or further extensions hereunder) or (B) the first anniversary of the
date of such Change of Control.

     For purposes of this agreement:

     “Cause” shall have the meaning given in the Employment Agreement; and

     “Competitive Activity” shall mean the Participant’s direct or indirect (i) engagement in any
“Competitive Business” (as defined below) for his or her own account, (ii) entering into the employ
of, or rendering of services to, any person engaged in a Competitive Business, or (iii) becoming
interested in any entity engaged in a Competitive Business, directly or indirectly as an
individual, partner, shareholder, officer, director, principal, agent, employee, trustee,
consultant, or in any other relationship or capacity; provided that the Participant may
own, solely as an investment, securities of any entity which are traded on a national securities
exchange if the Participant is not a controlling person of, or a member of a group that controls
such entity and does not, directly or indirectly, own 2% or more of any class of securities of such
entity; and

     “Competitive Business” shall mean “Competitive Business” as defined in any employment
agreement then in effect between the Participant and the Company or if not defined therein or, if
there shall be no such agreement, the design, manufacture, sale, marketing or distribution of
branded or designer apparel and other products in the categories of products sold by, or under
license from, the Company or its affiliates within the United States; and

“Disability” shall have the meaning given in the Employment Agreement; and

     “Good Reason” shall have the meaning given in the Employment Agreement.

          (b) Method of Exercise.

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               (i) Subject to Section 3(a), the Vested Portion of the Option may be exercised by delivering
to the Company at its principal office written notice of intent to so exercise or by delivering
such notice to the Company by such other method as may be permitted by the Committee;
provided that the Option may be exercised with respect to whole Shares only. Such notice
shall specify the number of Shares for which the Option is being exercised and shall be accompanied
by payment in full of the Exercise Price. The payment of the Exercise Price may be made in cash,
or its equivalent, or (x) by exchanging Shares owned by the Participant (which are not the subject
of any pledge or other security interest and which have been owned by the Participant for at least
6 months), (y) subject to such rules as may be established by the Committee, through delivery of
irrevocable instructions to a broker to sell the Shares otherwise deliverable upon the exercise of
the Option and to deliver promptly to the Company an amount equal to the aggregate exercise price,
or (z) with the consent of the Committee in its sole discretion, by the promissory note and
agreement of the Participant providing for the payment with interest of the unpaid balance accruing
at a rate not less than needed to avoid the imputation of income under Code Section 7872 and upon
such terms and conditions (including the security, if any therefor) as the Committee may determine,
or by a combination of the foregoing, provided that the combined value of all cash and cash
equivalents and the Fair Market Value of any such Shares so tendered to the Company as of the date
of such tender is at least equal to such aggregate exercise price.

               (ii) Notwithstanding any other provision of the Plan or this Agreement to the contrary, the
Option may not be exercised prior to the completion of any registration or qualification of the
Option or the Shares under applicable state and federal securities or other laws, or under any
ruling or regulation of any governmental body or national securities exchange that the Committee
shall in its sole discretion determine to be necessary or advisable.

               (iii) Upon the Company’s determination that the Option has been validly exercised as to any of
the Shares, the Company shall issue certificates in the Participant’s name for such Shares.
However, the Company shall not be liable to the Participant for damages relating to any delays in
issuing the certificates to him, any loss of the certificates, or any mistakes or errors in the
issuance of the certificates or in the certificates themselves.

               (iv) In the event of the Participant’s death, the Vested Portion of the Option shall remain
exercisable by the Participant’s executor or administrator, or the person or persons to whom the
Participant’s rights under this Agreement shall pass by will or by the laws of descent and
distribution as the case may be, to the extent set forth in Section 3(a). Any heir or legatee of
the Participant shall take rights herein granted subject to the terms and conditions hereof.

     4. No Right to Continued Employment. Neither the Plan nor this Agreement shall be
construed as giving the Participant the right to be retained in the employ of, or in any consulting
relationship to, the Company or any Affiliate. Further, the Company or an Affiliate may at any
time dismiss the Participant or discontinue any consulting relationship, free from any liability or
any claim under the Plan or this Agreement, except as otherwise expressly provided herein.

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     5. Legend on Certificates. The certificates representing the Shares purchased by exercise
of the Option shall be subject to such stop transfer orders and other restrictions as the Committee
may deem advisable under the Plan or the rules, regulations, and other requirements of the
Securities and Exchange Commission, any stock exchange upon which such Shares are listed, and any
applicable Federal or state laws, and the Committee may cause a legend or legends to be put on any
such certificates to make appropriate reference to such restrictions.

     6. Transferability. Except as otherwise determined by the Committee pursuant to its
authority under Section 14(a)(iii) of the Plan, during the Participant’s lifetime, the Option is
exercisable only by the Participant and the Option may not be assigned, alienated, pledged,
attached, sold or otherwise transferred or encumbered by the Participant otherwise than by will or
by the laws of descent and distribution, and any such purported assignment, alienation, pledge,
attachment, sale, transfer or encumbrance shall be void and unenforceable against the Company or
any Affiliate; provided that the designation of a beneficiary shall not constitute an
assignment, alienation, pledge, attachment, sale, transfer or encumbrance. No such permitted
transfer of the Option to heirs or legatees of the Participant shall be effective to bind the
Company unless the Committee shall have been furnished with written notice thereof and a copy of
such evidence as the Committee may deem necessary to establish the validity of the transfer and the
acceptance by the transferee or transferees of the terms and conditions hereof.

     7. Withholding.

          (a) The Participant may be required to pay to the Company or any Affiliate and the Company or
any Affiliate shall have the right and is hereby authorized to withhold from any payment due or
transfer made under the Option or under the Plan or from any compensation or other amount owing to
a Participant the amount (in cash, Shares, other securities, other Awards or other property) of any
applicable withholding taxes in respect of the Option, its exercise, or any payment or transfer
under the Option or under the Plan and to take such other action as may be necessary in the opinion
of the Company to satisfy all obligations for the payment of such taxes.

          (b) Without limiting the generality of clause (i) above, the Participant may satisfy, in whole
or in part, the foregoing withholding liability by delivery of Shares owned by the Participant
(which are not subject to any pledge or other security interest and which have been owned by the
Participant for at least 6 months) with a Fair Market Value equal to such withholding liability or
by having the Company withhold from the number of Shares otherwise issuable pursuant to the
exercise of the option a number of Shares with a Fair Market Value equal to such withholding
liability.

     8. Securities Laws. Upon the acquisition of any Shares pursuant to the exercise of the
Option, the Participant will make or enter into such written representations, warranties and
agreements as the Committee may reasonably request in order to comply with applicable securities
laws or with this Agreement.

     9. Notices. Any notice necessary under this Agreement shall be addressed to the Company in
care of its Secretary at the principal executive office of the Company and to the

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     Participant at the address appearing in the personnel records of the Company for the Participant or
to either party at such other address as either party hereto may hereafter designate in writing to
the other. Any such notice shall be deemed effective upon receipt thereof by the addressee.

     10. Choice of Law. THE INTERPRETATION, PERFORMANCE AND ENFORCEMENT OF THIS AGREEMENT SHALL
BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.

     11. Option Subject to Plan. By accepting this Agreement and the Award evidenced hereby,
the Participant agrees and acknowledges that the Participant has received and read a copy of the
Plan. The Option is subject to the Plan. The terms and provisions of the Plan as it may be amended
from time to time are hereby incorporated herein by reference. In the event of a conflict between
any term or provision contained herein and a term or provision of the Plan, the applicable terms
and provisions of the Plan will govern and prevail.

	 	 	 
	ROGER FARAH

	 	POLO RALPH LAUREN CORPORATION
	 
	 	 
	 
	 	 
	     /s/ Roger Farah     

	 	By:      /s/ Mitchell Kosh          
	 
	 	 
	

	 	Title: Senior Vice President Human Resources

6EX-10.21

 

Exhibit 10.21

DEFERRED COMPENSATION AGREEMENT

     AGREEMENT made as of the 19th day of September, 2002, by and between Polo Ralph
Lauren Corporation, a corporation organized under the laws of the State of Delaware (the
“Company”), and Roger N. Farah (the “Executive”).

     The Company recognizes that the Executive’s contribution to the growth and success of the
Company has been substantial. The Company desires to assure itself of the continued employment of
the Executive by providing an incentive for him to continue his employment with the Company.

     In order to effect the foregoing, the Company and the Executive wish to enter into a Deferred
Compensation Agreement on the terms and conditions set forth below, as provided for in the Amended
and Restated Employment Agreement, dated as of July 23, 2002, between the Company and the Executive
(the “Employment Agreement”).

     Accordingly, in consideration of the premises and covenants hereinafter contained, the parties
hereto agree as follows:

Section 1. Deferred Compensation Account; Contributions to Trust.

          (a) The Company shall credit to a book reserve (the “Deferred Compensation Account”)
established for this purpose the aggregate amount of $250,000 per year for each of the

 

 

Company’s fiscal years from fiscal 2003 through fiscal 2008, inclusive, in monthly installments,
provided that the Executive is employed with the Company on the last business day of such month,
and provided further that the initial payment to be made will equal the aggregate amount that would
have been credited if this Agreement had been dated as of July 23rd, 2002. The amount
of the monthly installments shall be equal within each fiscal year. The Executive shall select one
or more investment elections from the mutual funds managed by the Vanguard Group of Investment
Companies, subject to their rules, in which the amounts in his Deferred Compensation Account will
be notionally invested. The Deferred Compensation Account shall be debited or credited with
amounts representing all losses or earnings of such notional investments.

          (b) The Company agrees to establish a grantor trust (the “Trust”)” to which any amounts
represented by credits made to the Deferred Compensation Account in accordance with the first
sentence of paragraph (a) above shall be contributed by the Company on the last business day of
each month. Such Trust shall be established pursuant to the Trust Agreement, as amended, annexed
as Exhibit A hereto (such agreement as further amended or supplemented and any successor agreement
hereinafter referred to as the “Trust Agreement”).

          (c) The Executive agrees on behalf of himself and his designated beneficiary to assume all
risk in connection with

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any debits or credits made to his Deferred Compensation Account by reason of losses or earnings on
the notional investments selected by him in accordance with Section 1(a) (or by reason of the
Executive’s failure to select any such notional investment).

Section 2. Benefit Payments.

          (a) On the earlier of (i) January 1, 2012 and (ii) the earliest date reasonably practicable
following the Executive’s termination of employment with the Company for any reason, the Company
shall pay (or cause to be paid from the Trust) to the Executive or to the Executive’s beneficiary
or estate (in the event of his death) in cash a lump sum amount equal to the vested amount
(determined pursuant to Section 3 hereof) reflected in the Deferred Compensation Account as of the
date of such termination.

          (b) The beneficiary referred to in paragraph (a) above may be designated or changed by the
Executive (without the consent of any prior beneficiary) on a form provided by the Company and
delivered to the Company before his death. If no such beneficiary shall have been designated, or
if no designated beneficiary shall survive the Executive, the lump sum payment payable under
paragraph (a) above shall be payable to the Executive’s estate.

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Section 3. Vesting.

          (a) Except as provided in paragraph (b) below, the Executive’s interest in the Deferred
Compensation Account shall vest at the rate of 20% per year, commencing on the first anniversary of
the date of this Agreement, and on each of the following four anniversaries thereof, thereby
becoming 100% vested on July 23, 2007, but only if the Executive is actively employed by the
Company and has remained continuously so employed from the date hereof to and including the
applicable anniversary date. The Executive shall not be deemed to be actively employed for a
period during which the Executive remains on the payroll for the purpose of collecting salary
pursuant to a severance or similar termination arrangement.

          (b) In the event that (i) the Executive dies, (ii) the Executive’s employment is terminated
by reason of Disability (as defined in the Employment Agreement), (iii) the Executive’s employment
is terminated by the Company for other than Cause (as defined in the Employment Agreement) or (iv)
the Executive terminates his employment for Good Reason (as defined in the Employment Agreement),
then the Executive’s Deferred Compensation Account shall be 100% vested.

Section 4. Unfunded Arrangement.

     It is the intention of the parties hereto that the

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arrangement described in this Agreement be unfunded for tax purposes and for purposes of Title I of the Employee Retirement
Income Security Act of 1974, as amended. Nothing contained in
this Agreement or the Trust Agreement and no action taken
pursuant to the provisions of this Agreement or the Trust
Agreement shall create or be construed to create a fiduciary
relationship between the Company and the Executive, his
designated beneficiary or any other person. Any funds that may
be invested under the provisions of the Trust Agreement shall
continue for all purposes to be a part of the general funds of
the Company and no person other than the Company shall by virtue
of the provisions of this Agreement have any interest in such
funds. To the extent that any person acquires a right to receive
payments from the Company under this Agreement, such right shall
be no greater than the right of any unsecured general creditor of
the Company. This Agreement constitutes a mere promise by the
Company to make a benefit payment in the future.

Section 5. Nonalienation of Benefits.

     The right of the Executive or any other person to the payment of deferred compensation or
other benefits under this Agreement shall not be subject in any manner to anticipation, alienation,
sale, transfer, assignment, pledge, encumbrance, attachment or garnishment by creditors of the
Executive or the Executive’s beneficiary or estate.

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Section 6. No Right to Employment.

     Nothing contained herein shall be construed as conferring upon the Executive the right to
continue in the employ of the Company as an executive or in any other capacity.

Section 7. Effect on Other Benefits.

     Any deferred compensation payable under this Agreement shall not be deemed salary or other
compensation to the Executive for the purpose of computing benefits to which he may be entitled
under any pension plan or other arrangement of the Company for the benefit of its employees.

Section 8. Binding Agreement.

     This Agreement shall be binding upon and inure to the benefit of the Company, its successors
and assigns and the Executive and his heirs, executors, administrators and legal representatives.

Section 9. Governing Law.

     This Agreement shall be construed in accordance with and governed by the laws of the State of
New York without regard to its conflict of laws principles.

Section 10. Validity.

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     The invalidity or unenforceability of any provision or provisions of this Agreement shall not
affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and
effect.

Section 11. Counterparts.

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

Section 12. Arbitration.

     Any dispute or controversy arising under or in connection with this Agreement shall be settled
exclusively by arbitration in the City of New York in accordance with the rules of the American
Arbitration Association then in effect. Judgment may be entered on the arbitrator’s award in any
court having jurisdiction. Fees and expenses payable to the American Arbitration Association and
the arbitration shall be shared equally by the Company and by the Executive, but the parties shall
otherwise bear their own costs in connection with the arbitration; provided that the arbitrator
shall be entitled to include as part of the award to the prevailing party the

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reasonable legal fees and expenses incurred by such party in an amount not to exceed $25,000.

Section 13. Amendment.

     The Agreement may be amended in whole or in part by a written instrument executed by both
parties hereto.

     IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly
authorized officers and the Executive has hereunto set his hand and seal as of the date first above
written.

	 	 	 	 	 
	 	POLO RALPH LAUREN CORPORATION

 	 
	 	By:  	/s/ Mitchell A. Kosh
 	 
	 	 	 	 
	 	 	 	 
	 

	 	 	 	 	 
	 	EXECUTIVE:

 	 
	 	          /s/ Roger N. Farah
 	 
	 	Roger N. Farah 	 
	 	 	 
	 

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