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Exhibit 10(s)
RESTRICTED TRANSFORMATION SHARE AGREEMENT
RESTRICTED TRANSFORMATION SHARE AGREEMENT (the "Agreement"),
dated as of January 6, 1998, between LIZ CLAIBORNE, INC., a Delaware corporation
(the "Company"), and ____________________ (the "Grantee").
The Compensation Committee of the Board of Directors of the
Company (the "Committee") has determined that the objectives of the Company's
1992 Stock Incentive Plan (the "Plan") will be furthered by the grant to the
Grantee of __________ issued shares of Common Stock of the Company currently
held by the Company, subject to the terms, conditions and restrictions set out
in this Agreement (the "Restricted Transformation Shares").
Notwithstanding any provision hereof, this Agreement shall not
become effective until the Grantee shall have executed and delivered to the
Company this Agreement.
In consideration of the foregoing and of the mutual
undertakings set forth in this Agreement, the Company and the Grantee agree as
follows:
SECTION 1. ISSUANCE OF RESTRICTED TRANSFORMATION SHARES. As
soon as practicable after receipt from the Grantee of this executed Agreement,
the Company shall cause to be issued under the Plan in the name of the Grantee,
either represented by a stock certificate or book entry registration at the
Company's transfer agent, that number of shares of Common Stock
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set forth on the first page of this Agreement as Restricted Transformation
Shares. Such issuance shall be subject to this Agreement and the restrictions
set forth in Sections 2.1 and 6 hereof. No shares or certificates with respect
thereto shall be delivered to the Grantee until the Restricted Transformation
Shares represented thereby are free of restrictions as set forth in this
Agreement. Upon the issuance of shares, the Grantee shall have the rights of a
stockholder with respect to the Restricted Transformation Shares, subject to the
terms, conditions and restrictions set forth in this Agreement.
SECTION 2. RESTRICTIONS; VESTING.
2.1 Restricted Transformation Shares may not be sold,
assigned, transferred, pledged or otherwise encumbered or disposed of prior to
vesting. These restrictions shall apply as well to any shares of Common Stock or
other securities of the Company which may be acquired by the Grantee in respect
of the Restricted Transformation Shares as a result of any stock split, stock
dividend, combination of shares or other change or any exchange,
reclassification or conversion of securities.
2.2. Unless sooner terminated pursuant to the terms hereof,
and subject to accelerated termination pursuant to Section 2.3, the restrictions
set forth in Section 2.1 shall expire on July 6, 2007, provided that the Grantee
is then and has at all times since the date of grant remained an employee of the
Company. For purposes of this Agreement, "Vesting Date" means July 6, 2007 and
any other date as of which Restricted Transformation Shares become vested
pursuant to Section 2.3, 3.2 or 4. As soon as practicable after a Vesting Date,
the
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Company shall deliver to the Grantee, subject to the provisions of Section 6, a
stock certificate representing the Restricted Transformation Shares which became
free of the restrictions set forth in Section 2.1 on the Vesting Date and
dividends thereon as described in Section 5. Shares which become vested shall
remain subject to Sections 6 and 7.
2.3. (a) The following definitions shall apply in
this Agreement:
(1) "Competitor Group" shall mean (i) with respect to the First Three-Year
Performance Vesting Period, the apparel and related companies as
previously designated by the Committee and (ii) with respect to
subsequent Three-Year Performance Vesting Periods, such apparel and
related companies as shall be designated by the Committee, and shall
for all purposes hereunder include the Company.
(2) A "Three-Year Performance Vesting Period" shall mean each of the First
Three-Year Performance Vesting Period, the Second Three-Year
Performance Vesting Period and the Third Three-Year Performance Vesting
Period. The "First Three-Year Performance Vesting Period" shall be the
period commencing January 1, 1998 and ending December 31, 2000; the
"Second Three-Year Performance Vesting Period" shall be the period
commencing on January 1, 2001 and ending December 31, 2003; and the
"Third Three-Year Performance Vesting Period" shall be the period
commencing January 1, 2004 and ending December 31, 2006. Each
Three-Year Performance Vesting Period shall consist of sixteen (16)
separate three-year calculation periods (each a "Performance
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Period") which shall commence on each of the last eight Fridays of the
year preceding the first year of the Three-Year Performance Vesting
Period and on each of the first eight Fridays of the first calendar
year of such Three-Year Performance Vesting Period; provided, that if
any such Friday is a day on which major securities markets are not
open, the next preceding day on which such markets are open shall be
substituted.
(3) The "Final Value" for any company shall mean the Market Value (as
defined below) as of the last day of each Performance Period of the
number of shares of such company's capital stock which had a market
value of $100 as of the first day of such Performance Period, assuming
the reinvestment of any dividends paid with respect to such shares
during the Performance Period on a pre-tax basis in additional shares
of such company's capital stock and taking into account any stock
splits, reclassifications or any similar events; provided, that if any
company enters into bankruptcy reorganization during any Performance
Period in a Three-Year Performance Vesting Period, all Final Values of
such company shall be deemed to be $0.00 for all purposes hereunder.
The "Average Final Value" for any company shall mean the average of the
Final Values for such company for each Performance Period in a
Three-Year Performance Vesting Period. The "Market Value" of a share of
a company's capital stock shall be determined for any day as follows:
(i) if the shares are then listed or admitted to trading on a national
securities exchange, the closing sales price of such shares on such day
as reported on the consolidated transaction or other reporting system
for securities listed or traded on such exchange, or in case no such
reported sales take place on such day, the average of the last reported
high bid and low
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asked prices for the shares on such exchange; and (ii) if sales of the
shares are then reported on the National Association of Securities
Dealers Automated Quotation System ("NASDAQ"), National Market System,
the closing sales price of the shares on such day as reported on the
NASDAQ, National Market System, or in case no such reported sales take
place on such day, the average of the last reported high bid and low
asked prices for the shares as reported on the NASDAQ, National Market
System; or (iii) if the shares are not then listed or admitted to
trading on a national securities exchange or if sales of the shares are
not then reported on the NASDAQ, National Market System, the average of
the last reported high bid and low asked prices for the shares in the
over-the-counter market, as reported by NASDAQ or the National
Quotation Bureau (or, if such prices are not so published by NASDAQ or
the National Quotation Bureau, as furnished by any New York Stock
Exchange member firm which is a market maker for such stock). In the
event the Market Value cannot be determined as aforesaid, the
Compensation Committee shall in good faith determine such value on such
basis as it considers appropriate. If a company included in the
Competitor Group at the beginning of a Three-Year Performance Vesting
Period is merged into or consolidated with, or acquired by, another
entity, its subsequent Market Value for purposes of this Agreement
shall be deemed to be the fair value at the transaction date of the
consideration received by a holder of a share of such company's common
stock, carried forward from such date to any subsequent date at a rate
of change equal to that of an index to be constructed and calculated
substantially as the Standard and Poor's 500 Index, but reflecting only
the performance of the shares of the remaining companies comprising the
Competitor Group during such interval.
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(b) Vesting of the Restricted Transformation Shares shall be
accelerated as of the last day of the final Performance Period for a
Three-Year Performance Vesting Period if (a) the Grantee has held the
Restricted Transformation Shares for at least 18 months during such
Three-Year Performance Vesting Period and holds such Shares at the end
of the last day of the final Performance Period of such Three-Year
Performance Vesting Period and (b) the Company's Average Final Value
for such Three-Year Performance Vesting Period ranks at or above the
50th percentile of the Average Final Values for all companies in the
Competitor Group; provided, that in no event shall Restricted
Transformation Shares vest with respect to any Three-Year Performance
Vesting Period if the average annual total shareholder return on the
Company's Common Stock during such Three-Year Performance Vesting
Period does not exceed the interest rate on a three-year Treasury
security acquired on the first business day of such Three-Year
Performance Vesting Period.
(c) If the Company's Average Final Value ranks at or above the
75th percentile of the Average Final Values for all of the companies in the
Competitor Group in a Three-Year Performance Vesting Period, all of the
Restricted Transformation Shares shall vest as of the last day of the final
Performance Period of such Three-Year Performance Vesting Period. If the
Company's Average Final Value ranks at the 50th percentile of the Average Final
Values for all companies in the Competitor Group in a Three-Year Performance
Vesting Period, one-half of the Restricted Transformation Shares shall vest as
of the last day of the final Performance Period of such Three-Year Performance
Vesting Period. If the Company's Average Final Value ranks above the 50th
percentile of the Average Final Values of all of the companies in the Competitor
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Group in a Three-Year Performance Vesting Period, but below the 75th percentile,
one-half of the Restricted Transformation Shares shall vest as of the last day
of the final Performance Period of such Three-Year Performance Vesting Period,
plus the number of Restricted Transformation Shares equal to the product of (i)
one-half of the Restricted Transformation Shares multiplied by (ii) a fraction,
the numerator of which is the difference between (1) the Company's Average Final
Value and (2) the Average Final Value for the 50th Percentile Company (as
defined) and the denominator of which is the difference between (1) the Average
Final Value for the 75th Percentile Company (as defined) and (2) the Average
Final Value for the 50th Percentile Company.
(d) For purposes of this Section 2.3, the company representing
the 50th percentile of the Average Final Values for all companies in the
Competitor Group (the "50th Percentile Company") shall be determined as follows:
(i) list all companies in order of Average Final Values;
(ii) multiply the number of companies in the Competitor Group
by 0.50, round any fractional result down to the next whole number, and
designate the result as "n";
(iii) the nth company, counting up from the bottom of the
list, represents the 50th percentile.
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The company representing the 75th percentile (the "75th Percentile Company")
shall be determined in the same manner but substituting 0.75 for 0.50. The
percentile rank of the Company among all companies in the Competitor Group
listed in order of Average Final Values shall be a percentage equal to (i) the
Company's rank in such list, counting up from the bottom, divided by (ii) the
number of companies in the Competitor Group, with the result rounded down to the
nearest whole number.
(e) Restricted Transformation Shares that do not vest at the
end of the final Performance Period a Three-Year Performance Vesting Period may
vest subsequently in accordance with the terms of this Agreement.
SECTION 3. TERMINATION OF EMPLOYMENT.
3.1 Except as provided in Section 3.2, effective upon
termination of the Grantee's employment with the Company for any reason, the
Company shall cancel the stock certificate or book-entry registration
representing any unvested Restricted Transformation Shares, and the Dividend
Escrow Account (as defined in Section 5) shall thereupon be terminated, it being
understood and agreed that Grantee shall not be entitled to any payment
whatsoever under this Agreement or provisions of the Plan relating to this
Agreement in connection with such cancellation and termination.
3.2 (a) For purposes of this Agreement, "Retirement" means
Grantee's ceasing to be employed by the Company and any of its affiliates on or
after the Grantee's 65th birthday, on or
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after the date on which Grantee has attained age 60 and completed at least six
years of Vesting Service (as defined in and determined under the Liz Claiborne
Profit Sharing Plan, as the same has been and may from time to time be amended)
or, if approved by the Compensation Committee of the Company's Board of
Directors, on or after the date Grantee has completed at least 20 years of
Vesting Service.
(b) For purposes of this Agreement, "Disability" shall mean
Grantee's total physical or mental inability to perform the usual duties of
employment with the Company or any affiliate, which inability continues for at
least six months.
(c) In the event that Grantee's employment with the Company
terminates during the course of any Performance Period for a Three-Year
Performance Vesting Period on account of Retirement, Disability or death,
Restricted Transformation Shares that are then unvested shall be subject to
vesting as of the last day of the final Performance Period of such Three-Year
Performance Vesting Period in accordance with the provisions of Section 2.3(c);
provided, however, that the number of Restricted Transformation Shares that
become vested in such circumstances shall be equal to the number that would
otherwise vest pursuant to Section 2.3(c) multiplied by a fraction, the
numerator of which is the number of months (including any fractional month)
elapsed in the Three-Year Performance Vesting Period prior to the Grantee's
employment termination and the denominator of which is 36.
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(d) In the event that Grantee's employment with the Company
terminates after December 31, 2006 and prior to July 6, 2007 on account of
Retirement, Disability or death, Restricted Transformation Shares that are then
unvested shall become vested on July 6, 2007.
SECTION 4. CHANGE IN CONTROL.
4.1 For purposes of this Agreement, "Change in Control" shall
have the meaning set forth in Section 3.7 of the Plan, but shall be deemed to
have occurred only if and after the event constituting such a Change in Control
results in the Company's Common Stock no longer being quoted on an established
market.
4.2 In the event that a Change in Control occurs more than six
months after the date hereof, the date of such Change in Control shall be
treated as though it were the final day of the final Performance Period of the
then current Three-Year Performance Vesting Period, and the performance rankings
described in Section 2.3(d) shall be determined accordingly; provided that the
Market Values of the Competitor Group (other than the Company) shall be based on
the eight Fridays before such date; and provided further that the Market Value
of the Company's Common Stock shall be determined based solely upon such Value
on the closing date of the change in control event. The number of Restricted
Transformation Shares that become vested as of such date shall be the greater
of:
(a) the number determined pursuant to Section 2.3(c), as
modified by the above provisions of Section 4.2; or
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(b) the excess of (i) over (ii) where:
(i) is a number equal to the product of (A)
the number of Restricted Transformation Shares originally
granted hereunder multiplied by (B) a fraction, the numerator
of which is the number of months (including any fractional
month) elapsed from January 1, 1998 to the date of Change in
Control and the denominator of which is 120; and
(ii) is the number of Restricted
Transformation Shares previously vested pursuant to Section
2.3(c).
Restricted Transformation Shares that do not vest pursuant to this Section 4.2
shall be forfeited.
SECTION 5. DIVIDENDS. Dividends that become payable on
Restricted Transformation Shares shall be held by the Company in escrow in
accordance with the provisions of this Agreement. In this connection, on each
Common Stock dividend payment date while any Restricted Transformation Shares
remain outstanding and restricted hereunder (each, a "RS Dividend Date"), the
Company shall be deemed to have reinvested any cash dividend otherwise then
payable on the Restricted Transformation Shares in a number of phantom shares of
Common Stock (including any fractional share) equal to the quotient of such
dividend divided by the Market Value of a share of Common Stock on such RS
Dividend Date and to have credited such
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shares to an unfunded book account in the Grantee's name (the "Dividend Escrow
Account"). As of each subsequent RS Dividend Date, the phantom shares then
credited to the Dividend Escrow Account shall be deemed to receive a dividend at
the then applicable dividend rate, which shall be reinvested in the same manner
in such account in the form of additional phantom shares. If any dividend
payable on any RS Dividend Date is paid in the form of Common Stock, then any
such stock dividend shall be treated as additional Restricted Transformation
Shares under this Agreement, with such additional Restricted Transformation
Shares being subject to the same vesting and other restrictions as the
Restricted Transformation Shares with respect to which dividends became payable,
and with any fractional share being treated as a cash dividend that is subject
to the escrow and reinvestment procedures in this Section 5. Any other non-cash
dividends credited with respect to Restricted Transformation Shares shall be
subject to the escrow and reinvestment procedures in this Section 5, and shall
be valued for purposes of this Section 5 at the fair market value thereof as of
the relevant RS Dividend Date, as determined by the Committee in its sole
discretion. At any Vesting Date, the Company shall deliver out of escrow to the
Grantee that whole number of shares of Common Stock equal to the whole number of
phantom shares then credited to the Dividend Escrow Account as the result of the
deemed investment and reinvestment in phantom shares of the dividends
attributable to the Restricted Transformation Shares on which restrictions lapse
at such Vesting Date. The value of any fractional share shall be paid in cash.
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SECTION 6. TRANSFERABILITY; STOCK OWNERSHIP REQUIREMENT. [FOR
INCLUSION IN AGREEMENTS FOR 5,000 SHARES AND UP:] Grantee and the Company
acknowledge as a common goal that Grantee will accumulate a personal holding of
unrestricted, unencumbered shares of Common Stock (either directly, or
indirectly through the Company's 401(k) Plan or Supplemental Executive
Retirement Plan or any similar plan hereafter adopted) having a market value at
any date of reference not less than the Grantee's then annual salary. Grantee
shall not (except for the withholding of shares to pay taxes in accordance with
Section 7) sell, transfer, give, pledge, deposit, alienate or otherwise encumber
or dispose of (as used in this Section 6, collectively "transfer") any shares of
Common Stock (or any securities issued as a dividend or distribution on such
shares, or in respect of such shares in connection with a recombination or
reclassification of the Common Stock) issued to Grantee pursuant hereto if,
following such transfer, Grantee would not be the beneficial owner of
unrestricted, unencumbered shares of Common Stock with a value not less than
Grantee's then annual salary. The Committee may in appropriate circumstances
waive the operation of the foregoing sentence; provided that if Grantee is not
an executive officer of the Company under the applicable regulations of the
Securities and Exchange Commission, such waiver may be granted by the Company's
Chief Executive Officer. [FOR INCLUSION IN ALL OTHER AGREEMENTS:] Grantee and
the Company acknowledge that as a common goal Grantee will accumulate a
significant personal holding of unrestricted, unencumbered shares of Common
Stock (either directly, or indirectly through the Company's 401(k) Plan or
Supplemental Executive Retirement Plan or any similar plan hereafter adopted).
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SECTION 7. WITHHOLDING TAXES. Whenever Restricted
Transformation Shares that have vested in accordance with the terms hereof is to
be delivered to the Grantee pursuant to Section 2.2, the Company shall be
entitled to require as a condition of such delivery that the Grantee remit to
the Company an amount sufficient in the opinion of the Company to satisfy all
federal, state and other governmental tax withholding requirements related to
the expiration of restrictions on such shares. The Company shall, upon the
written request of the Grantee, automatically withhold from delivery shares
having a Fair Market Value on the Vesting Date equal to the amount of tax to be
withheld. Fractional share amounts shall be settled in cash.
SECTION 8. NATURE OF PAYMENTS. The grant of the Restricted
Transformation Shares hereunder is in consideration of services to be performed
by the Grantee for the Company and constitutes a special incentive payment and
the parties agree that it is not to be taken into account in computing the
amount of salary or compensation of the Grantee for the purposes of determining
(i) any pension, retirement, profit-sharing, bonus, life insurance or other
benefits under any pension, retirement, profit-sharing, bonus, life insurance or
other benefit plan of the Company, or (ii) any severance or other amounts
payable under any other agreement between the Company and the Grantee.
SECTION 9. PLAN PROVISIONS TO PREVAIL. This Agreement is
subject to all of the terms and provisions of the Plan. Without limiting the
generality of the foregoing, by entering into this Agreement the Grantee agrees
that no member of the Committee shall be liable for any action or determination
made in good faith with respect to the Plan or any award thereunder or
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this Agreement. In the event that there is any inconsistency between the
provisions of this Agreement and of the Plan, the provisions of the Plan shall
govern.
SECTION 10. MISCELLANEOUS.
10.1 Section Headings. The Section headings contained herein
are for purposes of convenience only and are not intended to define or limit the
contents of the Sections.
10.2 Notices. Any notice given to the Company hereunder shall
be in writing and shall be addressed to the Company's Senior Vice President,
Finance and Chief Financial Officer, at One Claiborne Avenue, North Bergen, NJ
07047, or at such other address as the Company may hereafter designate to the
Grantee by notice as provided in this Section 10.2. Any notice given to the
Grantee hereunder shall be addressed to the Grantee at the address set forth
beneath his or her signature hereto, or at such other address as (s)he may
hereafter designate to the Company by notice as provided herein. A notice
hereunder shall be deemed to have been duly given when personally delivered or
mailed by registered or certified mail to the party entitled to receive it.
10.3 Successors and Assigns. This agreement shall be binding
upon and inure to the benefit of the parties hereto and the successors and
assigns of the Company and, to the extent consistent with Section 3.2 of this
Agreement, the heirs and personal representatives of the Grantee.
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10.4 Governing Law. This Agreement shall be interpreted,
construed and administered in accordance with the laws of the State of Delaware
as they apply to contracts made, delivered and to be wholly performed in the
State of Delaware.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date and year first above written.
LIZ CLAIBORNE, INC.
ATTEST:________________________ By:____________________________
Title:__________________________
GRANTEE
Name:__________________________
Date:___________________________
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