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GPS » Topics » Potential Payments Upon Termination

This excerpt taken from the GPS DEF 14A filed Apr 26, 2007.

Potential Payments Upon Termination

Marka V. Hansen, Byron H. Pollitt, Jr., and Eva M. Sage-Gavin

In February 2007, following the end of fiscal 2006, the Company’s Compensation and Management Development Committee approved severance benefits for Ms. Hansen, Mr. Pollitt and Ms Sage-Gavin in the case of an involuntary termination other than for cause prior to February 13, 2009. The benefits generally include:

 

  i. The executive’s then current salary for eighteen months (the “severance period”). Severance period payments will cease if the executive accepts other employment or professional relationship with another company primarily engaged in the apparel design or apparel retail business or any retailer with apparel sales in excess of $500 million annually, or if the executive breaches his or her duty to protect confidential information and an agreement not to solicit Company employees. Severance period payments will be reduced by any compensation the executive receives during the severance period from other employment or professional relationship with a non-competitor.

 

  ii. Health benefits during the period in which the executive is receiving payments under paragraph (i) above.

 

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  iii. During the period in which the executive is receiving payments under paragraph (i) above, reimbursement for his or her costs to maintain the financial counseling program the Company provides to senior executives.

 

  iv. The vesting of stock options and stock awards that otherwise would not have vested as of the executive’s termination date, pursuant to the following schedule: (a) if the executive is terminated during the period from February 13, 2007 to August 12, 2007, the stock options and stock awards that would have vested from the date of termination up to and including February 12, 2009; and (b) if the executive is terminated during the period from August 13, 2007 up to and including February 12, 2009, the stock options and stock awards that would have vested from the date of termination up to and including the date 18 months from the termination date. This provision is not applicable to any stock options or stock awards that have performance-based vesting.

Securities and Exchange Commission regulations require that we estimate the value of severance benefits assuming that the triggering event (in this case, a termination without cause) occurred on February 3, 2007, the last day of our 2006 fiscal year. The arrangements described above were entered into following the end of our 2006 fiscal year and, accordingly, no severance benefits would have been paid to these executives under these arrangements had a termination occurred on February 3, 2007.

Dawn Robertson

In October 2006, we entered into an agreement with Ms. Robertson regarding her employment with the Company. The agreement provides that, in the event Ms. Robertson’s employment is involuntarily terminated from the Company for reasons other than for cause prior to the second anniversary of her employment, the Company will pay her then current salary to her for six months (the “severance period”). Severance payments will cease if Ms. Robertson accepts new employment or establishes any other professional relationship (e.g. a consulting relationship) for which she is compensated during the severance period or if she breaches her duty to protect confidential information or her agreement not to solicit Company employees. If Ms. Robertson had been terminated on February 3, 2007, the last day of our 2006 fiscal year, she would have been entitled to receive up to $450,000 (six months of her then current salary).

Paul S. Pressler

Mr. Pressler ceased to be our President and Chief Executive Officer on January 22, 2007. Pursuant to his 2002 employment agreement with the Company, he will remain a non-executive employee for a period of 24 months (the “Continuation Period”) and receive the following payments and benefits (“Continuation Pay and Benefits”):

 

  i. Base compensation in effect on the date of his termination as an executive officer ($1,500,000 annually).

 

  ii. Any bonus paid under the Executive MICAP he would otherwise have received during the Continuation Period, up to a maximum payment equal to 100% of his base compensation on the date of his termination as an executive officer ($1,500,000), payable, if and when paid to other executives.

 

  iii. Health insurance coverage as provided to other senior executives by the Company, which we have estimated has a value of $19,600.

 

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Payments and benefits described above are subject to the following conditions:

 

  i. Mr. Pressler executed a release of all claims arising out of his employment and the termination of employment.

 

  ii. In the event Mr. Pressler accepts employment with a competitor of the Company (defined for this purpose as another company primarily engaged in the apparel design or apparel retail business or any retailer with apparel sales in excess of $500 million annually) during the otherwise anticipated Continuation Period, he will cease to be an employee and will forfeit all unaccrued pay and benefits. If Mr. Pressler accepts any other employment with a for-profit enterprise which is not a competitor of the Company (“New Employment”) during the otherwise anticipated Continuation Period: (1) Mr. Pressler will immediately cease to be an employee of the Company as of the date of such acceptance (“New Employment Date”); (2) Mr. Pressler will continue to receive payments during the otherwise anticipated Continuation Period equal to his base compensation, provided that the Company’s obligations to make such payments to Mr. Pressler will be reduced by the amount of any cash compensation he receives for other services during the otherwise anticipated Continuation Period; (3) Mr. Pressler will cease to receive all other payments and benefits, including any bonus to be paid under the Executive MICAP and health insurance coverage, and any other options not vested as of the New Employment Date; and (4) Mr. Pressler agrees to notify the Company’s General Counsel in writing of his New Employment and all related financial terms on or before the New Employment Date.

 

  iii. In the event Mr. Pressler accepts any other compensation during the Continuation Period for other services (e.g. services provided to a charitable organization or as a Director, consultant or otherwise), Mr. Pressler will continue to receive the Continuation Pay and Benefits as a non-executive employee, provided that the Company’s obligations to make such payments will be reduced by the amount of any cash compensation Mr. Pressler receives for such other services, and Mr. Pressler will promptly notify the Company’s General Counsel in writing of the financial terms.

In addition, pursuant to Mr. Pressler’s 2002 employment agreement with the Company, the vesting of the remaining portion of the options granted to him in 2002 that were scheduled to vest during the Continuation Period were accelerated to the date of his termination as an executive officer. All stock options with vesting dates two years beyond that date were cancelled. The estimated value of Mr. Pressler’s accelerated options was $9,378,750 on the date of his termination, based on the difference between the exercise price of those options and the closing price of our stock on that date.

Jenny J. Ming

In July 2006, we entered into an agreement with Ms. Ming regarding her separation from the Company. The agreement provides that Ms. Ming will receive a lump sum gross amount of $500,000 on or after April 16, 2007 and bi-weekly payments of $38,461.54 from April 16, 2007 until April 15, 2008. Any and all payments to Ms. Ming are conditioned on the following:

 

  i. Adherence to all terms and conditions of the agreement. Any breach or violation of any term will result in the cessation or forfeiture of all such payments, compensation and benefits under the agreement.

 

  ii.

In the event Ms. Ming engages in any work (broadly defined in the agreement) from October 15, 2006 to April 15, 2007 with, for, or as a competitor (defined for this purpose as any potential, new or existing business engaged in the apparel or accessories industries), Ms. Ming will be paid a prorated amount of the $500,000 lump sum amount noted above for the portion of time between October 15, 2006 and April 15, 2007 in which

 

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she is not engaged in work for a competitor, and all further payments will cease and be forfeited, including compensation and benefits under the agreement.

 

  iii. In the event Ms. Ming engages in any work from April 16, 2007 to October 15, 2007: (1) with, for or as a competitor with annual sales in excess of $100 million; or (2) with, for, or as part of any new venture or start-up engaged in the apparel or accessories industry with any direct or indirect third-party financing or funding, all further payments will cease and be forfeited, including compensation and benefits under the agreement.

 

  iv. In the event Ms. Ming engages in any work from October 16, 2007 to April 15, 2008 with, for, or as a competitor with annual sales in excess of $100 million, all further payments will cease and be forfeited, including compensation and benefits under the agreement.

 

  v. In the event Ms. Ming engages in any work during the 18-month period beginning October 15, 2006 and ending April 15, 2008, payments under the agreement will be offset by any such income from such Work, except that there will be no offset for compensation derived from participation on any Board of Directors for a company or organization that is not a competitor (“non-competitor board work”).

 

  vi. Ms. Ming’s agreement to notify us within five days of her engagement in any work between October 15, 2006 through April 15, 2008, with the exception of non-competitor board work.

On or after April 16, 2007, Ms. Ming will also receive a lump sum equivalent of the amount of the Company’s contribution to the cost of healthcare premiums and financial planning assistance for 18 months, which we have estimated has a value of $30,800. In addition, Ms. Ming will be reimbursed for up to $15,000 total for the amount she might spend on outplacement, legal or financial advice related to the agreement.

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