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GPS » Topics » Severance Benefits - Glenn Murphy

This excerpt taken from the GPS DEF 14A filed Apr 7, 2009.

Severance Benefits — Glenn Murphy

On July 25, 2007, the Company and Glenn Murphy, our Chairman and CEO, executed an employment agreement in connection with Mr. Murphy joining the Company. The employment agreement was amended and restated on December 1, 2008 in response to Section 409A of the Internal Revenue Code (“Section 409A”), and was amended again on February 9, 2009 in connection with the change in Mr. Murphy’s salary described in the Compensation Discussion and Analysis section on page 24 (the “Employment Agreement”). The amended and restated Employment Agreement was filed as an exhibit to the Company’s Annual Report on Form 10-K, filed with the SEC on March 27, 2009. The Employment Agreement generally provides the following severance benefits, contingent on Mr. Murphy signing a release of claims:

Without a Change in Control: If Mr. Murphy is involuntarily terminated without Cause, or Mr. Murphy terminates his employment for Good Reason or due to a Material Diminution of Responsibilities, other than in connection with a Change in Control of the Company (each as defined in the Employment Agreement), he will be eligible for:

 

  i. His then current salary for twenty-four months (the “severance period”). Severance period payments will cease if Mr. Murphy 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 he breaches his obligations to the Company (e.g. duty to protect confidential information, agreement not to solicit Company employees). Severance period payments will be reduced by any cash compensation Mr. Murphy earns during the severance period from other employment or professional relationship with a non-competitor other than up to $500,000 per 12-month period earned for providing director and/or consulting services to a non-competitor while Mr. Murphy is unemployed.

 

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  ii. A prorated bonus in the year of termination if earned, plus bonuses at an annual maximum of 150% of base salary if earned for the next two fiscal years, subject to cessation or offset as noted under paragraph (i) above.

 

  iii. Should Mr. Murphy elect to continue health coverage through COBRA, reimbursement for a portion of the COBRA premium during the period in which he is receiving payments under paragraph (i) above.

 

  iv. Acceleration of 25% of the unvested portion of the stock options granted on his start date.

Following a Change in Control: If Mr. Murphy is involuntarily terminated without Cause in connection with or within twelve months after a Change in Control of the Company, he terminates his employment for Good Reason within twelve months after a Change in Control, or he terminates his employment due to a Material Diminution of Responsibilities within 30 days after the six month anniversary of a Change in Control (each as defined in the Employment Agreement), he will be eligible for:

 

  i. A lump sum equivalent to his then current salary for twenty-four months.

 

  ii. A prorated bonus in the year of termination if earned plus bonuses at an annual maximum of 150% of base salary if earned for the next two fiscal years.

 

  iii. Should Mr. Murphy elect to continue health coverage through COBRA, reimbursement for a portion of the COBRA premium.

 

  iv. Acceleration of any unvested portion of the stock options granted to him on his start date with the Company.

 

  v. If the termination is after fiscal year 2009, acceleration of a portion of the performance share award granted to him on his start date with the Company if the prorated performance metrics set forth in that award have been met.

The table below shows the amounts that Mr. Murphy would be eligible for in a non-Change in Control scenario and in a Change in Control scenario under the agreement described above, assuming that the termination occurred on January 31, 2009, the last day of our 2008 fiscal year.

 

Potential Severance Payment Eligibility for Glenn Murphy

Assumes termination date of January 31, 2009

  
Description      No Change in Control
(as defined in
Employment Agreement)		       

Change in Control

(as defined in
Employment Agreement)

  

Cash Payments Related to Salary (1)

      $ 3,000,000         $ 3,000,000   

Cash Payments Related to Bonus

        7,516,397          7,516,397  

Health Benefits

        21,870          21,870  

Stock Option Vesting Acceleration (2)

        0          0  

Stock Award Vesting Acceleration

        0          0  

Total

        10,538,267          10,538,267  

Footnotes

(1)

   

Does not include the deferred compensation that Mr. Murphy would also be entitled to receive upon termination, as described in the Nonqualified Deferred Compensation section, above.

 

(2)

   

All of Mr. Murphy’s options that were eligible for acceleration on January 31, 2009 were “out-of-the-money” on that date (i.e., the exercise price was greater than the last closing price of our common stock as of that date).

 

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